Centralized Receiving Function | Enhanced Internal Controls | Ohio CPA Firm | Rea CPA

How Can Centralized Receiving Improve Your Internal Controls?

Do you have department heads, principals or administrators with the ability to request, receive and approve payments for a good or service? Do you have secretaries, principals, department heads or administrators that are resistant to follow procedures or forget to return the packing slip or receiving copy of the purchase order?

If you answered yes to either of these questions, this may be an indication of a weakness in your internal control structure. One way to improve these controls is to develop a centralized receiving function, filtering all purchases through one location.

Centralized receiving is a single location with designated personnel that accepts all deliveries for a government, acknowledges receipt, verifies quantity and quality, and is responsible for facilitating delivery or pick-up among the multiple government locations.

Advantages to a Centralized Receiving Function

Any centralized process allows for streamlined efforts, standardized forms, reduced redundancies and the ability to train employees to specialize in their tasks. Other advantages include:

  • Separating the employee ordering and/or approving the goods to be received from the personnel receiving the goods from the vendor
  • Deterring requesting purchases that may not be for a legitimate business purpose
  • Requiring a specific shipment location will prevent unauthorized purchases from being shipped directly to the requestor and/or approver of the purchase (when purchasing items using credit cards or procurement cards)
  • Increasing supervision and accountability over transactions
  • Saving shipping costs and taking advantage of bulk ordering discounts when purchasing similar items delivered to one location
  • Simplifying your inventory and asset tracking procedures reduces the chance for error
  • Standardizing any process only requires one step to revise the activities, creating a greater degree of flexibility

How to Begin Implementing Centralized Receiving

The cost to implement centralized receiving can be managed by making use of existing land or building space, as well as utilizing handbooks, standardized forms, and policies and procedures that have already been created by companies operating a centralized purchasing function. These items, coupled with proper staff training and regular communication, are essential to facilitating implementation and ensuring a smooth transition. Additionally, identifying back-up personnel in the event of absences is integral to maintaining segregation and avoiding disruptions in processing.

Another critical component to an effective centralized receiving function is a receiving report. Such a report should document the date, timing, and status of goods or services received, supplier name, packing slip, invoice and original purchase order for future matching to an invoice. To ensure accurate and timely recording, this receiving report should be submitted to accounts payable person immediately for proper recording.

With multiple buildings, employees and departments possessing the ability to request purchases, establishing a centralized receiving function will improve segregation of duties by adding an additional level of verification. With fraud becoming more prevalent and fraudsters becoming more sophisticated in their approaches, it’s as important as ever to protect yourselves and the taxpayer funds you manage.

For more information or assistance, email Rea & Associates.

 

This article was originally published in Illuminations: Facts & Figures from people with a brighter way, a Rea & Associates enewsletter, 7/28/2013.
Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.