AP Articles

AP N&T Survey Reveals Rush Checks Not the Only Check Issue to Cause Headaches in AP

Download a pdf version of this article.

It will probably come as no surprise to our readers to learn that when asked to identify the check problem they would most like to lose, an overwhelming majority of participants in the recent AP N&T survey picked rush checks. You may be surprised, however, to find that another check problem runs a close second. This article will take a look at the results of the survey and offer suggestions for handling some of these age-old problems.

Survey Results

As indicated above, a huge number of accounts payable departments continue to be plagued by rush check issues. While we rather expected this issue to lead the list, we were a bit taken back by the magnitude of the problem. After all, it’s not as if this issue hasn’t been identified as a problem for a long time. Of course, another way to spin this landslide is to theorize that accounts payable has made tremendous progress in other check related areas. Here are the check problems as ranked by our readers:

Rush checks                                                                                    57%

Returning checks to requisitioner                                                        21

Lost in the mail                                                                               10

Signers                                                                                            4

T & E reimbursement by check instead of ACH                                        4

Casual handling by vendors                                                                 2

Other                                                                                               2

Why Returning Checks Can Be a Problem

Checks should not be returned to requestors for two simple reasons: it’s inefficient and it opens the door to fraud and duplicate payments. I could write a million words explaining the inconveniences to accounts payable caused by requests to return checks and it might make some impact on a few. I could write about the potential for fraud in theory and more but it would have half the effect one of our readers does with a real-life tale. Here is the story in the professional’s words.

“A former employee, who was in charge of all the tradeshow planning, would request checks to be processed, payable to the tradeshows.  The request was approved by the same person using the initials of their superior.  This was common practice at that time, due to the lengthy traveling the superior does.  Now when I think about it, how stupid were we to put that much trust in someone?  We have a list of people allowed to sign the checks here, none are stamped.

"Those individuals signed these checks, trusting the former employee, and allowed me to return the checks to her believing they were getting sent to the tradeshows.  Never in my wildest dreams did I ever imagine it was possible for a check made payable to another business to be allowed to be deposited into a personal bank account.  Five years into the situation, one of the VP’s decided to find out why the tradeshows were costing so much. We found out why. This ordeal cost the company a lot of money.  Since then we have drastically changed our policies.  I will not give any check back to the requester.  The only exception to this rule is that specific requests must be signed off by an officer of the company.” 

This story emphasizes, once again, the old adage about fraud being committed by long-term trusted employees. If you are still getting nowhere on this issue, you can always point out that under Sarbanes-Oxley, returning checks to requisitioners could be considered poor internal controls.

There are also practical considerations as explained by another reader, whose company does allow the return of checks to employees. This professional explains that “Many times the check never gets mailed out to the vender. Then AP gets a call wondering where payment is.  When we research this we find out the departments pick up the check and forget to mail out the check.”

An End Run around the Problem

Getting as many vendors as possible set up for ACH payment helps. This way there is no check to return and the confrontation with the requestor is avoided. Now some might point out that this does not address the underlying issue within the company, but it does avoid some of the battles and allows accounts payable to chip away at the problem, especially if management isn’t willing to back a “no-return-to-requisitioner policy.”

Here’s another way to make ACH work for you in this regard. If certain employees routinely demand that checks be returned to them for particular vendors, and management allows it, consider recruiting the vendor in question for participation in your ACH program. Once you’ve got the vendor on board for ACH, you can even tell the requestor that the vendor prefers payment this way. (By the way, used in the earlier trade show example, this approach would have uncovered the fraud.)

Need Checks Returned: Here’s a Policy You Can Use

One of the semi-legitimate reasons employees ask for a check to be returned to them is that they need to attach it to some other material. This may be a conference registration, a subscription form or something like that. While we are loathe to recommend anything that will add to the administrative burden in accounts payable, this is one time when, alas, that is what we are going to do.

Set up a process that allows employees to send along material that must be included with the check and then make it part of the check mailing process that these items be reattached to the check prior to the mailing.

You can also try talking to employees who want their checks returned to find out the reason behind these requests. Sometimes you will be able to suggest an acceptable alternative. For example, occasionally an executive needs a check to present to a charitable organization. We’ve all seen the televised events with the executive presenting a huge facsimile of a check. You can create a similar, albeit not so large, reproduction for your executives to use.

By imaginatively addressing the problem, forward-thinking professionals will be able to minimize the number of checks returned to requisitioners in their organizations.

Download a pdf version of this article.

Resources:

1) Several of our CDs would help including Accounts Payable Best Practices and Fraud in the Real World. Browse AP Now’s CD selection to pick the best to build your Accounts Payable CD Library. Click here.

2) Read Accounts Payable Now & Tomorrow each month for articles like this containing best practice advice on avoiding duplicate payments and other accounts payable best practices. You can subscribe here.

3) The Controller & CFO’s Guide to Accounts Payable (John Wiley & Sons) explains in detail why certain practices don’t work – and others do. It is part of our Accounts Payable Executive Set for Controllers & CFOs.