Difference Between Rules and Policies

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.

Bottom Line

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.

Best Way to Organize Digital Invoices

Introduction

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.

Description

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.

Conclusion

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.

Best Way to Organize Paper Invoices

Introduction

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.

Description

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.

Include spreadsheets

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.

Conclusion

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.