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By Jesse Wood
Jesse Wood is the CEO of document management software vendor, eFileCabinet. Founded in 2001, eFileCabinet, Inc. began as a cutting-edge tool to digitally store records in accounting firms. As it grew in popularity, eFileCabinet developed into a full-fledged electronic document management solution designed to help organizations automate redundant processes, ensure security, and solve common office problems.
The year of 2017 has long since begun, but many auditors, CPAs, and accountants are discovering unforeseen hurdles in their respective industries that go far beyond a digital revolution or a new presidential administration, forcing them to seek recourse in dealing with these challenges.
In 2017, the stakes for performance are higher than ever, and accounting professionals must use new technologies to meet newfound challenges as easily as possible. Technologies for better managing documentation can improve outcomes for organizations that would otherwise suffer common problems: balance sheet issues, overhead costs, tepid growth, marginal security, and a lack of client satisfaction , to name a few.
Here are some of 2017’s most pressing accounting issues and details on how more efficient document management technologies can mitigate or even solve these problems.
In an economic era driven by entrepreneurship and innovation, risk taking in the business world is becoming more prevalent in 2017, and securing both the accounting methods and technologies to safeguard organizations against the risks that businesses imposes is of the utmost importance.
A net operating loss (NOL) is a loss incurred during a period where an organization’s allowed tax deductions are greater than its taxable income. In the event expenses overshadow revenues in the given period where the operating loss occurs, the NOL of the company can in many cases be used to recover past tax payments.
As a form of tax relief for businesses losing money, the net operating losses can afford organizations the opportunity to have reduced payments in future periods and in some cases, prevent companies from paying taxes on the lost revenue itself.
Although the accountant or CPA who can effectively diagnose these situations is valuable to his or her organization, an accountant who can diagnose and then troubleshoot the reasons behind this issue is an even more superb asset to his or her organization.
For instance, implementing a document management system to reduce information liability, improve productivity, and ensure quick document turnaround ( especially during tax season), can mitigate the risks of any organization incurring a NOL.
Accounting for property damage and related insurance recoveries are always considered in CPAs’ procedural risk assessments. Filing the claims can be a lengthy process in and of itself. Understanding the impact of these claims is important, but preventing them before they occur is always the safest prophylactic measure.
In accounting operations, a big component of potential expenditures is the possibility of interruption. Although any course with CPE credit can explain what this means in detail, most instructional materials on the subject fail to discuss technology’s role in mitigating business interruptions. The implementation of a proper document management system offers security of digital files, disaster mitigation and long term cost savings.
The more organized a business’s information, the more transparent its revenue generators and cost liabilities. A document management solution not only helps organize accounting information, but also helps measure the efficacy of the information—detailing who’s used it, when, and for what purpose.
Given the amount of scrutiny that GAAP (generally accepted accounting principles) have received in recent years, a significant number of industry analysts and forecasters are focusing more on non-GAAP earnings as a large component of a more holistic analysis of a company’s financial health. Not just to better inform investors and stakeholders, but also to champion transparency in the accounting process for everyone.
And with GAAP earnings and accountancy, reporting has been tailored to larger organizations, making compliance with GAAP policies a big headache for accountants and other financial professionals working in small business environments.
Although non-public organizations are not mandated to use GAAP, any lenders or investors for private companies typically expect financial reporting and accountancy standards that comply with GAAP rules in private company settings, which were first administered by the Financial Accounting Standards Board (FASB).
Document management systems can further legitimize operating earnings in the non-GAAP space, (non-GAAP being the profit earned after subtracting from revenues the expenses that are associated directly with the business operating, like the cost of selling goods and services, marketing, depreciation and other expenses).
These kinds of earnings correlate strongly with financial health, and therefore enable an accurate assessment of any given company’s future. However, certain technologies like document management software can further legitimize non-GAAP reporting, alleviating a huge burden on accounting professionals working for and in small business environments, and reducing the stresses of standards overload.
Standards overload, the result of trying to follow compliance manually and without technological intervention, can severely harm the compliance and accounting efforts of even the most intelligent business owners and CPA firms.
Finding a system that can automate redundant processes, simplify document routing, and enhance security measures without significant process overhaul are easier ways to mitigate this problem than an increased budget, because these document management outcomes free up time for accounting professionals to use the skills they are paid for—their business analyses.
PricewaterhouseCoopers noted last year that non-GAAP measures were back in style again. But technological intervention may be the most crucial factor in reconciling the numerous differences between non-GAAP and GAAP reporting, because document management systems can simplify objective accounting measures and reporting standards.
Copyright © 2017 Tax Management Inc. All Rights Reserved.
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