You’re an executive director or a manager, and you receive a request for payment on a bill or a stack of bills. You look up the backup documentation, see authorizations and all the proper paperwork and you're done. Simple enough, right? Hold on a minute. Many managers really don’t question anything, but look at a bill and go on auto-mode on approving bills. This can be quite risky, and if something goes wrong, blaming someone for your wrong approval or payment will not go well. Below are some ideas about what to do to avoid issues paying bills.

 1- Ask for a vendor change/new vendor report from your computerized system. Most software can give you this information. The idea here is to make sure the vendor exists. I (and probably you) have heard about employees making up vendors and depositing checks in their own accounts. It could be an odd name that could be someone’s grandma or a name similar to other vendors. The step of reviewing new or changed vendor information regularly may prevent this issue.

 2- Have a policy of requiring two signatures on payments of over a certain amount, say $5,000. It’s always good to have two pairs of eyes looking at the documentation. One or both people could be members of the board of directors or managers in different departments. Many nonprofits have more than two people allowed to sign on payments to vendors, so that if one person is not available, another one may be. Additionally, make sure that whoever signs checks or make online payments is not connected with the accounting area to assure proper segregation of duties. 

 3- Review your bank account online once a week, looking at a sample checks to make sure they look familiar. Unfortunately, it’s possible for checks and other payments to be modified after they are signed off. Zeroes can be added afterward or payee can be changed a bit. So, having someone not involved with accounting take a look online at the checking account can prevent problems down the road. Also consider using “positive pay,” a bank system that only pays checks on a list. Review this list regularly, if your nonprofit uses this system.  


Comments are closed.