In Financial Accounting, both Rules and Policies help determine how a company prepares its financial statements. So, the differences between the two concepts might not be readily obvious.
Generally, rules and policies combine to form the body of guidelines that guides a company’s financial statements. The goal is to ensure that a company’s financial statements conform to the legally accepted standards.
But before we consider what makes rules and policies different, it is important to understand what each of them means and the connection between them.
What are the Rules?
Rules in Accounting are a set of principles that “must be” adhered to by a company in the preparation and presentation of financial statements.
They are the legal guidelines regulating the recording and reports of the financial data of companies within a particular state or country. Usually, these rules are set by the financial accounting governing bodies in a place.
In the United States, the Generally Accepted Accounting Principles (GAAP) specify the rules guiding the quality of the financial reports of companies. The GAAP is set by the Financial Accounting Standards Board (FASB).
It is a requirement for all publicly traded companies in the US to adhere to the GAAP. It also guides the activities of non-publicly traded companies too.
Failure to adhere to these rules might attract legal actions against a company by the governing bodies.
Cost, Accrual, Conservatism, Monetary Unit, Full Disclosure, and Reliability principles are some of the rules that consistent with the GAAP.
What are the Policies?
A company’s accounting policies are the standards set by the company for preparing its financial statements.
Simply put, policies are internally established procedures for financial reports. In essence, it is a company’s specific guidelines for following the general rules. They are specified by a company itself and not by external bodies.
Company policies are designed to help the company achieve its goals while still conforming to the generally specified rules.
Rules Vs Policies
To draw the line between these two concepts, you need to understand the connection between them.
Rules determine generally accepted financial report practices, while company policies are based on rules.
From its policies, a company can also derive internal rules for its operations.
The internal rules ensure that company policies are properly adhered to. The policies are designed to help the company maximize its potentials while conforming to the general rules.
The differences between Rules and Policies can be summarized thus:
While Rules are general accounting principles binding every company, policies are implemented by a company to help her adhere to the rules.
Rules are specified by the Financial Accounting governing bodies such as the FASB and IFRS. On the other hand, companies decide their policies and how to implement them.
Rules help regulate and maintain the quality of financial reports within a territory. Policies help a company to tailor the rules to achieve its goals.
Having a lawsuit filed against a company for violation of rules can be detrimental to the reputation of the company. To avoid this, every company needs to ensure that it is guided in all its activities.
Adherence to rules by making effective policies will help a company stay out of trouble and maximize its aims and objectives.
Creating a paperless account payable seems like a daunting task but it hosts numerous benefits that save time, money, and storage space. The saving of these three things proves a success for the businesses.
However, switching to a paperless account does not happen overnight nor it is easy. But it is definitely worth it which is why this article explains the process of going paperless.
In order to head towards the paperless accounts payable via software, the accounting process should be digitized. It is necessary to realize the paperless goals and take a record of the present process.
The software will implement an automation process and it is important to have a meeting on this with the team so that no conflicting opinion is raised.
Steps to Paperless Accounts Payable
Keep an eye on AP
Before planning to implement the paperless process, understand and familiarize the current account and where it stands. The present workflow should be monitored. Basically the things which need to be understood are the time taken to process an incoming invoice and the expenditure an invoice needs on average. Brainstorm and ask questions before jumping into the implementation step.
Have a meeting with the CFO, AP managers, and other staff members in order to have a better grip on the AP. Set the goals for automation and communicate with others. Ask for approval from everyone. Discuss the type of automation system to use for the account.
Things that need discussion are the amount of money that can be saved by automation, what the AP employees will do in the free time and the total sum of money required.
Take approval from everyone
Making a paperless accounts payable affects the whole company, not just an individual. Therefore, it is crucial to get everyone at the same level of understanding before actually doing it.
Mostly it is the upper management or the IT department which is not in favor of any changes so in order to avoid resistance, talk about their concerns. Moreover, the management team asks for
evidence in order to make sure that the paperless account is cheap and it improves the business. As for the IT team, it gets curious about how the compatibility, resources and security within the company will be affected. The staff is concerned whether they will be fired and how the business will be affected.
Base decisions about paper
The degree of automation which should be implemented is crucial to talk about. Therefore, understand where the process of your accounts payable stands and how many people are in favor of automation.
Eliminating the use of paper is not possible which is why it should be decided how far with automation the business will go.
Some options include making payments via paper checks like before but storing the AP information by digital means. Or the invoices can be digitized while the paper files of the incoming invoices are stored. Do note that all these decisions depend on the needs and requirements of the company.
Set Custom Tolerances
In order to process invoices, custom tolerances are set up in an automated system. A competent software for automation is the one which not only codes the incoming invoices automatically but also routes them for getting approval by electronic means. The user can enjoy full leverage and authority over the automation process.
Select an automation supplier
The software requires a good supplier. The software should implement the system as fast as possible. The cost expenditure on the implementation and if the system is compatible with the current ERPs are some of the concerns which need to be solved before practically doing it.
Also, inquire about how much the business can be expanded with the supplier and how efficient the reporting tools are. It is best if the software offers a free trial. The software which is the best at implementation is NextProcess.
Adapt to the new system
After the software is implemented, learn and get familiarized with the new system. Check to see if it is functioning properly. The invoices get processed
automatically and those invoices which are not compatible with the customized tolerances or need manual approval are sent to the respective manager.
Re-engineering the account processes to paperless is a huge milestone that every business should be prepared for. While there are many methods to go paperless, the software method is the most preferred one as it is safe and fast.
With so many businesses and companies choosing paperless accounts, it is evident now that the only reason it is getting popular is that this version offers many benefits. The revenue and exposure of the company can be increased by switching to paperless accounts. This article reveals how choosing the QuickBooks in allowing the implementation of paperless accounts payable is a wise decision.
In the accounting world, QuickBooks Online provides a cost-effective, customizable and scalable software solution for Accounting.
Third-party applications can be leveraged by QuickBooks. A lot of features to manage the documents and Accounts Payable automation process can be found in the App Centre of QuickBooks.
Benefits of QuickBooks
Improved accuracy of data
The accounting records and information should be correct and precise. QuickBooks eliminates all types of keying errors and mistakes in each data point by the paperless Accounts Payable workflow.
Features are introduced by QuickBooks which increase the dependability and accuracy. These features are pre-populated data and SmartCoding.
Transparency of Accounts Payable
QuickBooks allows full visibility of the expenses and allows easy tracking of the Accounts Payable. Moreover, it also shows the things in progress which drastically improves the cash flow so that you can take better decisions. In progress, the supplier invoice totals are made visible prior to getting posted on QuickBooks.
By allowing this information to be accessible to the users, the forecast reports can be generated by seeing the committed expenses. This visible information enhances the cash flow and companies irrespective of the size will get benefits.
Electronic invoice approvals
It takes a lot of time and energy to get approval from supplier invoices and checking the costs especially when the business has various locations.
With the help of QuickBooks, the frauds and errors are eliminated along with a deduction in the budget expenditure. The advantage of the invoice approval workflow is obtained from the electronic capability.
Immediate access from all locations
By using the QuickBooks Online, better and improved access to the data files is given as compared to the desktop version. Nevertheless, the full Accounts Payable workflow can only be seen after the supplier invoices have been posted.
This applies to both versions. No matter which device is being used, the approvers and the accounting teams can monitor everything in a single location with the help of the Accounts Payable automation.
Benefits of transforming into a paperless office
- Paper takes up a lot of space which after digitizing is cleared especially the filing cabinets. The thing about paper is that it accumulates rapidly which makes it almost impossible to organize. Most industries especially the financial ones have regulations regarding the storing of paper documents for long periods of time. This means that paper cannot be thrown out for years. However, if the documents are digitized, this problem can be solved. It is better to store in the cloud rather than in the physical records archive.
- After the documents are compiled and stored using the document management software, they can be accessed anytime using any device by both clients and colleagues. Popular applications like Adobe Acrobat and Microsoft Office are also involved in managing the documents. All the files can be saved in the content management system with a simple click.
- Where the physical forms can get destroyed or misplaced, digital documents pose no such threats. It is hard to check the printing, access, and copying of some sensitive physical files as well. However, the introduction of security capabilities in document management software eliminates such issues. After setting up the granular access rights, the system administrators can permit for the visibility of documents at three levels of user level, document level, and system level. It is to note that the paperless method has more security benefits than accessing. The confidential information can be redacted, electronic signatures are set up and audit trails are created.
- When the process is improved to such a degree, it is obvious that money and expenditure will be saved as well. In a much lesser amount of time, a large bulk of paperwork can be processed as compared to a traditional office. Furthermore, no money is wasted on the printer, paper, ink office space for storage and postage. Employees are also freed from the responsibility of managing paperwork. The employees can in turn spend that time on regulatory audits and expense reimbursement instead.
Owing to all these perks and how QuickBooks has made the process of getting paperless office easier, it is time to be ahead in the game and move forward in the technological realm.
All businesses obtain receipts, invoices, and other documents in a bulk quantity. These documents should be neatly organized in an accurate office filing system. It is crucial to learn this organizing skill in order to not lose money, time, and other resources.
The invoices and documents should be organized in such a way that whenever one wants to access or retrieve them, they should be in easy reach.
The importance of all documents and files should be known by a business owner. Nowadays, the best businesses are those which have gone digital with the invoices. However, it is still important how to store and organize these digital invoices.
A digital invoice eliminates a big percentage of cost and time in a payment flow. It is a modernized version of the payment through which the sending and receiving of invoices have been made convenient. There are many advantages of digital invoices which is why many companies and businesses are digitizing their invoices.
A tool automatically creates a digital invoice which extracts information from the accurate sources. An option is given to the person to check the precision of the information before the invoice is sent. Afterward, the tool sends the invoice by electronic means.
The receiver is notified when it will arrive. The recipient has the option to either receive the invoice in the bank or through email.
Steps to organize digital invoices
Choose a filing system
Before actually starting to organize, it is important to decide which filing system should be followed. Each system will have its own positive impact on the functioning of the business. The digital invoices can be organized in an alphabetical or numerical method.
The decision should be made on the way you usually access invoices. If the invoices are searched by account number or name, decide accordingly. Similarly, check the way your paperwork is assembled
i.e the category of finance, expenses or marketing.
Check the office and personal habits
Think which invoices need to be accessed frequently and which of your employees usually want instant access to the files. Monitor the work stations of all employees and the type of work they all do. Have a meeting with the staff to judge the location of the filing cabinet.
Check the storage needs
If the digital invoices are in a bulk quantity, then it is important to organize in such a way that they can be accessed daily. If the invoices are not checked daily, it is not necessary to have the filing system at the workspace. Moreover, there are some files which need to be stored for long-term and others need to be on the watch daily.
Benefits of digital invoices
Whenever a digital invoice is received, there is no need to scan the document. The details of account, due date and the invoice number is always accurate because this information is extracted from the correct sources. Automatic suggestions are given to the person for the bookkeeping purpose. More than 9 euros are saved upon receiving a digital invoice.
Whenever a digital invoice is sent, more than 5 euros are saved. The payment is received much earlier because the invoice is sent directly to the receiver’s bank or email. In case if the invoice does not reach the recipient, it is immediately known to the sender. There is no time or money wasted on postage, printing and packaging.
With the help of Cloud, digital solutions have become the future of the businesses. The companies are quickly adapting to the digital means to complete numerous tasks. Paper invoices are decreasing in number rapidly because they are dangerous to the environment and slow in process. It is more difficult to arrange the paper invoices than the digital invoices.
In the Nordics, more than 19 billion Euros can be saved per year if all invoices are digitized. Therefore, do not fall behind in technology and switch to the faster and more accurate electronic means of business tasks.
With the automatic process of digital invoices, the user does not have to print, submit a manual data entry or send via post. The formats which are supported by the digital invoices are B2G, E-invoice B2B, B2C email, PDF, paper printout, and People.
There are more numerous benefits of the digital invoices which is why it is both wise and safe to digitize the incoming invoices. Time is saved, costs get reduced and the peace of mind is secured.
Gone are the days when businesses used to stick with the paper-based process and wrote the record of the financial records by pen and paper. In today’s digital age, bookkeeping has become paperless. More and more businesses are now going paperless with almost all company-related tasks.
Even the Accounts Payable is automated by document management software, document scanning, and more similar technological tools. This article provides a clear guide on making your account payable paperless.
Accounts Payable abbreviated as AP can be defined as the responsibility of a business to pay a short-term debt to the respective suppliers or creditors. This account is inside the general ledger.
AP can also be referred to as that division or business department which is obligated to give payments to the creditors and suppliers. In simple words, accounts payable is the amount of cost for the services and goods received which have not been paid for yet.
Steps to make Accounts Payable Paperless
1) Decide on the Implementation process
In order to do this, the current AP should be kept in a record so that it can be known which things need to be made better. Get familiar with the Accounts Payable workflow before thinking about implementing the paperless solution.
How long is the duration of processing the invoice? How is the invoice approved? These questions will give an insightful depth.
2) Communicate with the team
Do not carry out the process of automation alone without the team knowing. When the implementation process is being laid out, it is crucial to involve the team. It is possible that the changes a business owner is working on are not suitable for the employees.
The departments within a business which oppose such changes are the IT, upper management, and the accounts payable department. Therefore, it is advised to give light to all the concerns and decisions before moving forward.
3) Scan and convert the current documents
If the Accounts Payable department has an abundance of invoices being sent, it is necessary to find a reasonable way to convert the invoices into an electronic copy. This step is crucial to complete before the automation of invoice processing. Whichever method is selected for converting into electronic format, it should have the technology of Optical Character Recognition (OCR).
Another technology named Data Indexing is equally useful in this process because it forms an index that can be searched for any aspect of the document. The information involved in the document and how the information was extracted both can be known via this technology. A high level of automation and big data storage is guaranteed by incorporating such technologies.
4) Choose an AP automation solution
A reasonable supplier for the accounts payable automation software should be chosen. This step saves a big percentage of money and minimum data entry is required.
Factors that need to be taken into consideration are the cost of the system, the ease of expanding the system, the speed of implementation of the system, whether the system works with the current ERP, and how the reporting tools function.
5) Customize the software settings
In order to process the electronic invoices, a software with custom tolerances is set up. This element is found in the automated system. The user has complete control because the software allows automatic coding of the incoming invoices and routing it for approval.
A good platform adapts to the settings of each business so that it can expand. Therefore, custom tolerances should be created in order for the fast transfer of the incoming invoices.
6) Adapt to the automation process
After the implementation has been successful, it is advised that the employees test a new product and think of questions. This is done in order to adapt, learn and scale the automation process so that the team can get familiar with the new system.
Afterward, streamline operations can take place to make the business successful. The AP automation process can be scaled with the integration of the Accounts Payable department.
Benefits of going paperless
Any business can take benefits with a paperless office. The processing expenditures are cut short by removing the paper documents. This is because the paper invoices demand a lot of manual effort. The handling of the paper invoices requires time and with time, costs are increased.
A lot of money is saved by digitizing the invoices and using a paperless automated accounts payable process. Moreover, records are more easily accessible and the processing is done faster too.
Enjoy better control, organization, and an environmentally friendly way of running your business by involving paperless electronic means in the office.
A productive business is the one that is organized. The thing which hinders a business from being organized is the bulk of paperwork. This task takes up a lot of time and effort which is why paper invoices are important to use for small businesses. Paper invoices let the business owners know the things they have bought from specific vendors.
These invoices also catalog the products and services which have been given to customers. Therefore, invoices are given to customers and received by business owners as well which is why the outgoing and ingoing invoices should be kept in record. It is important to do so for business and accounting books.
An invoice is a commercial document which keeps a record of transaction between seller and buyer. It is a time-stamped document which highlights the terms of the purchasing deal and the options for payment. The invoices have an invoice number stated on it which acts as a unique identifier on the bill.
The identifier is helpful for external and internal reference. Contact information is displayed on the invoice to avoid any billing issues.
How to organize paper invoices?
Regularly update the organizing process
In order to not lose money and valuable information, accurate filing systems and standard database programs should be utilized. Precision is the key in this process which is why the information, name, and address should be correct on all invoices.
If there are any errors in the information then edit it. If the filing process is not updated daily, a mess will be created with backed up invoices. The funds for the invoice should be available in the collection which can be accessed anytime.
Make a chronological order
Form a separate e-folder according to each month and different year. If the physical form is utilized to carry this task, it will waste a lot of time so it’s better if it is done digitally. No paper will be wasted if the process is shifted to electronic means.
Have an invoice book
Since most people are in favor of introducing technology into the record-keeping process, it is advised to use an electronic invoice book.
This book can be utilized for uploading all invoices into the computer and storing it in the electronic book. This alternative is much better than having a hard copy of the invoices.
This tool is very helpful in organizing the invoices. It includes many options for organizing which the person can choose according to the preferences. For example, the arrangement of invoices in bi-weekly, monthly or random order.
Utilize the invoice software
If the software is used, the person can be assured that no errors in calculation or math will occur. The business life can be made much convenient by using this software and it also prevents uncharged tax.
Use the cloud
The cloud-based tools are widely used in the accounting world because they make things easier. With the cloud, collaboration can be done between colleagues and clients. The documents can be shared, stored, and can be accessed anytime.
The personal storage will be cleaned if the alternative of the cloud is used. Moreover, time will not be wasted in emailing the invoices.
Do not procrastinate
The temptation to delay the invoicing for one day can be costly so it is wise to avoid any irresponsibility. Instead, make the invoice organizing a crucial part of the daily business schedule and stick to it with all punctuality. Time can be set for doing this task either monthly or weekly.
The time schedule depends on the scope of the business entirely. Once the schedule is decided, it is a responsibility to not cause any delay and not to fall in any procrastination. When it comes to any business task, precision, consistency, and organization are the three key elements.
These factors broaden the scope and revenue of the business. Do not queue the post office and do not avoid working the printer. In business, time is of utmost importance and it holds the status of money. Therefore, the less you delay, the more you will earn and vice versa.
Avoid losing a big chunk of your money by following the above-mentioned tips for organizing your collection of invoices.
Have a correct attitude and the know-how so that your invoices do not lie around unattended. Instantly saving the invoices does good and saves money for both the owner and customer.