Is Paperless Accounting and Finance Possible?

The Technology is here for paperless accounting and finance; proper mindset and willingness to do it are still required

If you’ve been through an accounting audit you know how frustrating this can be, no matter who the auditor is, or whether your work is flawless or riddled with errors. First, you are given a pre-audit list of things you must give to the auditor prior to the field audit. These are various reports, usually in a format ordered by the auditor, and you often have to convert data from your accounting or ERP system’s reports or export data directly to the requested format.

Frequently, you have the requested data but struggle to deliver it in a meaningful way. Other times, you simply have no access to the requested data, so you agree with the auditor to supply it another way.

The Field Audit Experience

Then, during the field audit you are constantly approached by the auditors to provide specific test sample data, answer questions, show source documents, and offer endless clarifications to questions you truthfully believe have already been covered and fully explained. You feel there is no end in sight.

A Case Study: Technological Integration

Some years ago, I was working on an engagement at a mid-market publicly held retail company, known for its innovations in both their operations and corporate accounting and finance. This company invested in one of the first document management systems and had it seamlessly integrated to their accounting software (the term ERP had not been invented yet).

Using their system, if you brought up an image of a vendor invoice you could follow the transaction trail through to the GL account posting. Similarly, if you clicked on a transaction detail in the GL you could drill through to the source document and have it displayed on the computer screen. It made both internal and external audit so much easier and without physical document retention, archiving and physical document retrieval. There was no chasing of misplaced documents or attempting to recover lost documents. This was truly a technological breakthrough.

The Benefits of Document Management Systems

Document management systems are much more common at present time but for some reason are not quite as popular as they should be, even though document scanners are readily available and document management software is not too difficult to implement and use. In fact, I have a small manufacturing client in my region that implemented such a system and eliminated paper documents. Not only are their vendor and customer documents (invoices, packing lists, etc.) electronic, but all production documents (work orders, shop travelers, material pull lists and more) are fully electronic too. They only print when they need to.

Automation in Finance and Accounting

Finance and accounting are great candidates for such automation, since they are the ones that must look up transactions and tie them to source documents. External audits can be greatly streamlined, and this may also reduce audit fees. In large organizations, the internal audit function can be made more efficient, perhaps using less persons to complete the required work in all the in-scope locations and processes.

Achieving a Paperless Finance Organization

Adding electronic vendor and customer invoice payments and cash receipts (ACH, wire, etc.) will further get the finance organization to this somewhat elusive paperless goal.

Operations can also benefit from this system, especially manufacturers that constantly receive and move inventory in and out of work in process, perhaps in hundreds or thousands of work orders simultaneously. Work orders and all their material and labor transactions can be viewed on-line and communicating with other departments or requesting explanations can be considerably simplified.

The Future of Accounting and Finance

Just as computerizing accounting and finance functions revolutionized how transactions were performed and reports and financial statements were compiled and produced, striving to achieve paperless functionality in these departments is the next natural step towards complete automation, better accuracy, security and efficiency.

Finally, some of the wonderful benefits to accounting and finance are the complete elimination of two dreadful chores: regular filing of documents and frequent trips to the attic.

Alan Hart, MBA, is Principal Consultant at Pacific Shine Group in Portland, Oregon, with responsibility for client business development and hands-on client project implementations. Prior to starting Pacific Shine Group, he worked in various executive accounting and finance positions with technology and growth companies. Notable is his 18 years in the hi-tech manufacturing industry where he served as Controller, Vice President of Finance and CFO of several privately as well as publicly held companies in the Hi-Tech industry, such as Hybrid Arts, Inc. Hamilton Bay Associates and Syncronys Software. In his role in management consulting, Alan has worked in diverse industries and with a variety of clients, including fortune 1000 companies such as Boeing, Delta Airlines, Intel, Wyndham Worldwide and others, as well as many mid-market organizations such as Guitar Center, Ducommun AeroStructures, Cypress Semiconductor, TriQuint Semiconductor and others.

Combining his skills and experience in engineering with a deep understanding of technical accounting, he assists small and medium-size manufacturing companies to establish GAAP compliant accounting and reporting systems.