Stadium files. Accordion organizers. Color Coded Hanging Folders. Rolodex. Red Stapler. (“Excuse me, I believe you have my stapler…” – can you name the movie??)
Am I describing a scene from an early 1990s office sitcom, or your accounting office?
In early 2020, many small to medium sized business accounting offices were still using paper filing and processing systems: sending invoices, mailing paper checks, printing statements for handwritten approvals, yadda yadda yadda. Then the pandemic hit and suddenly office employees were not able to be together to physically move paper around. Many businesses found themselves scrambling to operate without paper, and customers were left with a chaotic experience.
Maybe your accounting department doesn’t quite resemble a 1990s scene, but are you still holding on to a few straggling paper processes?
Consider small business owner, Mr. P. Arch Ment. His acquaintances call him Archie, for short. He needed to hire a new administrative assistant for his office, and put together what he thought was a great job description that would attract the ideal candidates. Job responsibilities included handling all office mail, printing and mailing payroll checks, and a few other tasks that required the employee to physically be in the office, daily. A few weeks after Archie posted the job, he was frustrated that the local pool of candidates wasn’t supplying a great candidate for the position. His Fractional CFO encouraged him to consider moving his accounting processes (and some other processes, too) virtually to expand the job pool to include remote candidates. After all, is there really a need for all this parchment? Archie wisely took the advice, and found several ideal, virtual candidates to choose from.
If you, like Mr. P. Arch Ment (parchment… get it?), haven’t figured out how to operate your accounting department in the virtual world, now is a great time to hire a Fractional CFO to help you make the transition. I can act as your official accounting declutterer, teaching you how to clear out the paper waste and moving you to a clean, organized accounting system that works for you. Paper processes can leave you feeling disorganized, messy, and feeling like something is falling through the cracks. You’ll be amazed at how quickly a fresh perspective on your accounting processes can lighten your load as a business owner!
Do I Really Need To Have Electronic Accounting Processes?
“If it ain’t broke, don’t fix it” is a piece of advice that doesn’t often apply in the world of business! Doing what you’ve always done is a way to fall behind the competition in an ever changing market. You’ll miss opportunities to make your processes more efficient, ultimately costing you time and money. If you change things to make them faster and easier, you won’t need as many back office employees pushing paper around.
Being married to paper is a sure way to appear sluggish in today’s fast moving world. Customers, vendors, and your business partners will notice if your accounting processes take twice as long as the experiences they are having with other businesses. Switching to electronic accounting processes allows you to be nimble in decision making and speeds up the cash flow process. (It’s called snail mail for a reason!) You will also save a little money on paper products and storage space, will never have to shred anything again, and can likely enable a remote accounting team.
Moving your accounting process from paper to paperless makes all around good business sense.
Tips For A Paperless Accounting Department
Now that you are ready to make the switch from paper accounting processes to electronic accounting processes, you may feel overwhelmed at where and how to start. It’s a big transition, but with a well-thought out plan and a financial expert on your side to help guide your strategy, you’ll be set up in no time.
Here are a few tips to get you started. And if you are mostly electronic, but still hanging on to a few paper weights, you can use this list to ensure your current processes are set up as efficiently as possible.
First things first: Consider whether you need a separate or integrated electronic filing system other than your company server or Google Drive. Most small companies don’t need anything besides a standard server, Google Drive, or Sharepoint to save documents. Don’t pay for one if you don’t need it!
Consider the rest of your business processes. Perhaps every part of your business is electronic except the accounting department. Does it make sense to mirror their folder structure and virtual processes? One critical question to ask yourself is: can a new employee easily find what they need because your folder structure follows common sense or logic? In other words, don’t name folders after people who hold positions in your company (Marc = Accounting). No one knows what that means. If you leave your employees – old or new – searching for documents, it will cost you time and money. So make sure your new system works in the grand scheme of the company.
Keep your own electronic expense records instead of relying on a vendor’s website or data. These records are required to support your business’ expense deductions in case of an IRS audit, and you don’t want to run into problems if the vendor isn’t able to provide you with accurate information. The IRS can go back 10 years for an audit (indefinitely if you are trying to defraud them…), so storing your records electronically on your own drive or server is the way to go.
Set up a hierarchy of folder layouts in your new electronic accounting system. Generally, I recommend a folder structure that looks like this:
- Accounting
- Closing (this folder includes bank statements and reconciliations, prepaid expense schedules, and deferred revenue waterfall files – all the items on your closing checklist.)
- Year
- 2023-01 (for year-month)
- 2023-02
- Year
- Accounts Payable
- 2023
- 2024
- Accounts Receivable
- 2023
- 2024
- Closing (this folder includes bank statements and reconciliations, prepaid expense schedules, and deferred revenue waterfall files – all the items on your closing checklist.)
It may be tempting to convert your paper filing system structure over to the electronic structure. Don’t do it! The nice thing about electronic files is that you can use the search function to find what you need instead of endlessly clicking through a maze of folders. If you have a tried and true file name system, this will make finding what you need a piece of (virtual) cake. I always recommend the file name include the vendor’s company name, date of invoice in reverse date order (year-month-day), then the invoice number. So it will look like this:
PArchMent 2023-10-31 inv#123.pdf
Pro tip: Don’t use words for the dates inside any file name or folder to avoid the system placing it into alphabetical order. If you do that, April and August will be beside one another instead of it being in actual date order.
Historically, you don’t need to bring your accounting documents up to speed with your new system. It’s usually not worth the time to scan a bunch of closed & paid invoices. Plus you’ll want to avoid mistakes when converting data from paper to electronic form since that can cause issues. Once you start this new process, anything new goes into the electronic system and you’ll know that anything before X date is still on paper.
Request vendors send you invoices electronically. Set up a generic email address for all invoices to go through, such as [email protected]. If you have turnover in your accounting department, you won’t need to notify your list of 200 vendors about a change in where to send invoices. You can always set up the account to forward to your accountant or assign your accountant this email address instead of a named address, if you prefer.
Pro tip: you can also have all government correspondence go to this email address so you never miss those infrequent yet important updates (business license renewal reminders, Secretary of State filings, or tax change alerts). Payroll notifications and other report emails can be sent here too.
Once you begin to receive electronic invoices, resist the urge to print it. Store it in your new folder system or use a software system to send it virtually through the approval process. If this makes you nervous, I developed a digital system that works wonders for approval processes and doesn’t require the expense of a software program to do it. Contact me today and let’s chat about how I fill the role as your Fractional CFO to get you set up and running with efficiency.
Ignore keeping copies of customer invoices and vendor payment checks in this new virtual accounting process. If you have a good bookkeeper who uses a General Ledger system, these are already recorded in your software. You don’t need a separate scanned copy of the printed versions. (However, don’t confuse these with similar-sounding items. You DO want to keep electronic copies of your vendor invoices, and your customer payments.)
Consider your team. Are there some who will struggle with going paperless? If you have employees who have been working with the same process for a long time, they are likely comfortable with their current job responsibilities and like the way things are now. You’ll especially want to have buy-in from your accounting team before you make this change, so it’s a good idea to involve them in the process from the beginning.
Take time and care in crafting an announcement and strategy for implementing the change company-wide. People resist change, so try not to change several things all at once. Explain the reasons why you are changing, and how it will not only benefit the company but also their job roles.
Don’t Go Electronic Solo
You don’t have to revamp your entire accounting system on your own. I’d love to serve as your official accounting declutterer and help you make the move from paper to virtual systems to improve the efficiency of your business operations. I can also design your electronic process so that you don’t lose critical internal controls when you go paperless. Reach out to me today for a free consultation to learn how bringing me on board as your Fractional CFO can transform your 1990s accounting department into a current day marvel!
