Managing source documents is one of the most critical aspects of small business compliance. They are important for accurately and efficiently completing the accounting process and provide informative business insights.
Source documents take a lot of effort to collect and manage. Up to 25% of some office spaces are used up for paper document storage! Today we are going to discuss how your accountant can help small businesses better manage financial source documents.
What are Financial Source Documents?
In accounting, a source document is an original record that contains details that support or substantiate a transaction. These are then entered into an accounting system. Some source documents are still printed in hard copy (on paper) but most modern source documents are kept electronically.
Source documents include:
- Vendors’ invoices for merchandise or services purchased
- Anything substantiating a transaction
- Receiving reports that support vendor invoices
Who Should Manage Source Documents?
While you can manage your own source documents, many accountants will help with document management. Not only does this take administrative tasks off your shoulders, but it can also help improve the relationship between accountant and business owner. If your accountant plays a significant role in your business – whether you outsource to an accounting firm or have an in-house – then having help manage source documents can be helpful.
Further, if your accountant helps manage source documents, they can not only help with compliance and audits but also help provide more accurate reconciliation. And this, in turn, leads to more meaningful business insights.
But this doesn’t mean you, as a business owner, can neglect your responsibility of keeping track of your source documents. Source documents are incredibly important for compliance and you, along with your accountant, need to ensure they are well managed.
What is the Importance of Source Documents?
Source documents are vital for audit preparation and compliance. As a result, it is important to understand the types of documentation that are required for small businesses to remain compliant. You need to keep up-to-date with the requirements of the country or countries where your clients conduct business.
They are also important for improving data quality for accounting. Most accountants will avoid reconciling directly from a bank statement when possible. This ensures that each transaction is verified by a source document.
As a result, it is important to have all source documents ready and available for the end of financial year. This makes the process faster, easier and accurate, ensuring you pay the right tax and your accountant can help provide you with accurate business insights.
How Do I Collect and Manage Documents?
Traditionally, source documents are painful to collect, requiring low-value client interactions and confusing communication. As a result, one of the best ways to collect and manage your source documents is to digitise them. Implement a process and relevant technology to automate and digitise document management.
There is a wide range of benefits to digitising your document management and collection process. It not only disaster proofs your documents (in the case of fire, theft, etc) but it also reduces the amount of space you need to dedicate to physical storage. As a result, you can manage documents from the office, home, or out on the road, making digital options highly flexible.
By utilising a single system for digitising and collecting source documents, you ensure all documents are readily available when you need them. There are a number of programs available, including Xero. Programs like Xero allow you to spend less time chasing clients for documents. Instead, you have all the information you need, on hand, in order to offer insightful business advice while automating some of the time consuming, manual processes.
Accountants can help small business owners digitally manage source documents, providing extra value to you as a client. They can utilise these documents to advise you on business expansion and navigating an increasingly digital world.
Utilising a Source Document Storage System
However, digitising source documents and document collection may require some change management. As a result, you need to ensure that you, your staff, and your clients have training in your roles and responsibilities regarding your new system. This will not only make things more efficient, but it will also help your employees and clients see the value of the new system.
Further, having a digital and centralised system for document management can also provide you with peace of mind. It also reassures clients who might be anxious about keeping track of documents, especially for auditing processes. Having documents readily available at all times and in one place helps ensure accounting processes, including audits, go smoothly.
Are you looking to move your hard copy source documents into a digitise form? Do you need help managing your documents coming up to tax time? Looking for a better management system in the new financial year? Contact the team at Siragusa today! We specialise in helping small businesses with their accounting needs, as well as business growth.