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If your company is not based in the United States (or even if they are!) there are business mysteries behind banking and taxation that don’t exist in many other places and sometimes don’t seem to make a lot of sense. A lot of those requirements originate from state and federal level regulations. This paper checks blog series will uncover what those mysteries are and how to understand them as systems that can be easily managed with Dynamics NAV and Dynamics 365 Business Central.
If you’ve never witnessed paper-based check business processes before, here it what it typically looks like. Please note that most of these processes are not best practice and can be improved but, are very frequently used in many US-based companies today.
Paper invoices are received from vendors, routed for approvals, coded to the general ledger, entered and posted in the ERP system, and filed, where they can be matched with a paper check later when it is printed.
If the paper invoices are related to inventory purchases, they may also be matched with a copy of the original purchase order as well as a paper packing slip from the warehouse as proof of receipt of the product. This satisfies the accounting concept of “three-way-match”, ensuring that purchase order, proof of receipt, and invoice all agree for total quantity and total cost, and is a primary accounting control. These three documents are sometimes called a voucher packet.
Periodically, the company will process a check run. This can sometimes be as little as monthly or as frequently as a few times a week. The purpose of the check run is to pay vendors in time to honor payment terms with the vendors, including paying in enough time to take discounts when applicable. Depending on the volume of payments to be made and delays in routing for approvals, it is not unusual to take a half or full day to accomplish.
To fully understand the full cycle of the paper checks process, we also need to know what happens on the other side, when the vendor receives checks, often called the daily deposit.
As you can see, these processes are highly manual and involve multiple approvals to accomplish. Each individual invoice may be “touched” over twenty times from beginning to end.
If you’d like some help with de-mystifying business processes and correct system setup related to US-based accounting practices, please get in contact with us to discuss how New View Strategies can help. We have specialists with deep accounting expertise in using Dynamics NAV and Dynamics 365 Business Central who can move quickly through the requirements for your company and establish clear and accurate processes to manage these complex business needs.
Looking for more topics related to US-based accounting? Check out the rest of our related blogs at the links below.
Why is the U.S. still using paper checks and what to do about it (Part 1 of 3)
Why is the U.S. still using paper checks and what to do about it (Part 2 of 3)
Why is the U.S. still using paper checks and what to do about it (Part 3 of 3)
The good, the bad, and the ugly side of US bank reconciliations
Pay me now or pay me later: managing 1099s throughout the year
What’s wrong with U.S. sales tax and how to make it right with your ERP system
What is South Dakota vs. Wayfair and why should companies who sell online care?
O Canada! GST, HST, GIFI and other three- and four-letter words related to Canadian taxes