The Financial Management Blog for Surprise, Arizona

Accounts Payable: The Best Practices for a Competitive Advantage

There are many reasons why an organization’s revenue can slip through the cracks. Outdated technology, lack of training, employee turnover and complacency are common culprits. Accounts Payable tends to be the land of the lost-disregarded and undervalued. Ignoring best practices in this department leads to loss of revenue and poses significant financial risk to your operation. Accounts Payable is critical to optimizing capital; it’s time to shed light on this core strategy.

Taking a strategic approach to Accounts Payable requires a business owner first to identify which practices are holding up their business. Common mistakes include:

  • Onboarding suppliers without following a standardized procedure
  • Duplicating payments due to workarounds in the ERP system
  • Missing the risky behaviors that expose your business to disbursement fraud
  • Taking liberties with late vendor payments
  • Not separating the duties of new supplier approval from invoice payment

A well-functioning Accounts Payable department is an opportunity to optimize payables and free up the working capital needed to fuel growth. Strengthening your accounts payable department processes and procedures is a big task. Addressing the following areas first will help build momentum:

  • Automated invoice and payment processes. Too often, small businesses use error-prone manual processes to approve requisitions, scan supplier invoices, and issue payments. Adopting automated systems will reduce the number and mistakes and increase the effectiveness of process controls.

 

  • AP Workflow. Unless you have an AP workflow in place, your ERP system will only act as a gatekeeper. Without an intentional workflow, manual loopholes make it possible to outsmart the very systems you have in place to prevent these mistakes. Setting up a workflow – a series of checks and balances – will help you avoid these errors before they begin.   For example,

 

  • Duplicate Payments. One challenging area for some of our clients are payments to vendors via check and by credit card. To avoid duplicate payments, we often suggest requiring PO numbers for payments made by credit card.

 

  • Three-Way Matching. It is always a good idea to confirm that the supplier invoice amount aligns with the goods or services you have purchased. Failure to do this can leave your organization susceptible to paying for things you did order, receive or approve. To prevent this, consider adopting a three-way matching approach to your checks and balances. This steps triple checks your process for oversights or mistakes. The three documents you will review are the vendor invoice, purchase order and receiving document (packing slip or report).

 

  • Airtight Master Files. Take vendor management seriously before an internal audit. Establishing and maintaining a clean vendor master file will safeguard you against potential fraud. Keeping records and contracts up-to-date will help you identify red flags and make it easier for your procurement personnel to do their jobs.

 

  • Proactive Behaviors. Your organization will benefit from a proactive approach, but three main areas will outshine in the Accounts Payable department.
    • Dynamic discounting produces a risk-free, annualized return on investments, simply by leveraging payments terms to your advantage. In simplified terms, the purchasing organization offers to pay their suppliers early in exchange for a discount. This synergistic approach is dependent on transparent and up-to-date disbursement systems and works best in organizations that have an efficient AP workflow.
    • On average, fraud takes 18 months to uncover. In addition to internal and external audits, businesses need to commit to regular, rigorous fraud monitoring. Being proactive in this area means establishing controls that look for red flags such as employee-vendor matches, invoice anomalies, or prohibited entities in your master list. Aggressive monitoring should not invoke a culture of distrust; it should instill a core value around trustworthiness.
    • A great byproduct to careful monitoring is an instinct toward recovery audits. When a department initiates recovery audits as part of their quarterly review process, they catch incidents like overpayments and pricing compliance before they require emergency mitigation.

 

  • A Thriving Team. If members of your accounting team have made a habit of extending payment cycles or accepting discounts without calculating the costs or neglect to take advantage of maximum savings through volume rebates, it might be time to reassess your staffing structure. Reactive accounting will not support your growth; it will curb your progress. Be sure your AP team knows their value, is adequately staffed, sufficiently trained, and has the right skillsets for tasks at hand. Personnel in this department need to have an analytical mind and the tools to get the job done.

Poor accounts Payable procedures happen in both developing and mature enterprises. If you need help strengthening your Accounts Payable department processes and procedures or if you want to talk about creating a capital optimization strategy, our office professionals can help! Give us a call to start today.

Gary Frisch Named Chairman of CPAsNET’s Technology Executive Committee

Boulder, CO – The Board of Directors has named Gary Frisch, CPA, MBA of Monheit Frisch CPAs PLC, Chairman of the Technology Executive Committee.

 

Gary is a Partner at Monheit Frisch CPAs PLC, the Arizona-based public accounting and business consulting firm. As Chairman of the Technology Executive Committee, he will be responsible for the strategic planning of the organization’s technology special interest group. 

2018 1st Global National Conference

1st Global held their National Conference in Louisville, Kentucky on November 11-13, 2018. Every year the 1st Global National Conference gives opportunities to be inspired by industry speakers, who are motivated by 1st Global leaders and an opportunity to connect with advisors and wealth management assistants from some of the top firms in the nation. This year, David Monheit was presented with the Founder’s Award. 

Navigating the New Qualified Business Income Deduction

Navigating the New Qualified Business Income Deduction

The tax reform legislation that Congress signed into law on December 22, 2017, was the largest change to the tax system in over 3 decades. The new tax code contains many provisions that will affect individual, estate, and corporate taxpayers. One of those changes includes the Qualified Business Income Deduction, a new tax benefit allowing entrepreneurs, self-employed individuals and investors to deduct 20 percent of their business income. It is an important factor to consider when deciding whether the structure of your business will be a pass-through entity or a C Corporation.

In this article, we will explain how the deduction works, examine the fine print and discuss how healthcare practices and physician owners can take advantage.

6 Tax Planning Strategies for Doctors to Consider

The Tax Cuts and Jobs Act (TCJA) was the largest change to the tax system in over 3 decades. The new tax code contains many provisions that will affect individual, estate, and corporate taxpayers, including hard-working physicians like yourself. Although the new tax law closes many loopholes, there are still tax breaks and strategies that offer ways for physicians to reduce their taxable income. Below we have highlighted 6 tax strategies physicians should consider for 2018.

  1. Bunching Charitable Donations

While the new tax reform does not eliminate charitable deductions, it does

Treasury, IRS Issue Proposed Regulations on Charitable Contributions and State and Local Tax Credits

A proposed amendment released by the U.S. Treasury Department and IRS on August 23rd could limit charitable donations and state tax credits. Previous charitable donations that qualified for an Arizona dollar for dollar tax credit would receive a state tax credit and a federal charitable deduction. The new proposed rule change states that donations to tax credit organizations will no longer be deductible on federal returns. This proposed rule will be set to apply to contributions made after August 27th – You might consider making your charitable donations now. Any donation made thereafter will still qualify for the Arizona tax credit but will no longer receive a federal charitable deduction. We will provide further updates as they become available.

Contact us to discuss how this ruling may affect your individual tax situation.

Changes to Fringe Benefits, Entertainment Expenses

Changes to Fringe Benefits, Entertainment Expenses

The tax reform legislation that Congress signed into law on December 22, 2017, was the largest change to the tax system in over 3 decades. The new tax code contains many provisions that will affect individual, estate, and corporate taxpayers. One of those changes, the elimination of a business-related deduction used for entertainment, amusement or recreation expenses, will make it costlier for business owners to entertain clients.

Navigating the New Qualified Business Income Deduction

Navigating the New Qualified Business Income Deduction

The tax reform legislation that Congress signed into law on December 22, 2017, was the largest change to the tax system in over 3 decades. The new tax code contains many provisions that will affect individual, estate, and corporate taxpayers. One of those changes includes the Qualified Business Income Deduction, a new tax benefit allowing entrepreneurs, self-employed individuals and investors to deduct 20 percent of their business income. It is an important factor to consider when deciding whether the structure of your business will be a pass-through entity or a C Corporation.

Local Financial Advisor, David Monheit, Leads Vital Efforts on Capitol Hill

Local Financial Advisor, David Monheit, Leads Vital Efforts on Capitol Hill

Surprise, Arizona – David Monheit, CPA PFS travelled to Capitol Hill recently to participate in promoting the message about the importance of access to affordable, honest financial advice and protection for investors. As part of the Financial Services Institute (FSI) team, David met with members of Congress and their staff members on June 6 in Washington, D.C.

We have two locations for your convenience:

 

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