Q. (cont.) I think the invoice would need to be rebilled to the U.S. subsidiary company to reduce possible duplicate payments and to maintain process efficiency. What is the best practice for this kind of situation?
A. Yes, you need to have the invoice reissued to the proper U.S. subsidiary's name. This will ensure the payment matches the invoice(s) and eliminate potential duplicate payments.
Q. I was wondering if there is any literature that states this is the best practice?
A. See the material on Internal Controls and on Duplicate Payments (use the site search and look for “duplicate payment”) on the AP & P2P Network. Often a specific scenario may not be addressed in our content until someone asks.
Many proven practices are based on a combination of experience, logic, meeting requisite controls while achieving objectives. It is these on which our experts base their answers. There are myriad practices and procedures across organizations, not all alike, many often arising to meet a particular circumstance. When we talk about best practice, or what some of our experts prefer to call “proven practice,” we mean practices that have proven to work well in meeting AP’s goals and responsibilities, driven by key principles including meeting internal control requirements, compliance requirements, efficiency, effectiveness and so on.
Of course, as you may have experienced, sometime guiding principles such as “controls” and “efficiency” may seem to be at cross purposes – in which case we tend to give priority to controls (and always to compliance issues). There is a degree of risk to every business decision, and so it goes with controls vs. efficiency. Each organization ultimately decides what level of risk it is willing to take in a given situation.
In the situation you describe, we see a greater risk in the subsidiary paying the invoice naming the parent company, as management has requested of you, and greater control in handling it as we have said (return it and ask that it be reissued in the subsidiary’s name). We are sure there are companies that may do things in the way the parent company in your case prefers. However, from an AP control perspective, we think the better way is to have the invoice addressed to the subsidiary, for the reasons stated. There may be other reasons not understood by us behind management’s directive just to pay it as is. But we see such an approach in policy and practice as risking duplicate payment.