Accounts
Payable Policy
Policy Overview
Accounts Payable is a type of short-term debt,
typically the amount owed by an organization to its suppliers or vendors for
goods and services purchased on credit.
The primary function of the UIS/OAS Accounts Payable (A/P) Department is
to process all vendor payments/credits and to perform all associated duties
necessary in accomplishing this objective.
Such
duties include:
- Administration of the
Purchasing Authorization Process
- Receiving and Tracking
Invoices
- Document Printing and
Matching
- Payment Approval
- Invoice Payment
- Month end Accruals
- Vendor Credits
- Payment Inquiries from
Vendors and Staff
- Payment Retrieval and
Document Archiving
Accounts Payable also serves as the liaison between
vendors and the business units to resolve any discrepancies found in vendor
account reconciliations.
Principles
Individuals
responsible for interacting with vendors on behalf of the University should
apply the following principles:
Accountability
It
is the department’s responsibility to ensure that all purchases are made in the
conduct of University business and well documented for tracking purposes. In order to continue the efficient
operation of the University, all purchasers must make sound purchasing decisions.
Accuracy
The
individual(s) managing the business activity are responsible for and must
convey to the vendor the importance of receiving invoices which correctly
identify work performed or goods received. In addition, the insistence of
accurate information provides support documentation for analysis by outside
independent auditors as required by Generally Accepted Accounting Principles.
Timeliness
UIS/OAS must also assure the University of its timely payment to the vendor. The matching principle states that expenses
should be recorded in the period in which the goods or services are rendered.
In order to apply this principle, an invoice must be received from a vendor
within a reasonable amount of time, usually thirty days.
Completeness
In
order to be processed, a vendor invoice must be an original document and must
contain specific information.
Basic Invoice Components:
- An original invoice
number
- Purchase order number
or contract number (if applicable)
- Harvard customer account
number
- Bill To and Ship To
addresses (including name of purchaser)
- Customer service telephone
number
- Billing period or date
of service
- A detailed description
of services rendered or products purchased
- Ensure that sales tax
is not included on the invoice. The
individual responsible must convey the Sales Tax Exemption status of Harvard University (documentation to
support the exempt status, a sales tax exemption number and certificate can be provided
upon request).
Definitions
Purchase Order (P.O.)
Written
authorization for a supplier to ship products at a specified price, which
becomes a legally binding contract once the supplier accepts it.
Purchase Receipt
A purchase
receipt is a document that informs those concerned of the receipt of purchased
goods. Copies are usually distributed to purchasing staff and the Accounting
department.
Packing Slip
A document prepared by the supplier to accompany the goods and which itemizes in detail
the contents of a particular package or shipment. It is often used as a reference in receiving
transactions to create an audit trail for invoice matching.
Payment Terms
The
amount of time defined by the vendor for payment of the invoice due. Most vendor terms are either “Due upon
receipt” or “30 days”. Some vendors
offer a discount for paying invoices early
(e.g. 1% discount for payment within 10 days, otherwise total amount due
within 30 days). Harvard’s policy is
that all vendor invoices are paid in 30 days from the invoice date unless a
specific reason (e.g. vendor discount) warrants deviation from these terms and
has been approved in advance.
Accounts Payable Process
Purchasing Authority
UIS/OAS manages
significant spending and valuable assets on behalf of the University. Individuals with purchasing, invoice approval
or payment signing authorities have important fiduciary responsibilities for
the organization. Designation as an
authorized purchaser, approver or signer comes with it the responsibility to
oversee certain transactions relating to those purchases. In order for a UIS/OAS employee to make a
purchase on behalf of the University, he/she must be on the “Approved Purchaser
List”. Please see the “Purchasing,
Approval and Signature Authority Policy” for more information on
purchasing authority.
Purchase Order Creation
Purchase
Orders can come from
the UIS purchasing system, or they can be created from another local
purchasing system. In either case, the
P.O. should include the following information before being sent to the vendor:
- The vendors name and address
- The purchasers name
- The bill to and ship to addresses
- The exact quantity and agreed upon price
- Any additional charges (e.g. shipping and
installation)
- The appropriate 33 digit
billing code
- The purchasers
signature
- Sales Tax Exemption
Provision
Receiving Invoices
Mail
received daily at 1230 Soldiers
Field Road is opened, date stamped and sorted. Those that have a UIS system P.O. number are
retained in the UIS/OAS A/P office.
Those without a UIS system P.O. number are forwarded to the individual
responsible for the purchasing. Invoices
are then processed according to the “Invoice
Approval Process” section below.
Document
Printing
For
purchases that are flowed through the UIS P.O. system, daily purchase orders are
generated from the automated system. The
purchaser can add, delete, and modify P.O.s prior to receiving the products into
the system. The P.O.s are printed weekly
and filed in the UIS/OAS A/P office.
Merchandise received daily in the various inventory
locations is input into the central system.
Accounts Payable confirms receipt of the product through the use of the
daily receiving reports. The receiving
groups are responsible for printing the daily purchase receipts, attaching them
to the packing slip (where applicable), and forwarding them to the UIS/OAS A/P
office. All other purchase receipts are
printed daily and filed in the UIS/OAS A/P office.
Document
Matching
Invoices received daily at
the UIS/OAS A/P office that reference a UIS system generated P.O.# are matched
with their corresponding P.O., purchase receipt, and packing slip. Any sizeable
variances between the invoice and purchase receipt are resolved via email
communication to the purchaser. If the
vendor has sent an invoice for product that has not been received, the
purchaser is notified by email to ensure timely payment processing. Immaterial discrepancies are accounted for
through the general ledger.
Invoice Approval Process
Invoices that reference a UIS
system P.O.# are approved via the matching process outlined above. If the vendor sends an invoice that
references a system P.O.# directly to the purchaser, the invoice should be forwarded
directly to the UIS/OAS A/P office at 1230
Soldiers Field Road for processing.
Invoices
received daily at the UIS/OAS A/P office that do not reflect a UIS PO# are forwarded to the appropriate approved purchaser
for authorization and coding.
If
a vendor sends an invoice not referencing a UIS PO#
directly to a purchaser, the invoice must be forwarded to the appropriate
approved purchaser in your department.
The approved purchaser must then authorize (legibly sign), furnish a 33-digit
billing code and forward to 1230 SFR in a timely manner. If you are uncertain as to where to code a
charge, please contact your Financial Partner
for assistance.
Invoice Payment Process
All UIS/OAS invoices must be sent directly to 1230 Soldiers Field Road
for processing. The UIS/OAS A/P office
performs a thorough review of each invoice.
Special consideration is given to past due invoices, and they will be
processed with a higher priority. Otherwise, invoices are processed in the
order they are received. Invoices are then uploaded to the Central
Administration A/P database. The Central
Administration A/P Office handles disbursement of all checks to Harvard
vendors. Checks will be issued net 30 of the invoice date – unless otherwise
specified. The University issues checks
on Tuesday and Thursday of each week.
Payment
Outside of Vendor Terms
All
vendor payments that need to be made earlier than 30 days must be accompanied
by a “Change in Vendor Terms” Form and forwarded to the Financial Dean for
signature. Requests of this type should
be infrequent due to the inefficient nature of this manual process.
New
Harvard Vendor Process
New vendors must be set up with Harvard Vendor Hotline,
prior to payment processing. Once this
has been completed, the first invoice paid to the vendor is processed via the University’s
central accounts payable system.
Month End Payment
Deadlines
It is imperative that all invoices be approved and arrive at
the UIS/OAS A/P office no later than noon, on the second to last business day
of the month for the payment to be reflected in the current month’s General
Ledger (GL). This deadline allows the
Accounts Payable staff to process payments in a timely and efficient
manner. It also permits UIS/OAS A/P to
meet Central Accounts Payable’s noon deadline on the last business day of the
month. If your invoice is received past
this deadline, then it will be processed in the new month through the accrual
process.
Accounting
for Month End Accruals
At the end of each month, Accounts Payable must account
for products that were received prior to the first day of the new month that were
not processed for payment until after the month closed. All expenses that were not included in month
end invoice batches, that are dated before the first of the new month, must be
accrued as a liability by the corresponding business unit. All invoices that should be accrued must be
submitted to the UIS/OAS A/P office no later than noon on the 3rd
business day of the new month. Vendor
payments must be totaled and allocated to the appropriate inventory or expense
account by the 4th business day of the new month. If this deadline is not met, please
contact your Financial Partner
to provide additional accruals.
Vendor
Credit Process
All UIS/OAS credit
memos are processed centrally, therefore, must be sent to 1230 Soldiers Field Road
in order to be paid. Credit memos
received from vendors at the UIS/OAS A/P office are forwarded to the purchaser
for coding and authorization, with the exception of central UIS P.O. system
generated credit memos, which are matched against credit receipts and processed
centrally. It is the purchaser’s
responsibility to return approved and coded credit memos.
Credits are processed in the same manner as invoices using
the UIS/OAS A/P database, and are netted with invoices totaling more than the
credit amount. If the invoices being
processed are less than the credit memo due, a check will not be released to
the vendor. For example, if a credit
memo is processed for $150 to a specific vendor, and at the same time a $100
invoice to the same vendor is processed, then a check will not be released to
that vendor until an additional invoice of at least $51 is processed.
It is the department’s responsibility to track down open
vendor credits if the University has ceased doing business with a vendor. Central Administration notifies every
department of open credits in the A/P system that have not been applied to
checks. If there are no debits in the
system to net with a vendor credit, then UIS/OAS will have to notify the vendor
to issue a check in lieu of the credit memo.
Retrieving
Payment Information
Vendors and employees can verify that an invoice has been
paid by retrieving checking information from the Accounts Payable
office or by calling Central A/P at 617-495-8500. A check number, issue date, total dollar
amount, and breakdown (or copy) of invoice (if more than one is encompassed on
a check) can be provided upon request.
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