Internal Controls that Require Basic Configuration

The following controls require some basic setup in the NetSuite UI.

• Accounts Receivable

  Open receivables identified by user-defined conditions, such as large invoices or exceeding the credit limit, are automatically identified and routed for review.

• Financial Close

  • The amount of expense to be amortized per month is automatically spread based on the amortization schedule prepared by A/P.

  • NetSuite automatically allocates the expenses to different departments based on the allocation percentages.

  • Access to open and close the sub-ledgers (A/P, A/R, and Payroll) and the general ledger is restricted to approved roles.

  • Elimination journal entries are automatically generated based on intercompany drop-ship workflow transactions.

  • Intercompany accounts are automatically reconciled.

• Commissions

  • Monthly, NetSuite automatically calculates eligible commission amounts based on the plan type linked to the participant (employee or partner).

  • After a commission is approved, it is automatically posted to A/P and to the general ledger, and is auto-populated for the payroll run.

  • Commissions are calculated and processed in line with standard compensation agreements.

• Fixed Assets

  • Edit access to the Fixed Asset Module is restricted to users with approved roles only.

  • NetSuite FAM is configured to calculate monthly depreciation based on the asset’s cost, depreciation method, and useful life.

• Human Resources and Payroll

  • Edit access to the Payroll folder, which contains the Payroll Worksheet, is restricted to users with approved roles.

  • NetSuite auto-populates employee hours and expenses after appropriate approvals are obtained in the system.

  • After a payroll is committed, the related payroll taxes, benefits, bonuses, and commission expenses are automatically calculated and posted to the general ledger.

• IT General Controls

  • NetSuite compares contact and customer records and provides notifications of possible duplicate records.

  • Employee access can be restricted based upon IP address.

• Order to Cash

  • A general ledger journal entry is automatically created when an authorized credit memo is created and approved.

  • A journal entry is automatically generated when a batch payment posting is created and approved.

  • After all payments from a bank batch are applied, a deposit activity is performed in NetSuite and the related journal entry is automatically generated.

  • When payment from the bank for a single activity is applied, a deposit activity is performed in NetSuite, and the related journal entry to accounts receivable is automatically generated.

  • Unbilled approved T&M hours are automatically populated in NS for invoicing.

  • NetSuite only allows fulfillment and shipment of inventory if the following conditions are met:

    • Sales order is in Pending Fulfillment or Partially Fulfilled status and is not on hold for any reason.

    • Part numbers of items being fulfilled match part numbers on the Sales order and the quantity being fulfilled does not exceed the quantity on the sales order.

    • For serialized inventory items, such as switches, each fulfilled serial number matches a serial number that exists in finished goods inventory.

  • Shipping amounts are automatically calculated and applied to transactions based on rules.

  • A 1099 or W2 is required prior to vendor approval.

• Procure to Pay

  • NetSuite automatically routes a PO for approval based on the approval policy set. Only POs that have been properly approved can be processed for invoicing.

  • Spending thresholds on POs are built into a workflow as required by governance.

  • Spending thresholds on non-PO spending are built into a workflow as required by governance.

  • Use of vendors in purchase orders is restricted to pre-approved vendors.

  • Updates to vendor information route automatically for review to designated approvers.

  • Non-inventory purchase requests are automatically routed for approval request to the relevant reviewer/approver.

  • Inventory purchase requests are automatically routed for approval request to the relevant reviewer/approver.

  • A three-way match is automatically performed for POs that have lines mapped to item receivable general ledger accounts. The control is configured at the item-level. If any item quantity or price does not match, an error message is displayed, the invoice is not posted, and the invoice is placed in Pending Approval status in NetSuite.

  • Expense reports are automatically routed to the employee’s manager and, after approval by the manager, to A/P for review and approval. After approval by the employee manager and A/P, the expense report is marked for payment.

  • Purchase requests are routed for approval based on set approval limits.

  • Expense reports are routed for approval based on set approval limits.

• Revenue

  • The relative fair value allocation at the time of an invoice is applied. The allocations are based on the relative fair values for all line items in the invoice based on the BESP data contained in NetSuite.

  • On invoicing, NetSuite creates a service amortization schedule for all of the service line items on invoice.

  • NetSuite is set up to defer revenue and the related COGS per terms and conditions set out in the customer primary file. These terms include: rights of return, acceptance, shipping terms, and others.

  • NetSuite automatically recognizes and defers revenue based on the Revenue Recognition Policy. (Note: The Revenue Recognition Policy must be set up in NetSuite for each item.)

  • NetSuite is configured to recognize revenue on a monthly straight-line basis, prorated daily basis for the first and last month, for subscription and support revenue based on the provisioned date, contract start and end dates, and revenue recognition schedule.

Related Topics

• Internal Controls in NetSuite
• Standard Internal Controls

General Notices