Q. (cont.) We frequently make outgoing wire transfer payments to vendors for things like property purchases, new investments, loan payoffs, etc. When we book these wire disbursements, often we post them into our accounting system as cash withdrawals outside of the vendor payable database, since they were not paid with checks.
Is it a best practice to post wire transfer disbursements in a way that they are made part of the vendor payment records, for example by posting what our system calls a “manual” check? I would like to have these wire payments included in our vendor payment records, but since they aren't checks, they are going outside of our vendor payment system. I would like to know if most companies find a way to incorporate outgoing wire payments into their accounts payable system rather than treat them as miscellaneous cash payments.
A. Checks, cash, ACH and wires should all be posted to the vendor payable. You might have to manually record them – enter on the manual check screen with a method to create a “check number” such as:
The form of payment can be identified in the check number field – for example: when making an ACH payment, reference “D06012016” where the “D” stands for a debit, followed by the date (if making a single payment in a day); use “C” for cash, etc.
This is important so that this file can be reconciled against a bank statement. By recording all payments, you reduce potential fraud, because you know which vendor received cash, ACH or wire; the bank statement can be traced to backup.
So yes, it is a best practice to post wire transfers so that they are part of the vendor payment records. Yes, best practice companies find a way to incorporate wire payments into their AP system rather than treat as miscellaneous payments.