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Under Pressure: What Happens When Accountants Can't Find Crucial Documents

Under Pressure: What Happens When Accountants Can’t Find Crucial Documents

One of the most consistent problems faced by accounting teams is the non-availability of crucial documents when they need them the most. Whether it’s a crucial invoice relating to a transaction that has caught the eye of an auditor, a Purchase Order that needs to be checked in order to calculate accrual for a purchase on which an invoice is yet to be issued, or shipping documents required to perform a three-way match, the organization and storage of such documents has always been a stress point for the entire Finance team.

Missing documents, or indeed documents that are, at any rate, hard to find, affect bookkeepers, controllers and project managers in more ways than one.

Delaying Month-end Close: Your month-end report is a crucial time for you; in some ways, it’s like a spot check — a short-term indication of the strength of your internal controls. The length and accuracy of your month-end report determines your and your team’s effectiveness, and, of course, your ability to run a well-oiled financial reporting process in your company. And it’s at such crucial junctures that many accounting teams find themselves in a scramble. “Where is that invoice? Who approved this Purchase Order? Did the CFO sign off on this expense? Have we been invoiced for this purchase yet?” — these are questions they need to find answers to quickly and accurately. The lack of a centralized storage of documents, which provide these answers and act as a single version of truth for any financial activity that perplexes you, comes at a huge cost. When documents and financial records are not available, accounting teams, already in a crunch, can either indefinitely delay their month-end close or close their books anyway, without the confidence that their reports are accurate. Neither of these two outcomes is desirable. 

Auditors Lose Confidence: Whether your company is undergoing an internal audit, or in more serious cases when a third-party auditor has been hired to stress test your company on compliance and internal controls, you need to be in a position where you can easily retrieve any document requested by the auditor. In more searching and thorough audits, it’s not just the essential documents like POs, Invoices, Receipts etc. that are sought out, it’s the smaller details like approval time stamps, a full record of any and all changes made to an order between requisition and purchase, which are asked for as well. In such cases, unless you have a full audit trail that tells the entire story behind a particular transaction, your auditors are bound to red flag your process and lose confidence in your company’s internal controls.

Incorrect and Unreliable Invoices: If you’re a project or service vendor that’s working contractually with a company, or an organization or government entity, the invoice and statement of work that you draw up for your client would need to be not just accurate, but also supported by documents and records. In such situations, missing documents and records can easily undermine the credibility of the work that your client is being billed for. This can not only lead to unpleasant conversations and strain your relationship with your client, it can drive away larger companies and government organizations that insist on auditing their vendors and being provided a full audit trial for nearly everything that you bill them for.

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Three-way Match Becomes a One-Way Match: As a rule of thumb, every controller worth his salt performs a three-way match between an invoice, its corresponding purchase order and shipping document. This is undertaken quite simply to ensure that the invoice for a particular product or service matches the Purchase Order (which, effectively, ensures that the items mentioned in the invoice were indeed ordered by someone in the company) and that both the PO and the Invoice match the shipping document and packing slip (which, effectively, ensures that the product or services ordered have actually been received in good condition). Often times, accountants can’t find a PO or Packing Slip against an invoice; when this starts happening with more frequency, it becomes a systemic problem — the Accounts Payable team then becomes accustomed to paying off invoices without checking them against the PO and shipping documents first. This can only be remedied by a concerted effort to store and maintain such  documents in a safe and centralized location so that Finance has easy and instant access to them.

Your purchasing process shouldn’t be slowing your company down. Learn how you can increase your purchase to approval time by up to 80%. 

 

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