Procedures for Check Processing

Although there is an increased use of electronic payments, paper checks are still a way of life for many AP departments. That means that check processing---printing, signing, and distribution---is an ongoing operation. Here are some insights into how to make this operation more efficient.

Check printing: To increase productivity in check processing, consider reducing the number of check runs. However, there are two potential problems with this policy: (1) the demand for rush checks may increase; and (2) invoice discounts may be lost. To reduce these negative side-effects, educate employees about when the check runs are done. Another idea is to create penalties (such as service charges) for not getting invoices or check requests in on time.

Check signing: To speed up check signing, some companies raise the dollar limits for dual signatures. Also, the use of electronic signatures can greatly reduce the time it takes to get checks signed. To increase the use of electronic signatures, you can: (1) raise the limits for checks that can be signed electronically; (2) use electronic signatures for recurring payments, such as rent, utilities, equipment leases, and the like; and (3) use electronic payments for payments backed up by approved purchase orders and receiving documentation.

Check distribution: Checks should always be mailed, not picked up by the requestor or someone the requestor designates. Allowing pick-ups not only wastes the time of the AP staff, it can open the door to fraud. One common scheme is for someone to submit a phony invoice, pick up the check from AP, and then deposit it in his or her own account. Of course, mailing all checks will increase postage costs, but the time saved and the reduced exposure to fraud will generally more than offset the increased cost.

For more policy tips, refer to our Accounts Payable Policies & Procedures Guide. It's designed to help you build a comprehensive set of policies and procedures and includes sample policy language and ready-to-use forms for invoice and payment processing, p-cards, master vendor file issues, petty cash funds, unclaimed property, 1099s, and more. Take a look at the guide's Table of Contents.