Match Each Description With A Document In A Voucher System

In a voucher system, meticulously matching descriptions with documents is crucial for maintaining financial integrity, preventing fraud, and ensuring accurate record-keeping. This process, seemingly straightforward, requires a deep understanding of each document's purpose and its place within the overall voucher workflow. Let's delve into the intricacies of matching descriptions with documents in a voucher system.

Understanding the Voucher System

At its core, a voucher system is a method of controlling disbursements, ensuring that payments are made only for legitimate and authorized expenses. It provides a structured and documented trail for every payment, enhancing transparency and accountability. The system typically involves several key documents, each playing a vital role in the approval and payment process.

Key Documents in a Voucher System

To effectively match descriptions with documents, you must first understand the individual purpose and content of each document. These commonly include:

Purchase Requisition: This is the initial request for goods or services, originating from within the organization. It outlines the what, why, and quantity of the required items, as well as the department needing them.
Purchase Order: Once the purchase requisition is approved, a purchase order is issued to the vendor. This document represents a formal offer to purchase goods or services under specified terms and conditions, including price, quantity, and delivery details.
Receiving Report: Upon delivery of the goods or completion of the services, the receiving department prepares a receiving report. This document verifies that the items received match the purchase order in terms of quantity and condition. It serves as proof that the company has received what it ordered.
Vendor Invoice: This is the bill received from the vendor, detailing the goods or services provided, the price, payment terms, and any applicable taxes or discounts. The invoice should align with the purchase order and receiving report.
Voucher: The voucher itself is a summary document that compiles information from the other supporting documents. It serves as an internal control mechanism, providing a standardized format for authorizing payment. The voucher typically includes the vendor's name, invoice number, amount due, account codes for proper GL posting, and approval signatures.
Check or Electronic Payment: This is the final step in the process, representing the actual disbursement of funds to the vendor. The check or electronic payment should be directly linked to the voucher and all supporting documentation.

The Matching Process: A Step-by-Step Guide

The heart of a robust voucher system lies in the meticulous matching of descriptions and data across these documents. Any discrepancies must be investigated and resolved before payment is authorized. Here's a detailed breakdown of the matching process:

Invoice to Purchase Order:
- Description: The first step is to compare the description of goods or services on the vendor invoice with the corresponding description on the purchase order.
- Matching Points:
  - Are the goods or services described identically?
  - Are the quantities and unit prices consistent?
  - Do the invoice number and purchase order number match where referenced?
  - Are there any unauthorized charges or discrepancies in pricing?
- Action: Any discrepancies must be investigated. This could involve contacting the vendor for clarification, reviewing the original purchase requisition, or consulting with the requesting department.
Invoice to Receiving Report:
- Description: This step verifies that the goods or services invoiced were actually received.
- Matching Points:
  - Do the quantities listed on the invoice match the quantities listed on the receiving report?
  - Does the description of the goods or services align with what was received?
  - Is the receiving report properly authorized, indicating that the goods were inspected and accepted?
- Action: Discrepancies may indicate a shipping error, damaged goods, or even attempted fraud. These issues must be resolved before payment is made.
Purchase Order to Receiving Report:
- Description: This comparison ensures that the goods or services received were actually ordered.
- Matching Points:
  - Do the quantities and descriptions match between the purchase order and the receiving report?
  - Is there any evidence of over-shipment or unauthorized substitutions?
- Action: Any discrepancies here suggest a potential issue with the ordering process or the vendor's adherence to the purchase order.
Voucher to All Supporting Documents:
- Description: The voucher serves as a summary and control document, so it must accurately reflect the information contained in all supporting documents.
- Matching Points:
  - Do the vendor name, invoice number, and amount due on the voucher match the vendor invoice?
  - Are the account codes on the voucher appropriate for the goods or services being purchased?
  - Are all supporting documents (purchase requisition, purchase order, receiving report, and vendor invoice) attached to the voucher?
  - Is the voucher properly authorized by designated personnel?
- Action: The voucher should not be processed if any discrepancies are found or if any supporting documents are missing.

Addressing Discrepancies

Discrepancies are inevitable in any voucher system, but how they are handled is critical. A well-defined process for addressing discrepancies should include:

Investigation: Thoroughly investigate the cause of the discrepancy. This may involve contacting the vendor, reviewing internal records, or consulting with the requesting department.
Documentation: Document all findings and actions taken to resolve the discrepancy. This creates an audit trail and provides valuable information for future reference.
Resolution: Implement corrective actions to prevent similar discrepancies from occurring in the future. This may involve revising internal procedures, improving communication with vendors, or providing additional training to employees.
Approval: Any adjustments to the voucher or supporting documents should be approved by designated personnel before payment is authorized.

The Importance of Automation

While manual matching is possible, it is time-consuming and prone to error. Automation can significantly improve the efficiency and accuracy of the voucher system. Features to look for include:

Optical Character Recognition (OCR): Automatically extracts data from invoices and other documents, reducing the need for manual data entry.
Automated Matching: Automatically compares data across documents and flags any discrepancies for review.
Workflow Automation: Streamlines the approval process, ensuring that vouchers are routed to the appropriate personnel for review and authorization.
Reporting and Analytics: Provides insights into spending patterns, vendor performance, and potential areas for cost savings.

Internal Controls and Best Practices

A well-designed voucher system is not just about matching documents; it's about implementing robust internal controls to safeguard assets and prevent fraud. Key internal controls include:

Segregation of Duties: Separate the responsibilities for ordering goods, receiving goods, approving invoices, and making payments. This prevents any single individual from having too much control over the process.
Authorization Limits: Establish authorization limits for different levels of management. This ensures that significant expenditures are subject to appropriate review and approval.
Regular Audits: Conduct regular audits of the voucher system to identify any weaknesses in internal controls and ensure compliance with policies and procedures.
Vendor Management: Implement a vendor management program to screen vendors, negotiate favorable terms, and monitor vendor performance.
Employee Training: Provide regular training to employees on the voucher system, internal controls, and ethical conduct.

Examples of Matching Scenarios

To further illustrate the matching process, let's consider a few examples:

Scenario 1: Quantity Discrepancy

Purchase Order: 100 units of Widget A at $10 each.
Receiving Report: 100 units of Widget A received.
Vendor Invoice: 110 units of Widget A at $10 each.

In this scenario, there is a quantity discrepancy between the purchase order/receiving report and the vendor invoice. The invoice indicates that 110 units were shipped, while only 100 units were ordered and received. This discrepancy must be investigated. Perhaps the vendor made a shipping error, or perhaps the receiving department failed to accurately count the units. The company should only pay for the 100 units that were ordered and received, unless the additional 10 units were authorized by a change order.

Scenario 2: Price Discrepancy

Purchase Order: Service B at $500.
Receiving Report: Service B completed.
Vendor Invoice: Service B at $550.

Here, there is a price discrepancy. The vendor invoice is $50 higher than the price agreed upon in the purchase order. This could be due to an error on the invoice, or perhaps the vendor is attempting to charge a higher price than was agreed upon. The company should contact the vendor to resolve the discrepancy before paying the invoice. It's possible that a change order was issued authorizing the higher price, but this should be documented.

Scenario 3: Unauthorized Charges

Purchase Order: 50 units of Part C at $20 each.
Receiving Report: 50 units of Part C received.
Vendor Invoice: 50 units of Part C at $20 each, plus a $50 "handling fee."

In this case, the vendor invoice includes an unauthorized "handling fee." Unless this fee was explicitly agreed upon in the purchase order or a subsequent agreement, the company should not pay it. The company should contact the vendor and request a revised invoice without the unauthorized charge.

Frequently Asked Questions (FAQ)

What happens if a receiving report is missing?

If a receiving report is missing, it's difficult to verify that the goods or services were actually received. The company should attempt to locate the receiving report or, if that's not possible, obtain alternative documentation from the receiving department. Without proper documentation, payment should be withheld until the issue is resolved.
Can a voucher be approved without a purchase order?

In general, a voucher should not be approved without a purchase order, as the purchase order represents authorization for the purchase. However, there may be exceptions for certain types of expenses, such as petty cash or emergency repairs. In these cases, a special approval process should be in place.
How often should the voucher system be audited?

The voucher system should be audited regularly, at least annually, to ensure compliance with policies and procedures and to identify any weaknesses in internal controls.
What is a three-way match?

A three-way match refers to matching the purchase order, receiving report, and vendor invoice. This is a common best practice in voucher systems, as it provides a high level of assurance that the payment is legitimate and accurate.
What are the benefits of using a voucher system?

A voucher system offers several benefits, including improved internal controls, enhanced transparency, reduced risk of fraud, and more accurate record-keeping.

Conclusion

Mastering the art of matching descriptions with documents in a voucher system is paramount for maintaining financial integrity and ensuring efficient operations. By understanding the purpose of each document, following a structured matching process, and implementing robust internal controls, organizations can minimize errors, prevent fraud, and ensure that payments are made only for legitimate and authorized expenses. Embracing automation can further enhance the efficiency and accuracy of the voucher system, freeing up valuable resources and improving overall financial management. The voucher system, when properly implemented and diligently managed, becomes a cornerstone of sound financial governance.