Avoid the "Credit Memo Purge"

Generally, AP should never make a payment off of a vendor statement. Statements often contain invoices that have already been paid. Because of the lag time, the vendor may not have received payment, so these invoices show up on the statement. If you pay from the statement, you'll double-pay these invoices.

But that doesn't mean vendor statements aren't useful. You should look at them regularly--and even request them periodically. Why? One reason is to avoid a phenomenon called the "credit memo purge," according to Nat Goodman, APM, MBA, CPA, and one of our senior AP consultants.

At our recent one-day seminar on AP Best Practices in Boston, Goodman pointed out that some AR departments purge credit memos off of their systems after a certain period of time. When that happens, they disappear from the statement--and your company may never realize it missed taking the credits.

"Of course, vendors are not supposed to do this, because of escheatment," he says "But they rationalize it by saying that if the buyer does not take the credit within a certain amount of time, it must not be a valid credit, so it's purged."

So check the vendor statements regularly, and when you see a credit memo---apply it immediately. "Take it first and research it after the fact," Goodman advises.