Discover our latest AI-powered innovations around faster payments, smarter workflows, and real-time visibility.Learn more →
Payment controls help accounts payable (AP) departments avoid losing money due to fraud, late payment fees, and other errors. They are a necessary part of a company’s overall payment operations to keep payments secure, accurate, and authorized.
The AP department is responsible for making payments to suppliers, contractors, and other vendors—a complex process where much can go wrong. Implementing payment controls keeps errors at bay across the entire process: verifying the payment obligation, entering payment data, and the actual payment.
How do Payment Controls Work?
AP teams rely on a bevy of controls that span multiple steps within the payment process. Let’s review some of the main payment controls.
3-Way Matching
This payment control uses three key documents to make sure a business is paying the right vendor the right amount. The AP team reviews the following documents:
- Purchase Order (PO): The original order submitted to a vendor for goods or services.
- Invoice: The bill submitted by the vendor with the payment amount due.
- Goods Receipt Note (GRN): A document from the business to the vendor confirming the receipt of goods or services.
Verifying that information matches across all three documents prevents errors and fraud. Any discrepancies are flagged and should be resolved before a payment is made. This is how businesses avoid paying the wrong amount—or paying for something they never received.
Approval Control
Another popular payment control is approval control. Businesses can set up a hierarchy of approvals before a payment can be made to vendors or contractors. Most approval processes require multiple approvals from management, though the specifics may vary depending on the size and complexity of the business. Some approvals are done manually, while others use an automated system to streamline the process with electronic approvals.
Just like with 3-way matching, the approval payment control verifies that the right payment amount is made to the right vendor at the right time. This stops unauthorized payments for goods or services never received and prevents fraud.
Automated Checks
Some businesses automate check issuance to eliminate the risk of human error, limit the time involved in making payments, and reduce fraud. The automated check payment control automatically transfers pre-defined criteria from the AP system to a secure system to print and mail checks. Pre-defined criteria include vendor information, payment terms, and approved invoices.
Beyond reducing the manual labor of data entry and check printing, this payment control provides greater visibility over the payment process. An automated system means AP teams can generate reports, keep an eye on the status of payments, and track payment history.
Segregation of Duties
Another payment control option is to divide the responsibilities of the payment process across several individuals. Since no one person has total control over the payment process, businesses can reduce the possibility of unauthorized payments, fraud, and errors. Duties like entering invoices, reconciling bank statements, and issuing checks may be assigned to different people or departments to improve overall control and visibility into the payment process.
Payment controls are an essential part of running a business. In fact, even the government uses payment controls. We’ve discussed some of the biggest ones here, but AP teams may also use payment limits, cutoff procedures, obligation-to-pay verification, data entry controls, and other authorization measures to protect the business’s hard-earned money.
Try Modern Treasury
See how smooth payment operations can be.
Learn
Payment operations is an umbrella term that refers to the entire lifecycle of money movement for a company.
Bank reconciliation is the process of verifying the completeness of a transaction through matching a company’s balance sheet to their bank statement.
A banking API is software that facilitates a digital connection between a company and a bank.
The term "cash position" pertains to the quantity of cash or assets that can be readily converted to cash, held by an individual, company, or financial institution at any given moment.
Continuous accounting is the ongoing process of updating a business’s general ledger with reconciled bank statement transactions as soon as they become available.
Fiat money is a form of currency issued by a government and declared legal tender, though not backed by a commodity.
Financial reporting empowers businesses to make informed financial decisions by identifying trends and tracking performance. It also offers insights into a company's assets, liabilities, and debt management strategies.
The Flow of Funds is the movement of money in and out of bank accounts.
Gross merchandise volume (GMV), also known as gross merchandise value, is the total value of the goods or services retailers sell over a set period.
An invoicing API allows companies to create, send, manage, and reconcile invoices, as well as track related payments end to end.
Know Your Business (KYB) is a set of verification procedures that helps companies avoid getting into business with criminals.
Month-end close is a critical process where the accounting team reviews and records financial transactions to close out the month.
Payment operations is an umbrella term that refers to the entire lifecycle of money movement for a company.
While both are essential for managing online transactions, there are several differences between payment processors vs. payments gateways.
Two options for financial transaction settlement—differing in both speed and style—here, we’ll look at how both Net Settlement and Gross Settlement work in action.
Incoming payment details are notifications that a company is going to receive a payment it didn’t originate—meaning the receiving funds were not initially requested.
Payment controls help accounts payable (AP) departments avoid losing money due to fraud, late payment fees, and other errors. They are a necessary part of a company’s overall payment operations to keep payments secure, accurate, and authorized.
Payment rails are the underlying systems and networks that facilitate the movement of funds between parties in financial transactions.
Account-to-Account (A2A) banking, sometimes also called Me-to-Me banking, is the transfer of funds from one account to another account.
Implementing a multi-bank strategy is vital for companies looking to reduce risk exposure. In this article we explain how to reduce financial risk by implementing bank redundancy.
Batch processing is a method of processing various types of transactions. As the name suggests, transactions are processed in a group or “batch.”
In business terms, float refers to the time delay between the movement of funds from one account to another.
Know Your Customer or Know Your Client (KYC) is a set of guidelines for verifying the identity of a customer and gauging the associated risk of working with them.
Money transmission is the act of one party receiving currency for the purpose of sending it over to another party.
The 10-K is a comprehensive report mandated by the U.S. Securities and Exchange Commission (SEC) that publicly traded companies must file annually. This report provides a thorough overview of a company's financial performance over the past year.
A merchant’s bank account must pay an interchange fee to the card-issuing bank each time someone uses a credit or debit card to purchase something from their store.