Do you have documented policies and procedures to handle rush checks? Did you know this could be the first sign of a well-run organization with problems in the accounts payable process? If this has you scratching your head, let me explain. Rush checks are one of the leading causes of both duplicate payments and fraud. They can also get you into trouble on a Sarbanes-Oxley audit if you have too many of them. While everyone understands that no business runs so smoothly that the occasional rush check won't be requested, more than a few each month is a sign that the payment function is not running as well as it should.
Why the Fuss?
If fraud and duplicate payments aren't enough to convince you that your organization shouldn't permit rush checks (also known as ASAP checks or manual checks), here are a few more reasons to get rid of them:
- Rush checks are very expensive to issue when you take into account the time it takes to produce them.
- Issuing rush checks disrupts the accounts payable function making it less efficient.
- More than a few rush checks demonstrate poor internal controls.
- When rush checks are permitted on a regular basis, the rest of the company gets lazy and makes no attempt to avoid them.
- Rush checks often are sent by overnight delivery making them even more expensive.
The Action Plan
If you want to put a serious dent in the number of rush checks issued in your company, try the following:
- Convince management that they are a bad idea. Use the above facts along with statistics that demonstrate how expensive a rush check actually is.
- Make it really difficult for someone to get a rush check. This can include requiring a sign-off from the CFO along with an explanation of why this payment could not wait for the regular check cycle.
- Keep a log of who requests them and why so you can identify the causes for rush checks. After you have a few months of activities, you will be able to identify trends and culprits (both at your company and externally) and fix the problem.
- Identify duplicate payments made with a rush or manual check. Bring this to the attention of everyone involved as well as management. There's nothing like seeing a large-dollar amount associated with rush checks to put an end to the practice.
- Insist on paying electronically instead of by check. When you do get a request for a rush check, insist on automatic clearing house (ACH) payment. If you can convince the recipient to be paid electronically in the future, you can eliminate them from future rush-check pools.
By following the issue relentlessly and refusing to let it grow, you can make some serious headway in reducing the number of time-wasting, productivity-sucking, rush-check requests.
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Mary S. Schaeffer is the author of over a dozen business books including Controller & CFO's Guide to Accounts Payable (John Wiley & Sons) and Fraud in Accounts Payable: How to Prevent It (John Wiley & Sons). She is the publisher of the CFO & Controllers Accounts Payable Management Journal, a quarterly electronic journal for senior executives concerned about internal controls and cost control in their payment function, writes a monthly newsletter, a free weekly ezine e-AP News, speaks at accounts payable webinars, seminars and conferences and directs the organization's consulting practice.