Trends in 2016: smart and compliant vendor booking!
No doubt, when you record vendor invoices there is still a large amount of manual work required. And therefore many chief financial officers are dreaming about an automated recording and booking of accounts payable. While more and more invoices are sent digitally, these invoices alone can not be used for automated recording and booking of accounts payable. Namely, a number of minimum requirements has to be met before an accounting record is legally compliant.
Nowadays there is some advertising of providers of smaller financial accounting programs, claiming now to be able to electronically book the accounts payable. That might work in principle, yes, but presupposes that the supplier and the customer are working on the same financial accounting system. But this is usually not the case. And cross-system formats such as “Zugferd” are neither widely used nor have standards emerged yet.
In our experience, this approach won’t solve any problem. Because the legal environment of accounting has changed fundamentally. While in the past the focus was on the correct accounting record, now the focus shifts on the aspect of security and traceability. The security requirements will become more demanding as more bills will be issued as electronic record only.
And the security requirements do not only affect storage and archive obligations, but the trend in national regulations asks for a closed loop internal control process to ensure only legally correct bookings are entered. In practice this means that for booking a vendor the relevant order must exist. And if it’s about the supply of goods, the receipt of incoming goods inspection must be there before a vendor invoice can be booked.
So things here are about an ICS or Internal Control System. And as an internal control system extends far beyond accounting the whole business process must be mapped to one IT system for reasons of efficiency and effectiveness. Many financial accounting systems, still in use, will soon come to the end of their product life.
As a substitute for financial accounting only solution more and more ERP systems will be deployed. The reason is quite simple. The purchase order, the receipt of goods, the booking record, up to the payment, the whole business process is auditable and traceable at all times.
Some will complain that here the complexity is multiplied without any benefit gained. Now that depends on the implementation. Namely, from the purchase order in the ERP system these data can be used to automatically book the vendor invoices. And here’s the advantage. The generation of the booking record out of the order data is largely an automated booking system. And with this approach, the purchase order gets compared with the invoice record automatically. Difference between the terms of the order and the terms of the invoice are immediately visible.
Thus, with the use of a suitable ERP system is not only the bookings of accounts payable are largely automated, but also, much more important, is the establishment of a closed loop internal control system to ensure that the legal requirements have been met to a proper accounting in the future.
Thus, with electronic invoices accounting costs are reduced significantly. The processes with printing, enveloping, franking and sending can be saved on the supplier side as well as opening and scanning on the client side. But the savings on the customer side is considerably increased when the supplier invoice does not need to be re-entered, but can be created from the purchase order. And in this way an adequate internal control system is used.
What is your internal control system? Discuss with us on the blog!
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