Page 93 - Accounting Best Practices

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Billing Best Practices
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The best practice that avoids this problem is to reduce the number of invoice
copies. Only one copy should go to the customer, and one copy should be
retained. That is two copies, not the four or five that some companies use. By
reducing the number of copies, there is much less chance that the printer will jam,
and the cost of the invoices can be substantially reduced. The biggest cost saving,
however, is of the filing time that has been eliminated, which can be many hours
per month, depending on the volume of invoices that are created periodically.
The biggest objection to reducing the number of invoice copies is from those
parts of the company that are accustomed to using the extra invoice copies. This
group is rarely the accounting department, which must do the work of filing the
extra copies, but rather other departments that have an occasional need to look at
them. The best way to overcome these objections is to educate the dissenters in
advance regarding the required filing time needed to keep extra copies, so they
understand that the cost of additional filing does not match the benefit of their
occasional need for the invoices. Another option is to give these people read-only
access to invoices in the accounting computer system, so that they can call up
invoice information on their computers, rather than looking for it manually in an
invoice binder. The combination of these two approaches usually eliminates any
opposition to reducing the number of invoice copies, allowing the accounting
staff to achieve extra efficiencies with this best practice.

Cost: Installation time:

4–15 REPLACE INTERCOMPANY INVOICING WITH
OPERATING TRANSACTIONS

Those companies with subsidiaries will find some difficulty at the end of the fis-
cal year, because they must back out all sales between subsidiaries, which are
not, according to accounting rules, true sales. The most common way to record
product shipments between locations is to issue an invoice to another subsidiary,
which pays it as though it is from an independently owned organization. At the
end of the year, the accounting staff must then determine the margin on all sales
to subsidiaries (which can be a lengthy undertaking) and create a journal entry to
reverse out the margin. This is clearly not a value-added activity, and reducing it
to the minimum gives the accounting staff more time to deal with other, more
productive issues.
A best practice that multiple-subsidiary companies can use is to avoid using
invoices when shipping between company-owned facilities. Instead, there are two
ways to record the transactions. The first and easiest approach is to record any
inventory transfers as a simple movement of inventory between warehouse loca-
tions in the computer system. This approach is only possible if a company uses a
single enterprisewide database of information to control activities in all company
locations. If such a system is in place, a shipping clerk can simply record a delivery