Using a document management system to store accounting documents helps accounting department develop better controls in these five ways:
- Preparing for audits: If you have a paper-based system, an audit is often an ordeal for the accounting department as well as the auditor. The auditor might ask to see all of your invoices from 2010, for instance, so you’d give them access to your filing cabinets and the auditor would sit in a room and wade through all of the documents. With a document management system for managing accounting documents, your accounting department is better prepared for an audit, allowing you to respond quickly to auditor requests and maintain greater control over your business information.
- Creating audit trails: Accounting documents, data and financial information are often highly confidential, and it’s important to be able to see who accessed what accounting documents and when. That’s especially true for publicly-traded companies. To comply with the Sarbanes-Oxley Act of 2002, companies need a highly-detailed audit trail that’s only possible through document management. Electronic audit trails put safeguards in place that protect your company and employees. It ensures that you have a record of who is accessing accounting and financial records, helping to determine responsibility in the event of a fraud allegation or other confidentiality issue.
- Enabling precise document retention: A paper-based system makes document retention a cumbersome and time-consuming process. You have to manually assess the age of each document and sort it by date, then discard the files on a schedule. With document management system, however, it’s easy to capture document information like the storage date and invoice date, and include that metadata in your document database. From there, you specify how long you’re going to keep different document types, such as invoices and financial statements, and the system takes care of when to discharge out-of-date accounting documents. These old electronic documents are then either deleted or exported to an off-site archive.
- Supporting detailed cost analysis: When your organization is conducting a cost analysis, you often need to access information that’s outside your enterprise resource planning (ERP) platform. The details of your payments tend to be hidden deeper in the actual invoices and other supporting documents, which makes detailed cost analysis time-consuming and difficult unless you have a document management system that is integrated your ERP system.
- Delivering accurate budget planning: When your company puts together a budget, you need access to information that’s deeper than just your financial statements in order to accurately plan your finances and budget. Financial statements show what you spent in a certain year, but if you want to know what’s behind a number, you’d need to analyze the underlying invoices. This kind of transparency allows business executives to assess whether previous spending is going to be necessary for the coming year, and ultimately to make smarter decisions about whether to retain or change services.
Ultimately, the process you use when storing your accounting documents has a huge impact on your ability to control critical business information. By using a document management system, these documents are ready for instant retrieval, improving the outcome of potential audits and increasing the accuracy of budget planning and cost analyses.
Download our free guide: 5 Trends That Will Shape Finance in 2018 for a closer look into how you can begin your company's digital transformation within the finance department.