CHAPTER 1: INTERNAL CONTROLS
1.6 AR Internal Controls
The following list of controls are sorted by functional area.
Credit:
Credit applications must be received against government Blocked and Denied Party lists. If the potential customer is on a list, no business shall take place between your organization and that customer. In determining lines of credit, all laws and regulations should be followed – especially antitrust/anticompetitive law. Customer Master File: Customer and product master data must be accurate and timely, with the appropriate safeguards to ensure that the data is secure. Controls include approval of data before entry, segregation of duties to prevent data tampering, and audits to ensure that data is accurately entered into the system. Customer information must be safeguarded from unauthorized access. Compliance with government regulations such as Blocked and Denied Party lists. Compliance with Payment Card Industry Data Security Standard (PCI DSS). Cash application must be segregated from billing, customer master file, credit, collections, and accounts payable. All payments should be posted to the customer’s accounts and the ledger within 24 hours. The collections department must regularly review the customer’s outstanding balances, both debits and credits, and initiate collection efforts on all accounts outstanding. The collection efforts must be documented and easily retrievable.
1.7 Policies and Procedures (P&P)
Policies are necessary to establish boundaries and baselines related to the organization’s mission and objectives. In the absence of well-established policies, an organization risks a much greater likelihood of mistakes, inefficiencies, and potential for fraud. A policy specifies what management wants employees to do, whereas a procedure includes a considerable amount of detail describing how it should be done—and is often presented as a step-by-step guide. Policies and procedures should be clear, simple, detailed at the ctivity level, and enforced consistently. Compliance is enhanced when the company or department gives employees an explanation of why a policy is in place by highlighting the internal control. In addition, it is important to define what level of authority a person has when carrying out a procedure and what needs to be escalated.
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THE ACCOUNTS RECEIVABLE SPECIALIST CERTIFICATION PROGRAM E-TEXTBOOK
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