1 Table of contents 147

ARS.2 E-Textbook

IOFM Team		3
Table of Contents		4
Dedication		7
Acknowledgments		8
Introduction		9
Dedication		7
Acknowledgments		8
Introduction		9
CHAPTER 1		11
Internal Controls		11
1.1 Introduction		12
1.2 What Are Internal Controls?		13
1.3 Control Environment		15
1.4 Risk Assessment		15
1.5 Control Activities		16
1.6 AR Internal Controls		20
1.7 Policies and Procedures (P&P)		20
1.8 Audit and Key Terms		21
1.9 Fraud		22
1.10 Consequences of Inadequate Internal Controls		27
CHAPTER 2		28
Understanding Your B2B Customer’s Procure to Pay Process (P2P)		28
2.1 Introduction		29
2.2 Non-PO Purchases		29
2.3 PO Purchases		31
2.4 The Perfect Invoice		32
2.5 DSO and DPO		33
2.6 Sending Statements of Past Due Invoices		34
2.7 AP and Procure-to-Pay Best Practices		34
2.8 Conclusion		36
CHAPTER 3		37
Customer Master File		37
3.1 Introduction		38
3.2 Ownership		39
3.3 Customer File Documentation		39
3.4 Verifying Customer Data		41
3.5 Updating the Customer Master File		43
3.6 Entering and Securing CMF Data		43
3.7 Cycle Time		44
3.8 Conclusion		44
CHAPTER 4		45
Credit Management		45
4.1 Introduction		46
4.2 Credit Management		46
4.3 Policy & Procedures (P&P) for the Credit Manager		49
4.4 New Customer Credit		52
4.5 Credit Application		55
4.6 Assigning a Credit Line		57
4.7 Relationship Between Credit and Sales		59
4.8 Resources for Credit Managers and the Customer Master File		62
4.9 Financial Statement Analysis		63
4.10 Internal Credit Score		65
4.11 Terms and Payment Methods		67
4.12 New Customer Acceptance Letter		70
4.13 Credit and Existing Customers		71
4.14 Metrics		72
4.15 Best Practice Summary		73
CHAPTER 5		75
Cash Application, Deductions, and Dispute Management		75
5.1 Introduction		76
5.2 Payment Types and Methods		76
5.3 International Payments		88
5.4 Cash Application		90
5.5 Dispute Management		92
5.6 Best Practices		99
5.7 Conclusion		100
CHAPTER 6		101
Collections		101
6.1 Introduction		102
6.2 Collections Prioritization		103
6.3 Collection Technology		104
6.4 Collections Staff		104
6.5 Collection Methods		105
6.6 Additional Practices and Tools		110
6.7 Compliance		115
6.8 Bankruptcy		121
6.9 Best Practice		125
6.10 Conclusion		125
CHAPTER 7		127
Accounting, Records, and Associated Regulations		127
7.1 Introduction		128
7.2 Accounting Definitions		128
7.3 Financial Reporting and Account Standards		129
7.4 General Ledger		130
7.5 Month-End Close		132
7.6 Financial Statements		134
7.7 Auditing—Internal and External		134
7.8 Record Retention/Destruction		136
7.9 Other Regulations		140
7.10 Unclaimed Property/Escheatment		145
7.11 Conclusion		147

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