Validating Business Processes in ERP Systems

Hello everyone, Payment Audit : Material Procurement. Auditing payment to vendors for material purchase is one of the critical checking aspects of P2P process. The main areas to check are: a) Checking of invoices with the Purchase Orders & its commercial terms such as rates, payment terms compliance, description, shelf life etc. b) Ensure that materials are actually received and GRN against the PO quantity is done. Without material receipt (unless it is advance payment terms) payment should not be done. c) Ensure system control has been performed (walkthrough) to ensure controls are there so that receipt quantity cannot exceed PO quantity i.e. payment is only to the extent of PO quantity. That comfort through system control will reduce checking time d) Ensure that items received matches the description of the items ordered as per PO e) Quality inspection of the material is important to ensure that correct quantity of material as ordered is received. In ERP there is quality inspection clearance stage is usually there before GRN can be made. this will depend on company process and system used. f) Any quality or damage issue of product can be dealt with as per terms agreed with the vendor either through insurance claim or claim from vendor. Ensure claim has been lodged. g) Invoice authenticity to ensure invoice is issued by a legitimate supplier and matches contractual terms. Verify the supplier’s name, GST/VAT registration, bank details (generally master is defined), company VAT reference are correct. h) Ensure system has defined three way matching concept i.e. Invoice vs PO vs GRN. once system walkthrough is performed to ensure proper control then this does not have to checked each time. i) Verify that the invoice has been approved by the relevant department i.e. internal certification. j) Ensure po amendment or approval is obtained for any deviation than the agreed terms. k) Bank master update and or validation of banking details as per laid down process so that payment is done to the correct account of the vendor. l) Check for any prepayments done earlier and its adjustment before the payment. Check if the invoice has already been paid to avoid double payments. usually system has control to raise alert if same invoice no is getting booked. m) Ensure all deductions are adjusted with the payment. (such as old recoveries, expiry recovery, discounts etc). n) The entry should be under correct ledger account to ensure proper finacial reporting. o) ensure all documents processed are original and not xerox copies to ensure fraudulent payments are not done. p) Check for various delays such as delay in GRN as compared to receipt date, delay in invoice receipt from vendor, considerable delay in payments etc. q) Ensure there is material receipt acknowledgement (sign and stamp) by authorized recipient along with date of receipt to ensure validation of actual receipt. Happy Learning Soneel

How IT Application Controls (ITACs) Keep Business Processes in Check – A Simple Guide Imagine you're running a busy café. Every day, you receive orders, prepare dishes, collect payments, and manage inventory. Now, what if someone forgets to record a sale? Or what if a staff member pays a fake vendor? Sounds risky, right? That’s exactly why Business Processes and IT Application Controls (ITACs) go hand in hand — especially in large organizations. What is a Business Process? A business process is a series of steps followed to complete a task or goal. Think of it like a recipe: Procure-to-Pay (P2P) involves buying goods or services from suppliers. Order-to-Cash (O2C) covers selling goods and collecting money. Hire-to-Retire (H2R) manages employees from joining to exit. Record-to-Report (R2R) handles financial records and reporting. These processes are the heartbeat of any business. But without control, they can go off track. Enter IT Application Controls (ITACs) These are automated rules or checks inside business applications (like SAP, Oracle, Workday, etc.) that validate data, enforce approvals, prevent fraud, and ensure accuracy. Story Time: Meet Sara, the Finance Manager Sara works in a retail company. One day, she logs in to process vendor payments. But the system stops her from paying one invoice. Why? Because the system's ITAC has automated a 3-way match check: Purchase Order (PO), Goods Receipt (GRN), and Vendor Invoice. No goods received? No payment. That’s an ITAC doing its job – protecting the business. How ITACs and Business Processes Work Together Let’s look at it like a relay race. Business processes run the race, but ITACs are the referees ensuring the rules are followed at each checkpoint. For instance, when a vendor is added, there’s a risk of fake or duplicate vendors, but ITACs block this by validating entries in the system. During PO creation, there's a chance someone might bypass approvals, but ITACs enforce the approval matrix automatically. When processing invoices, the system detects and prevents duplicate payments. For journal entries, ITACs ensure the logic is accurate by auto-validating entries, reducing human error. This seamless integration of checks and controls at each step keeps business operations efficient and secure. Why Should You Care? If you're an auditor, ITACs help assess whether business processes are safe and reliable. If you’re a business owner, ITACs reduce fraud and save money. If you're a tech professional, you’ll understand how applications support the business with built-in safeguards. Real-World Analogy: Airport Security Think of your business process as a passenger journey: booking a ticket, going through security, and boarding the plane. ITACs are like the X-ray machines checking bags, boarding pass scanners confirming tickets, and flight control ensuring a smooth takeoff. Without these systems, the airport would be chaos — and so would your business. Loved this article? Share it!