Two Approaches to Paying Bills

A company can take one of two approaches in paying its telecom bills. In the first approach, depicted in Exhibit 1, the Accounts Payable department (A/P) pays all invoices without review and forwards a copy to the Telecom department for later review

Exhibit 1: Telecom Department Reviews Invoices after Payment

This approach ensures timely payment of carrier invoices and avoids service interruptions due to late payment, as most payment terms with carriers specify net 30. One disadvantage is the potential for overpayment, as the Telecom department typically runs lean on staff and may not have the resources to methodically review the invoices each period. Because the invoice is already paid, the Telecom department may not consistently review all invoices. Inertia often rules — payment is made without scrutiny if the supporting paperwork exists and the dollar amount is reasonably close to last period's payment.

In the second payment approach, depicted in Exhibit 2, A/P logs the invoices into the accounting system and sends all invoices to the Telecom department. The Telecom department reviews the invoices, notes and investigates exceptions, approves the invoices, and then forwards the invoices to A/P for payment.

Exhibit 2: Telecom Department Reviews Invoices before Payment

The second approach reduces the potential for overpayment, but also increases the potential of service interruptions or late penalties because the cycle time from invoice receipt to payment is doubled. The Telecom department may not have the capacity to review the invoices in a timely manner, or the invoices may get lost or misdirected in routing. Additionally, if the telecom department incorrectly disputes charges that are actually owed to the carrier, late penalties will accrue.

The second approach is generally preferred because billing errors are typically identified and resolved more quickly by the Telecom department. Companies that have their A/P departments pay the bill without the Telecom department first reviewing the bills may want to train an A/P clerk to perform the bill review. For this to be successful, the A/P clerk should have access to the Telecom department's circuit and service inventory and be aware of service connections, disconnections, or changes to validate the bills.