It's easy to overlook the importance of a well-managed accounts-payable system. Walter Pancewicz, vice-president of Aria Group Architects, an Oak Park, Ill., architectural firm, recalls, "Soon after we founded the company, in 1989, we started falling dangerously behind on our payables."
The problem: Aria's early system had relied on all three owners' taking turns handling accounts payable. "It became clear to us that we needed one person to be fully responsible," Pancewicz notes. He assumed that job; later the firm hired an office manager.
As Aria has grown to nearly $2 million in sales its accounts-payable system has developed, too. Pancewicz explains, "We've tried to keep payments timely and accurate and to protect ourselves against the risk of fraud." Here's the company's four-step system:
1. When bills arrive, the office manager logs them into the computer, recording the date of arrival, the amount and the date it's due, and any relevant comments (such as order problems or discounts for early payment).
2. Pancewicz receives a weekly report that details the information, highlighting which bills are due that week. The goal: to have all invoices paid within 30 days.
3. Once Pancewicz approves the weekly payment plan, checks are issued, which he then signs.
4. At the end of each month, Aria's outside accountant receives copies of those weekly logs, copies of all signed checks, and a monthly report that details all accounts-payable activities.
The precautions pay off, Pancewicz says. "Although we've never had a case of intentional fraud, our accountant did once catch a $12,000 mistake. We had received the same tax bill twice and paid it without double-checking our records." He laughs. "That proved to us that it's worth having safeguards."