Accounts Payable Turnover
Accounts Receivable Turnover
Chart of Accounts (COA)
Problems in Chart of Accounts Design
How do you file your paid vendor invoices? Alphabetically? Who taught you to do it that way? Have you ever wondered why?
How often do you go back and research a paid accounts payable invoice? How much time does it take?
Have you ever thought that there might be a better way?
Filing vendor invoices alphabetically has been a practice since before the time of computers. With accounting theory in existence for centuries it is safe to say that the practice has been in place for some time. In a manual environment, it is useful to be able to research invoices, especially if there is a lot of volume involved. But is it necessary in today’s computer environment to manually sort data?
Best Practice for Filing Vendor Invoices
By using the computer to sort for information, you no longer need to do so manually. Once a vendor invoice has been paid you should then file it in check number sequence or by date. This practice will save both the time to prepare the file folders, sort the paid invoices and the filing of those invoices. Additional benefits include not having to use as much supplies nor take as much space to store.’
The most common argument against this best practice (other than that’s not the way we have been doing it!) is that we need to be able to go back to the original invoice. There might be certain situations such as construction job costing that would require you to review previous bids. However, most often this objection can be countered by recording the required information in the computer, negating the need to go to the source document. In fact, as more companies adopt scanning of original source documents the ability to use a manual filing system will go away.
If you have not re-engineered your filing practices for paid vendor invoices then you are not realizing all of the time savings efficiencies of the computer. In fact, your system is a hybrid manual and computer system. Instead of designing your accounting system around the computer, you take the computer and wrapped it around your manual system!