Purpose and Objectives
The purpose of this policy is to outline the process of payments to external suppliers of our company . This includes the approval of payment vouchers and the processing of transactions using the Accounts Payable system.
Policy Scope/Coverage
These procedures apply to all our company staff who participate in the payment cycle on behalf of our company.
Policy Statement
The Accounts Payable process commences upon receipt of an invoice in respect of goods or services provided to our company.
Low value items (with a value of less than $5,000) are to be purchased using a Company Credit Card.
All other goods and services purchased by our company from external providers should be purchased using a requisition, which once approved is dispatched to the supplier as a Purchase Order.
When the goods or service is delivered the requestor (or their agent).
When the three-way match is achieved (Purchase Order, Goods Receipt and Supplier Invoice) the supplier can be paid.
Where there is a discrepancy between the source documents payment cannot proceed.
Payment Process
Process overview
The raising of orders facilitates the authorisations necessary for organisational units to track the processing of an order and the subsequent supplier invoice. It is vital that purchasers check their open orders to ensure the receipt of any goods ordered. Unless an order is receipted, the relevant invoice cannot be processed for payment.
It is imperative that operational units establish a receipting process whereby all staff within the unit enter their own goods receipt where the responsibility is assigned to a specific role, staff within the unit are aware that the assigned staff member must be advised of any goods received against an order.
Prompt attention by the buyer or designated officer in the absence of the buyer is essential to avoid late payment.
All invoices should be submitted to the Finance team as frequently as possible to ensure timely payment of suppliers. Successfully processed vouchers will be paid on the next payment run when due.
Details required on an invoice
Invoices that do not meet the below detail requirements for payment will not be accepted for processing and will be forwarded to the organisational unit to follow up or rectify.
- The document must be an invoice. Accounts Payable are not able to process quotes, purchase orders, statements, delivery dockets, dispatch advices or remittance advices. If you are unable to obtain an invoice and have been provided with an alternate document, please forward it to accounts payable, attention Accounts Payable Supervisor. Alternate documents are reviewed on a case by case basis and need to be approved before Accounts Payable will process.
- Invoices must be addressed to our company.
- Clearly identifies the supplier, their business name, address, the value of goods/services provided, description of goods and services provided, and value of any charges relating to the supply of goods/services.
- The relevant purchase order number shown prominently on the invoice.
- On all invoice/statements, such as telephone accounts, only the current amount invoiced can be paid.
- Invoices payable by our company from an Australian supplier must be a tax invoice in accordance with GST legislation. For information concerning what details are required on a tax invoice.
- Faxed, scanned or copied invoices are acceptable.
- The goods specified on the invoice should have been received in the required condition, quality and quantity.
Payment terms
Invoices are paid on 30 day terms. This is our company preferred payment terms.
Timely processing of payments and their submission on a regular basis will assist in prompt payments.
If urgent payment of an invoice is required send your request to the CFO with supporting paperwork and authorisations. The CFO, Accounts Payable has the discretion to decide the terms under which each supplier is paid.
Payment methods
Electronic Funds Transfer (EFT) – EFT domestic payments are processed twice a week only, except where our company is closed for Public Holidays.
FX Payments – Overseas payments are processed twice a week only, except where our company is closed for Public Holidays.
Cheque – The preferred payment method of our company is EFT. However, where cheque payments are made, these procedures must be followed:
- Cheque runs will only occur on a monthly basis.
- UQ cheques are “Not Negotiable”.
- All signed cheques are to be accompanied by a remittance advice when issued.
- Cash cheques are not permissible under any circumstance.
- If a payee advises in writing that a cheque in payment of an amount due has not been received, or, after receipt, has been lost, stolen or destroyed, a Stop Payment Notice on the cheque is to be issued immediately and acknowledged by the bank prior to the issue of a second cheque to replace it. This is to be done through Accounts Payable only.
- All spoiled, expired, or cancelled cheques that have been issued by our company should be returned to Accounts Payable.
- Under the Cheques Act 1986 a “stale cheque” is defined as a cheque that has been drawn but not presented within fifteen (15) months of the date appearing on the face of the cheque.
- Section 89 of the Act provides that where a cheque becomes stale, the duty and authority of the drawee’s financial institution to pay the cheque is terminated, unless there is an agreement to the contrary between the financial institution and the drawer.
Purchasing equipment with trade-in
Special procedures apply where the purchase of an asset involves a trade-in.
Credit adjustment notes
If an examination of the invoice indicates some discrepancy, this should be clarified with the supplier immediately. In these situations, the organisational unit should endeavour to obtain a credit adjustment note from the supplier. Original invoices are NOT to be amended.
Credit adjustments are processed against the original purchase and cannot be allocated to other chart strings.
Disputed invoices
Most queries can be resolved between the organisational unit and the supplier. Often the reason for non-payment is that the goods supplied or services rendered did not agree exactly with what was ordered, or the goods/services have not proven satisfactory. These situations must be resolved between the two parties, resulting in the account being paid or a credit note (full or partial) being provided by the supplier.
Internal Controls
The key responsibilities and accountability regarding the Accounts Payable function is summarised as follows:
Company Staff
- Certify requisition, purchase order and receipting of goods and services to approve payment process.
- Obtain necessary information to set up new suppliers
Procurement Unit
- Set up new suppliers
Accounts Payable
- Ensure the accuracy of payments
- Process invoices
- Process payments
Trade Payables
Trade payables are recognised at invoice of goods or services ordered and are measured at the agreed invoice price, gross of applicable trade and other discounts.
Amounts owing are unsecured and are generally settled on our company’s terms.
Payment must not be given unless the goods or services have been received in satisfactory condition unless a pre-payment agreement has been made.
Purchasing Accruals
When our company has a liability to pay a supplier for goods or services that have been received or supplied by a customer, but have not yet been paid, invoiced or formally agreed with the supplier, an accrual needs to be made for this expenditure and this will appear in the accounts as a liability.
At the end of each month a purchasing accrual journal is generated which is reversed in the following month.
At the end of the year the Accounting and Reporting Section moves all purchase accruals to the relevant accounts.
Queries
Organisational units are the principal point of contact in dealing with suppliers. Finance team role is to process and distribute the payment to the correct destination. Accounts Payable cannot assist until a valid accounting form is received, and even then the section’s role is limited to that of issuing the payment.
Organisational units that are in contract with a supplier are agreeing to accept the terms of payment negotiated. Organisational units must have procedures that ensure that accounts are paid within those agreed terms. All debts of our company must be settled.