Last week I wrote about the bookkeeping process for businesses and the importance of managing that process. This week we have been working with a client on a project which has a bookkeeping process that requires a large amount of data entry, and more difficult has been the processes which manage the paper inside the business prior to it reaching the bookkeeper for entry. While many businesses are working toward becoming paperless other businesses are required to manage paper invoices through a managerial approval process before the bookkeepers can ever enter them.
Invoices which arrive on paper must be kept in order, signed by appropriate managers, and organized for handoff to the bookkeeping department. Making sure the invoices are received, approved, and organized often requires multiple parties all doing one or more tasks in a timely manner. The process seems simple, but for business owners who find themselves constantly behind on payments or yelling to find invoices in order to pay bills the process can be difficult and result in poor cash flow management.
Cash flow management is the process of balancing payables and receivables within a monthly time frame. Businesses of all sizes struggle to balance receivables and payables each month. Sometimes receivables arrive early in the month and sometimes they do not arrive for sixty to ninety days. Meanwhile payables are due throughout the month. Cash flow management is not always a pretty process, and can require business owners to hold checks and defer payments which are not immediately due.
Knowing the timing of payments and the terms of invoices is the key to maximizing cash flow management. The terms of payments should be recorded in the company’s books, and decision makers should be presented with bills for payment approval. The company’s bookkeeping process can improve the approval process by using technology which allows decision makers access to the bills for approval from anywhere. After access the best point for improving the process is the speed and accuracy of the data entry so decision makers can see the most complete picture of the company’s payables, bank balances, and receivables when determining which bills to pay.
Improving data entry requires a company to move all of the paper invoices described above through the approval process faster, and/or provide data for invoicing clients quicker. The use of email to receive and send invoices is a great way to reduce the number of days in the process. The data entry cannot be completed until the bookkeeper has the data, so removing the postal service from the equation provides a more streamlined process. For companies with paper invoices staying organized through the approval process is the key to providing faster data to the bookkeeper. The quicker the data reaches the bookkeeper the quicker it is entered into the company’s books.
Having timely data in the company’s books and financial reports is the best way to improve cash flow because it allows decision makers to see the most complete picture of their company’s finances which in turn allows them to anticipate coming expenses and better predict collections. The bookkeeping process is not one which company’s focus on improving, and data entry is the last place any business owner wants to spend time. However, though data entry may seem like a mundane task, and while it is administrative by nature the information it generates is key to the highest level of managerial decision making.