Vendors submit invoices through our ERP oracle system (automatically). We review the invoices, verify attachments, etc., then confirm for payment...


Q. (cont.) We want to add a threshold to allow invoices of a certain amount to bypass us, and instead go straight to confirmation and be ready to pay per terms. Because the invoice won't pay until 15 or more days later, sometimes 30 days, we can sample-review at the back end using cost analysis tools. The goal is to realize huge labor savings on invoice volumes that equate to small percentages of total spending (less than 1 percent), but use our cost analysis to further reduce risk. Do you have any documentation or guidance on pitfalls, or what to consider when going this direction?

A. The review on the back end that you are considering is the common control practice. Very many large organizations have a method of audit review of invoices per your scenario. Our expert Judy Bicking offers the following.

She relates this practice is for PO-related invoices. So if the invoices are entered or uploaded by the supplier and matched to a PO within tolerance, AP performs an audit with the invoices that meet the following criteria:

  • All Invoices over a specified (large) dollar amount
  • A select percentage of invoices under the specified dollar amount—every “x” number is reviewed—for example, every tenth invoice is examined

These are based on the number of invoices received daily and how many invoices your specified auditors can review in a day.

So the above rules are based on 1) auditing the higher risk payments, i.e., high dollar invoices, and 2) then auditing a random percentage of the lower dollar value invoices/payments to ensure the lower dollar audit is appropriately assigned.

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