How to keep an audit trail for accounts payable

Short answer

1. Keep the source invoice on the bill.
2. Log who approved, rejected or sent back each bill, with a date.
3. Log changes and reasons.
4. Test it with five bills.

Before you start

Decide who needs to see the trail. That is usually your accountant, an auditor, a lender or a new owner. Their question is always the same: who agreed to pay this, and what did they check?

The invoice approval workflow generator can help you write down who approves what. For more on what auditors expect, read what auditors actually expect from finance automation platforms.

The manual way in Xero and MYOB

1. Attach the document. In Xero open the bill and use the Files or attach option. In MYOB attach the file to the bill.
2. Use History and notes. In Xero each bill has a History and notes section. It shows who created or changed the bill and when. Add a note when you approve, query or reject.
3. Use your approval setting. If you have turned on bill approval in Xero, only users with the right role can approve. Keep user roles tight.
4. Use reports. Run a report of bills by date and user when an auditor asks. In MYOB use the transaction journal and audit reports.
5. Link payments. Make sure payments are applied to the right bill.

Limits:

• Notes are only as good as the person who types them.
• Emails and chat messages sit outside Xero or MYOB.

The Pulsify way

1. Forward the invoice to your Pulsify address. The original file is kept with the bill.
2. Set approval rules by supplier, amount, account or job. Add steps and a review step if you need them.
3. Each approval, rejection and send back is recorded in the bill’s activity. Rejections can carry a reason.
4. Bulk approve or bulk reject keep a record per bill.
5. On final approval the bill is created in Xero or MYOB with the source file attached.

If someone edits the total, the supplier or an account after a bill is sent for approval, approval starts again. That keeps the record honest.

Worked example

Example Plumbing Supplies sends a $6,600 bill. Your rule says anything over $5,000 needs the owner.

The audit trail for this bill reads: received 3 March by email, checked by the bookkeeper 3 March, approved by the owner 4 March, created in Xero 4 March, paid 28 March. An auditor opens the bill and sees the file, the dates and the names in one place.

Common mistakes

• Approving by email only. The approval is not on the bill.
• Shared logins. A log that says “admin” proves nothing.
• Skipping rejection reasons. Later nobody knows why a bill was stopped.

Next step

Try an invoice and see the activity log on a bill. Read the approval workflows guide and the invoice checks guide.