The regulations relating to the storage of invoices vary by country, but in North America and Western Europe, there is a common misconception that invoices have to be stored in paper format.
On our travels, that is why we normally see filing cabinets containing copies of invoices.
For small companies, current and previous years invoices may be contained in filing cabinets in the office.
As companies grow in size, so does their requirement to store invoices and I have seen rooms devoted to storing invoices, and in the case of a number of distribution companies, warehouse space was taken up with copies of old invoices!
Large companies often use dedicated external file storage providers.
Who requires invoices to be stored in paper format?
When I ask people this question, I get one of three answers:
- Tax authorities require invoices in paper format
- Auditors require paper invoices
- The management require invoices on paper
Most Tax Authorities have happily been accepting invoices in electronic format for years! There are a number of key criteria:
- Have they been stored securely
- Can they be sure they have not been tampered with
- Are they available in ‘human readable format’
- Are they stored in accordance with legal guidelines (normally this means that they must be stored in a specific regional location)
Most electronic solutions store invoices in either PDF or TIFF format, so they can be printed and are in ‘human readable format’.
If you are going to store invoices electronically, make sure that your service provider is compliant with regulations on where invoices may be stored.
As part of an audit, auditors normally take random samples of invoices, view them and then confirm with customers or suppliers that the invoices are legitimate.
How many of you have had auditors arrive, take up space in your office, and ask you to retrieve specific invoice numbers?
With electronic storage, especially from ‘cloud-based’ services, auditors can be granted permission to access invoices from any location with Internet access. Therefore, they can login from their own offices and undertake any necessary due diligence on the validity of invoices remotely.
‘Old school’ managers or owners of business may insist that everything is printed. It is what they are used to and has served them well down through the years.
However, what many executives may not fully appreciate is that the cost of maintaining a paper-based system is very significantly higher than most electronic systems. International research shows that paper-based processes can be 60% to 70% more expensive than electronic based ones.
Advantages of electronic invoice storage
Where to start? I will just list a few and may come back to this subject at a later time, especially the shocking figures about the percentage of documents that are misfiled. However, for now, I will just list some of the common benefits:
- Cost saving – when the life cost of storing and handling paper are compared to electronic storage, savings of 60% to 70% are very common
- Get rid of paper – cluttering up the office
- Faster invoice retrieval – instead of having to get up and search through paper files, electronic retrieval is instant, and with comprehensive searches such as by invoice number, customer/supplier, or date range
- Secure, remote access – imagine being able to retrieve a customer or a supplier invoice before, during or after a meeting
There are many more advantages, but they will be dealt with in other posts.
- What Does Your Invoice Say About Your Business? - February 7, 2018
- Introducing OnePosting Price Monitor - September 11, 2017
- Accounting Automation Software Services Streamlines Retail Operations - June 6, 2017