Structuring Effective Controls Over the Five Primary Transaction Cycles
This is one part of a series designed to help organizations identify risks and improve internal controls over financial reporting. Click here to access the rest of the series, including a set of five downloadable tools organizations can use to help assess their own controls.
Chapter 3, Purchase to Pay, describes the processes, risks and recommended controls associated with selecting and purchasing supplies, inventory and services. Your organization may have a formal procurement department or a much simpler purchasing process; either way, you must select vendors, buy supplies, pay invoices and reimburse employee expenses.
Purchase to Pay transaction cycles involve all the activities involved in obtaining goods, hiring services, receiving invoices and paying vendors. Even organizations that do not have a separate Procurement function must still purchase materials and pay suppliers. Key processes include:
- Vendor management
- Procurement (for some organizations)
- Accounts payable and invoice processing
- Cash disbursements
Chapter 3 includes an overview of purchasing and payment functions, descriptions of processes and subprocesses, descriptions of internal controls that organizations can leverage to manage risks, and a table describing key risks and controls for each process and subprocess.
In addition, this chapter includes a downloadable, customizable risk–control matrix with a detailed list of risk considerations by process, with suggested controls to address each one.
Why It Matters
Whatever the size or complexity of your organization, implementing the right controls over sales to collection processes lays the foundation for a well-controlled financial reporting environment. This guide gives you tools to begin assessing and improving your own organization’s controls.
Executive Resource Center
This is an overview in a series of articles designed to help organizations identify risks and improve internal controls over financial…