Purchase Ledger - Cutting Corners?

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sheelagh
sheelagh Registered Posts: 133 Dedicated contributor 🦉
Please indulge me with this question. It's a long time since I have worked for a "larger" commercial organisation and I am ready to accept that I might be out of touch with reality.

Retail outlet with large volumes of supplier invoices, £2million turnover, so too high for VAT Cash Accounting. Currently employs one full time accounts clerk, with a couple of others doing a few bits and peices, and resisting increasing the number of staff in the accounts department.

They are not running what I would call a proper purchase ledger. ie record all invoices individually and post supplier payments. Instead they record only the payments to suppliers. Instead they record "batch totals" in the accounts software.

I can see several flaws in this method. I have oodles of experience in this sort of work and I know how I think it should be done. I want to encourage them to post each invoice at date of invoice and allocate payments when payments are raised. However the business owner is reluctant, citing lack of staff resources as hs main reason.

Should I stick to my guns or am I being old fashioned?

Comments

  • Bluewednesday
    Bluewednesday Registered Posts: 1,624 Beyond epic contributor 🧙‍♂️
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    I did some work experience at a large chain hotel, we always posted invoices separately.

    If they are posted in a batch method surely there is no double check?

    I guess if the owner wants it done that way you have no choice but I can see why you are concerned about it.

    Often people see accounts staff as a waste of money as they don't generate income but they don't see the compliance and control that they provide.

    Good luck with this one!
  • Andy Blyth
    Andy Blyth Registered Posts: 48 Regular contributor ⭐
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    I agree with BW.

    Also, if they don't post invoices individually with their tax point dates, how are they doing their vat returns? Wrongly, I would assume?

    How do they establish a purchase ledger cut off for the year end accounts?

    I would try to highlight all the problems this could potentially cause to the owner. If he doesn't listen, at least you tried, and when it comes back to bite him, you can say "I told you so".
  • sheelagh
    sheelagh Registered Posts: 133 Dedicated contributor 🦉
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    Thank you both

    Thank you Andy and BW for your comments. It's good to have the support and to know that I am not being "old fashioned".
    This guy will have to pull his socks up - if he hits his targets he will be over the audit threshold soon.
  • Gem7321
    Gem7321 Registered Posts: 1,438 Beyond epic contributor 🧙‍♂️
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    This would be a fab MAS project!
  • blobbyh
    blobbyh Registered Posts: 2,415 Beyond epic contributor 🧙‍♂️
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    As Annette said, how do they check for supplier invoicing errors or ensure costs are accurately going to the appropriate expense/asset codes?
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