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Little Functions, Big Difference

February 27, 2010

I am going through my industry magazines to catch up on some reading. Not surprisingly, the predominant theme in all of them is about how companies are shedding cost and conserving cash in a time when revenues are hard to come by.  Apparently, looking into software usage (or more like non-usage) is a big way to dig up some cash.  According to cfo.com, many companies are still paying for software programs and licenses they no longer use (article link here. If you don’t want to read the article, see “ * ” below for a summary and a tangent).  This makes me think of something a little different—all the functionality in our applications that are underutilized.  With less help and more work, there is more need than ever to have technology work for us, especially if it’s already paid for!  Here are a few ideas:

  • When processing invoices, most financial systems can detect duplicate invoices, but only if the vendor name is keyed in exactly right. So, if an invoice from IBM is keyed in as “I.B.M.” once and then as “International Business Machines” a second time, the system’s duplicate invoice check might not catch this.  That means IBM will be paid twice.  Same for invoice number, the system might not know that invoice “0785” and invoice “785” are one and the same. So make sure that:
    1. The vendor file is clean (e.g., IBM is in the vendor master only once)
    2. The vendor naming convention is clearly defined (e.g., Should companies with initials be set up with periods, without periods, or spelled out?)
    3. Invoice processing procedures are strictly followed (e.g., invoice number always entered in as shown, always check for the duplicate invoice flag, etc.)

Let the system check for duplicate invoices so you don’t spend time recovering duplicate payments later on.

  • Enter vendor terms in the system, instead of leaving the field empty. Once the real terms are in, check runs will be faster because less time will be spent on invoice selection.  The system will generate the invoice list based on the terms you defined.
  • At month-end, set up temporary journal entries, such as accruals, to auto-reverse.  As much as possible, don’t reverse journal entries by hand.  Not only is it a hassle, but manual activities that alter the general ledger always increase the risk of errors. Once the parameters are set up for these journals, the system will reverse them timely and accurately every time.

*The rationale is that software invoices are often priced based on number of users/licenses.  The amount on these invoices does not change very often.  So they become routine payments, like lease expense, for example.  The company might not think to review the bills and get them adjusted even after the company has gone through a workforce reduction (i.e., fewer licenses needed).  Originally, I wanted to write this up as a small idea for a separate post because it sounded so simple.  I decided not to after more thinking, mostly because I have not tried this myself, yet. But I’m totally intrigued by this and hope to try it somewhere.

Creative Commons License
The Back Office Mechanics Blog by Nancy Wu is licensed under a Creative Commons Attribution-Share Alike 3.0 United States License.

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