Making payments on behalf of clients
Policy & Procedure for ICB Members
Specific authorisation must be obtained at some point.
August 2011
Level 27
Rialto South Tower
525 Collins Street
MELBOURNE 3000
Tel: 1300 85 61 81
Fax: 1300 85 73 93
[email protected]
www.icb.org.au
BACKGROUND
As part of a Bookkeepers role in many businesses it becomes part of their duties to not
only record the suppliers invoices but also to arrange, if not actually, make payments to
those suppliers, paying direct from the business bank account or credit cards. Processing
and actually submitting the payroll for payment also requires thought & process.
This is a huge area of risk for both the bookkeeper and the business. What if an amount is
overpaid? What if a disputed order is paid? What if an illegitimate invoice or illegitimate
supplier is paid? What if the invoice is paid late such that rebates or discounts are
missed? What if an important supplier is not paid? What if total cashflow isn’t managed
correctly?
Despite this, reality is business owners ask and expect their bookkeeper to “just do it, it will
be ok”.
In some cases the business owner maybe overseas and expects the bookkeeper to do
everything. The owner is expecting the bookkeeper to act totally on their behalf. This
moves into the area of a full power of attorney.
ICB POLICY COMMENT
It is common! It is risky! Therefore:
A. MANAGE THE PROCESS PROPERLY
B. mitigate the risks through a practical but sensible authorisation process
C. always include two people in the process
D. be efficient: use technology, use banking imports, use a regular routine (not daily in
most cases, Some cases once a month is sufficient)
Only with a full power of attorney with specific understanding and consent in writing
provided by the business owners, do we believe it is acceptable for a bookkeeper to be the
sole person involved in the payment of suppliers for a client (or employer).
INSURANCE CONCERNS
We are currently seeking clarification with insurers on each of the potential risk areas for
you as a bookkeeper performing these services. What if you do make a mistake? We will
clarify how insurance applies as soon as possible.
The Institute of Certified Bookkeepers Ltd
is a member based company limited by
Guarantee. ABN 20 115 901 945
ICBAustralia is a member of ICBGlobal
THE PROCESS - A Bookkeeping process for dealing with suppliers
Specific authorisation must be obtained at some point.
A. Receiving the Suppliers Invoices
1. Receive the invoices
2. Invoice to be “accepted” as valid1 and correct
possibly including noting the expense account allocation
3. Invoice to be “approved”2” by the business. (Business should sign)
4. Process the invoice into the Business Accounting System3
including checking the arithmetic calculations
including checking the correct application of GST
including checking for any rebates, discounts that should be applied
including checking that there are no credits in the system for this supplier
5. Mark the paper purchase invoice as entered (date and initial)
6. File the paper invoice into the filing system4.
To this point we have dealt with simply receiving, authorising and recording the purchase
and no “payment” system has been implemented.
We have had the invoice “Approved” by someone in the business on the original detailed
invoice as a valid expense and agreed that there is an obligation to pay.
We understand that in some businesses the bookkeeper is considered “management” for
each of the “Acceptance” and “Approval” of invoice. While this is not preferred it is
acceptable and places further importance on the actual third party being involved in
making the payment.
Processing the payroll
1. Receive the time records or information to vary standard pays
2. Information to be checked for reasonableness
3. Information to be “approved” by the business. (Possibly just at a later step pre payment)
4. Process the payroll into the Business Accounting System
5. Mark the payroll information as entered (date and initial)
6. File the paper invoice into the filing system5.
The assessment of a “Valid” invoice may be the bookkeepers role: Is it a valid tax invoice? Is the GST obvious? Is the
suppliers ABN present? Have we already received and processed this invoice.
2 The assessment of whether an invoice is to be “Approved” is for management of the business. Do we know this
supplier? Did we order these goods? Did we receive this good or service? Is the amount we have been invoiced what
we were expecting?
3 “Business Accounting System” being the Computer Accounting Software that has a fairly comprehensive Suppliers
Purchasing system for invoicing, tracking creditors, making payments
4 Because the amount owed can now be seen in the Accounting system the purchase invoice can be filed away.
Electronic transactions and scan and store systems should be “Filed” away and electronic storage is acceptable
5 Because the amount owed can now be seen in the Accounting system the purchase invoice can be filed away.
Electronic transactions and scan and store systems should be “Filed” away and electronic storage is acceptable
1
B. Authorisation for Supplier payment
The ICB concept of authorisation: You are seeking approval and following direction on
making payments on the client behalf. Removing you from the risk of fault from late
payments, being at fault for disgruntled suppliers etc.
Specific authorisation must be obtained at some point.
Reality may be that you make this assessment and draw up the list for payment, then the
Payment authorisation step below is essential.
7. When all current paperwork has been processed,
8. Print out a total list of all outstanding amounts (preferably an aged and detailed (list of
invoices) payables report)
9. Obtain direction from the management on when each supplier (maybe each invoice) is
to be paid6 They may simply indicate which ones to pay this week.
10. Where Credit Card payment is to be used then direction or approval of credit card vs
bank account payment should be obtained
11. Management should sign off on this intended payment plan. At a minimum the
payment plan MUST be provided to management in advance providing time for
comment or alteration.
Providing information to the appropriate management by email and obtaining specific
authorisation by return email, that is retained by you, would be acceptable.
Authorisation for Payroll payment
You are seeking approval and following direction on making payments on the client behalf.
Removing you from the risk of overpaying, underpaying and disgruntled employees etc.
Specific authorisation must be obtained at some point.
Reality may be that you make this assessment and draw up the list for payment, then the
Payment authorisation step below is essential.
12. When all current time and payroll information has been processed,
13. Print out a total list of all payroll payments due to be submitted
14. Obtain specific authorisation from the appropriate management of the payroll
payment list. At a minimum the payment list MUST be provided to management in
advance of making the payment providing time for comment or alteration.
15. Obtain authorisation to make the payments.
6
It may be your role to recommend the payment plan and timing.
C. Making the payments
The most efficient process is to utilise software integration with electronic banking
processes.
The most common electronic process is the creation of “.ABA” files from within the
software, which is then uploaded into internet banking sites for processing.
One advantage is the added control provided by the software. The same system from
which all reports are created is the software using that same data to create the
transmission file for the bank to process. THIS IS THE PREFERRED SYSTEM. If you are
rekeying transactions into banking software the margin for error is HUGE requiring
emphasis on further authorisation.
Supplier Payments
16. Based on the payment plan
a. select for payment the appropriate suppliers & invoices to be paid
b. apply any credits in the system for the supplier
c. apply any rebates or discounts that are applicable
17. Print out a list of those specific payments being paid
This payment list MUST be specifically authorised by the business.
(From MYOB > To Do List > A/P > select on the right those to pay & “Pay Bills”)
(
> “Prepare Electronic Payments” > Print the list > get it authorised.)
If the ABA file is being used – having this report signed as the final authorisation by
the business is an option.
18. Also print a list of those not being paid which should be acknowledged at the same
time. (Using the above MYOB process printing a revised detailed accounts payable
report would provide this information.
19. the .ABA file was created above & saved to desktop. Proceed only following the
above authorisation.
20. Enter Internet banking > transfers >Import Files > process according to the banks
system.
21a. It may be that you have authorisation to set up internet banking but a second
password from Management is required to allow the payment through. In this case
set up the payment, provide management with the report and advise to log in and
authorise. DO NOT USE THE OWNERS LOGIN AND PASSWORD.
22. In either case: Print out the bank payment screen for this batch of payments & attach
it to the authorised payment report.7
23a. It maybe that it is following the import of the .ABA file into the bank internet software
that the payment report is printed. “FOLLOWING” signature authorisation on that
report the payment should be processed.
24. Process complete, signed authorisations filed.
7
In some businesses it is this report from the Internet Banking site that specifically details the Bank payments about to
be processed that is authorised. We recommend the first report from the software as we are hoping the software has
sent specific remittance advices to the supplier automatically
Payroll Payments
25. Based on the approval above (Payroll steps 7 to 10)
26. Process in the system through to Electronic Banking and create the “.ABA” file
27. Enter Internet banking > transfers >Import Files > process according to the banks
system.
28. It may be that you have authorisation to set up internet banking but a second password
from Management is required to allow the payment through. In this case set up the
payment, provide management with the report and advise to log in and authorise. DO
NOT USE THE OWNERS LOGIN AND PASSWORD.
29. In either case: Print out the bank payment screen for this batch of payments & attach it
to the authorised payment report.8
30. It maybe that it is following the import of the .ABA file into the bank internet software
that the payment report is printed. “FOLLOWING” signature authorisation on that
report the payment should be processed.
31. Process complete, signed authorisations filed.
IF YOU REKEY INTO BANKING SOFTWARE
Before the payment is submitted to the bank
 The best answer is that the owners must enter into the internet banking software
themselves and they submit the payment using their login and password.

At a minimum either owner solely or a two signature (dual logins and password)
authorisation process should be in place.
In any case print out the transaction or the report for the batch of transactions and provide
it to the business to advise them to authorise or to sign.
Manual payment process (inefficient and not much more secure)
(we are looking to minimise the double handling of paper, hence efficiency, but also
control and authorise what is occurring)
 Follow the same invoice receipt, acceptance and approval process
 Before filing the invoice, a remittance advice and cheque is prepared.
 The Cheque is put into a date driven filing system with the date being when the
cheque is to be signed and posted.
 Invoices might be filed at this point or kept with the “office” copy of the remittance &
proposed cheque.
 When the appropriate date arrives – the cheque and remittance is provided to the
owner for signing
 Cheque is either put in envelopes and posted by the owner or a second member of
staff.
Specific authorisation must be obtained at some point.
8
In some businesses it is this report from the Internet Banking site that specifically details the Bank payments about to
be processed that is authorised. We recommend the first report from the software as we are hoping the software has
sent specific remittance advices to the supplier automatically
D. Risk minimisation strategies
a. Specific agreement and authorisation on the roles of management and the bookkeeper
are identified and permission given in writing
b. Management who know the business have OK’d the invoice upon its receipt
c. the invoice numbers are keyed into the computer once and these same numbers are
used for multiple purposes from that point forward.
d. Computer software has prepared the reports and also uses that same data to prepare
the electronic payment file. There is no double keying.
e. the report can be easily checked to the underlying invoices if required
f. management has authorised the actual list of payments to be made hence the ability for
them to review keying errors
g. the .ABA file for the bank is electronically produced removing possible manual keying
errors.
h. if a second authorisation is required in the banking process so much the better –
possibly the second bank authorisation removes the requirement for the report to be
authorised, however the report should still be supplied.
In larger businesses dissection of duties is important: Many businesses have had money
stolen from cheque payment processes: e.g. typewritten cheques are signed and then put
back into the typewriter and the payee changed. A separation of duties would prevent this:
Cheques prepared by the bookkeeper and then handed over to the owner for signing.
Once signed they are ALWAYS WITHOUT FAIL immediately put into an envelope and
posted without being returned by the person who prepared the cheques.
If the internet banking process is used but payments are keyed into the Banks Transfer
screen then the chance for keying errors arise.
E. Establishment of the Process
Specific authorisation must be obtained at some point.
Specific and definite authority must be provided by the management of the business when
you are given access to make payments (refer attached template form of authorisation)
Specific and definite authorisation protocols for each payment process must be
established and followed (refer attached checklist)
Periodic review of the payments made protocols must also be in place.
Periodically provide reports to the client stating the amounts paid to suppliers, giving them
the opportunity to correct errors
Authorisation Template – Making Payments
This authorisation is a specific statement of intent and delegation to the extent and limits
stated herein (including page 2)
Bank Account Name:
Bank Account Number: BSB __ __ __ - __ __ __ & Account No.____________________
Bank & Branch:
Business/Entity:
ABN:
Credit Card permitted to be used:
Number
Expiry
Name
Security Code
Type
The owners of the business being the owners and authorised officers of the business for
the purpose of operating the bank account hereby give authority to the bookkeeper named
for the purpose of making payments on behalf of the business to the extent and limits
described.
BUSINESS PERSONNEL (list of key personnel who have access to and authority on the
bank account ie owners, directors other management)
Owners:
Officers (name & position)
Bookkeeper Name:
Private residential address:
Drivers Licence Number:
Contact phone number (Work & Home & Mobile required)
Period this Bookkeeper is Authorised to act in accordance with this authority
From_____/____/_____ until ____/____/_____
Business owner initials ____________________________ Date___________
Bookkeeper initials _______________________________ Date___________
Authorisation Template – Making Supplier Payments - Page 2
This authorisation is a specific statement of intent and delegation to the extent and limits
stated herein
The bookkeeper is required, given authority and permission to perform the following tasks:
(Initials of Business personnel or Tick the box, add limit or comments in final column)
Limits etc
TASK
Responsibility: Business Bookkeeper
1. Open the mail –
detect suppliers invoices
2a. Review each invoice for acceptance by the
business (value below $_____________)
Checking invoice is not a duplicate already
received and processed
Allocating the expense account for posting
Validating the invoice as a valid Tax
Invoice for claiming GST
3. Obtain approval of the invoice from a
“business invoice approver”
Supplier known to the business
Goods/Service were ordered and received
Value of invoice is as expected
4. Process invoice into accounting system
check arithmetic calculation
check the GST calc and code
Apply rebates, discounts, credits
5. Print out Aged creditors list
selection of payments to be made
approval of payment plan
6. Process selected payments in the
Accounting System
7. Create ABA file
Chq7: Prepare cheque and remittance advice
INT7: Rekey Bank payment transactions into
Banking Internet site
Key Credit Card payments into Bank
Internet Site or make phone payments etc
8. Obtain authorisation from “Client
authoriser” to make selected payment
9. Review Outstanding creditors following
payment
10. ABA file uploaded into Banking software
11. & INT11 ABA file submitted for processing
Chq11: Cheques submitted to “Client cheque
signature”
Chq12: Cheques enveloped and sent by
“Client Cheque Poster”
Authorisation Template – Making Payroll Payments - Page 3
This authorisation is a specific statement of intent and delegation to the extent and limits
stated herein
The bookkeeper is required, given authority and permission to perform the following tasks:
(Initials of Business personnel or Tick the box, add limit or comments in final column)
Limits etc
TASK
Responsibility: Business Bookkeeper
1. Receive the payroll information
2. Review information for acceptance by the
business (value below $_____________)
Review any leave allocations etc
3. Obtain approval of the payroll information
from “management”
4. Process payroll into accounting system
5. Print out Payroll payments list
approval of payment list
6. Process payments in the
Accounting System
7. Create ABA file
Chq7: Prepare cheque and remittance advice
INT7: Rekey Bank payment transactions into
Banking Internet site
8. Obtain authorisation from “Client
authoriser” to make payment
9. ABA file uploaded into Banking software
10. & INT10 ABA file submitted for processing
Chq10: Cheques submitted to “Client cheque
signature”
Chq11: Cheques enveloped and sent by
“Client Cheque Poster”
SAMPLE Financial Controls Policy
1. Financial Controls
Authorisation for signatures necessary on contracts, cheques, and orders for
payment, receipt or deposit or withdrawal of money, and access to securities of …..
shall be provided by resolution of the Business Owners/Directors.
1. Any individual authorised to purchase goods and/or services for the
organisation shall follow the procedures set forth in these policies.
2. The Management shall be responsible for reviewing and recommending any
annual operating and capital budget to the Owners for approval.
3. The Owners shall be responsible for adopting any annual operating and
capital budgets.
4. No expense shall be incurred in excess of the authorisation limits and if a
budget exists then the expense should be in accordance with the budget
allowing for prior approval exceptions permitted by the Owners.
2. Cheques-Signing Authority
1. Cheques require signatures in accordance with Appendix 1 direction.
2. Separation of payment duties: Following preparation of the Cheques for
supplier payment, the cheques will be placed in sealed envelopes
immediately following signature and posted without return to the Cheque
preparer.
3. Cash Disbursements
1. An authorised cheque signer will make disbursements only upon review and
approval of the transaction. This will include review for the existence of
proper supporting documentation, such as a purchase order and evidence of
the receipts of the goods and services.
2. The procedure for collecting and verifying documentation, etc, follows
procedures within the Office.
3. Reimbursements
1. Appropriate reimbursable expenses will be determined and approved
by the owners.
2. Reimbursement will not be made for:
1. Expenditures without proper documentation, including but not
limited to date, location, those in attendance, purpose and
description of how activity advances the system.
2. Other restrictions may be determined by the Owners at any
time.
4. Accounts
The Business shall maintain its bank accounts in major banking institutions as
determined by the owners. All funds received shall be deposited regularly (see
Appendix A. All non-productive funds shall be invested in accordance with the
Investment Policy established by the owners.
5. Authority to Sign
1. Authority to sign cheques will be provided by the owners and as described in
the Appendix
2. Authority to use business or owner Credit Cards may be provided by the
owners to be used in conjunction with the limits which must be expressed.
In addition, any payments being made to the preparer or processor of payment
must be specifically pre-approved by someone other than the payee.
6. Periodic Review
The owners shall, on a regular basis, review reports &/or lists of payments.
7. Borrowing of Funds
Only as specifically authorised or arranged by the business owners.
8. Loans
Only as specifically authorised or arranged by the business owners.
9. Credit Cards
We shall not issue corporate credit cards to staff.
A business credit card or owners credit card may be used for business payments in
accordance with the authorisation and payment policy.
10. Annual Review
This Policy and all banking authority and procedures are to be reviewed on an
annual basis and upon each change of any relevant personnel (owners,
management or Bookkeeper)
APPROVAL
(to be approved and signed by the owner, management and the bookkeeper)
Adopted: