Accounting Paperwork 101: The Business Impact of Lost Documents
One of the most consistent problems faced by accounting teams is the loss of crucial accounting paperwork, right when it’s needed most. For many teams who rely on paper-based processes, this couldn’t be truer. In fact, approximately 30 percent of printed pages are never picked up, and 45 percent are thrown away before the end of the day.
But here’s the thing about all that thrown-out paperwork: it’s often essential for accounting teams. In fact, each time someone casually discards or loses receipts, invoices, and purchase orders, a finance team member begins to cry.
We feel your pain. Whether it’s an invoice relating to a transaction that caught the eye of an auditor, a purchase order than needs reviewing prior to approval, or a shipping document required to successfully complete a three-way match, a single missing document creates inefficiencies that not only chip away at critical metrics, but that also create unwanted headaches.
In this blog, we outline a few ways that missing documents can cause problems for the wider organization. And we show you what you can do about it.
Delays in the month-end close process
Your month-end process is a crucial time for your organization. In many ways, this report is like an organizational spot check. And for accounting teams, it’s used to accurately measure the strength of your internal controls.
For leadership teams, your ability to close out the month quickly is a good signal of efficiency. Get it right, and it can free up your time so you can become a strategic business partner with the wider organization. Get it wrong, however, and you’ll be adrift and struggling to keep afloat.
What’s the difference between these two scenarios? Oftentimes, it’s a single missing document. At a crucial juncture like month-end close, it’s all too common to rush around in search of that missing invoice, or to rummage through mountains of paperwork to look for a specific purchase order.
But while finding these documents might solve the short-term woe, they don’t solve the core problem. To solve that, you must rethink your strategy so documents never go missing again. And sourcing a centralized and cloud-first document storage solution is undoubtedly less expensive than consistent delays in your month-end close.
Auditors lose confidence
Whether your organization is undergoing an internal audit or an outside auditor is stress testing your organization’s compliance, it’s vital to have access to any document requested as quickly as possible.
While this might be feasible for things like invoices, purchase orders, and receipts, auditors require much, much more. They might ask for approval time stamps, a full record of changes made to an order, and any other notable details surrounding every purchase. It’s up to you and your team to have this record of events ready and waiting.
In many cases, unless you have a full audit trail that tells the entire story behind every transaction, auditors will likely red flag your process, lose confidence in your internal controls, and perhaps even add a black mark against your organization’s name.
Incorrect and unreliable invoices
If you’re working contractually with an organization to supply goods or services, you’ll be relying on accounting paperwork like invoices and statements of work. These two documents need to be as accurate as possible. In many cases, they also need to be backed up by supporting documents.
Missing and unreliable invoices can quickly undermine the credibility of your spend management. This not only leads to unpleasant conversations (which can result in lost clients), but it can also drive away high-paying organizations, like governments and multinational enterprises, who depend on compliance.
Three-way matches become one-way matches
As a rule of thumb, every controller worth their salt performs a three-way match.
This simple process ensures that the invoice for a particular product or service matches the purchase order. It also ensures that your teams receive products and services both on time and in good condition.
A three-way match like this helps to reduce fraud, improve compliance, and ensures that every organizational cost is accounted for. However, many accountants often struggle to find a purchase order or packing slip. This means that they can’t complete the three-way match. It also means that accountants must sign off on spend without validating it. This undermines the entire spend process and leaving the organization vulnerable to risk.
To remedy this, finance teams must make a concerted effort to store and maintain all shipping documents in a safe and centralized place. By the same token, team members need an easy and efficient way to upload essential documents to their spend requests. Only then can accountants accurately perform a three-way match.
Technology to the rescue
Fact: manual and paper-based processes are negatively impacting your bottom line.
Without the right technology in place, finance teams struggle to close out the month. They also struggle to organize accounting paperwork for critical audits and three-way matches, and fail to remain compliant.
To build an efficient spend management process, it revolves around one key factor: technology. With the right tech stack in place, you can integrate your purchasing workflows into your accounting workflows and create end-to-end visibility, along with centralized control.
What’s more, accounting teams can promote organizational accountability, ensure a healthy and proactive spend culture, build auditor confidence, and streamline key workflows that help to reduce costs.
To find out more about how Procurify can help tick all of these boxes for your finance team, explore our product here.
Editor's note Original publish date: 17 August 2018 Original author: Nitant Narang We've since updated and republished this blog post with new content.