What Is Going Concern?

Going concern is an accounting term for a company that has the resources needed to continue operating indefinitely until it provides evidence to the contrary. This term also refers to a company’s ability to make enough money to stay afloat or to avoid bankruptcy. If a business is not a going concern, it means it’s gone bankrupt and its assets were liquidated. As an example, many dot-coms are no longer going concern companies after the tech bust in the late 1990s.

Key Take Aways

• Going concern is an accounting term for a company that is financially stable enough to meet its obligations and continue its business for the foreseeable future.
• Certain expenses and assets may be deferred in financial reports if a company is assumed to be a going concern.
• If a company is no longer a going concern, it must start reporting certain information on its financial statements.
• Negative trends that lead to no longer being a going concern include denial of credit, continued losses, and lawsuits.

Understanding Going Concern

Accountants use going concern principles to decide what types of reporting should appear on financial statements. Companies that are a going concern may defer reporting long-term assets at current value or liquidating value, but rather at cost. A company remains a going concern when the sale of assets does not impair its ability to continue operation, such as the closure of a small branch office that reassigns the employees to other departments within the company.

Accountants who view a company as a going concern generally believe a firm uses its assets wisely and does not have to liquidate anything. Accountants may also employ going concern principles to determine how a company should proceed with any sales of assets, reduction of expenses, or shifts to other products.

Going concern is not included in the generally accepted accounting principles (GAAP) but is included in the generally accepted auditing standards (GAAS).

Red Flags Indicating a Business Is Not a Going Concern

Certain red flags may appear on financial statements of publicly traded companies that may indicate a business will not be a going concern in the future. Listing of long-term assets normally does not appear in a company’s quarterly statements or as a line item on balance sheets. Listing the value of long-term assets may indicate a company plans to sell these assets.

A firm’s inability to meet its obligations without substantial restructuring or selling of assets may also indicate it is not a going concern. If a company acquires assets during a time of restructuring, it may plan to resell them later.

Going Concern Conditions

Accounting standards try to determine what a company should disclose on its financial statements if there are doubts about its ability to continue as a going concern. In May 2014, the Financial Accounting Standards Board determined financial statements should reveal the conditions that support an entity’s substantial doubt that it can continue as a going concern. Statements should also show management’s interpretation of the conditions and management’s future plans.

In general, an auditor examines a company’s financial statements to see if it can continue as a going concern for one year following the time of an audit. Conditions that lead to substantial doubt about a going concern include negative trends in operating results, continuous losses from one period to the next, loan defaults, lawsuits against a company, and denial of credit by suppliers

Article published by Investopedia, written by Will Kenton | 20 April 2021
Source: https://www.investopedia.com/terms/g/goingconcern.asp

Accounts Payable (AP) doesn’t always take center stage as companies strive to expand, increase sales and build an advantage over the competition.

And isn’t always a top priority for management even though it should be, since good AP management results in better vendor relationships, the opportunity to take advantage of discounts, and avoidance of late-payment fees.

Why Your Accounts Payable Processes Are in Need of a Makeover

AP processing deserves more attention. Delayed payments to vendors can erode goodwill with valued suppliers and impact payment terms and service levels.

Paying invoices early may also allow companies to take advantage of discounts (e.g., 1% Net 10 Days) that can add up over time. By taking a strategic accounts payable approach, organizations can leverage these and other opportunities.

If you haven’t assessed your AP workflows in the last few years, then it’s definitely time for a thorough evaluation of the people, processes and technology you’re using to manage accounts payable.

How to Streamline Your AP Processes in 9 Steps

Roughly 55% of companies still handle their AP processes manually, providing an opportunity for major improvements. Even companies that have automated some or all of their AP processes could benefit from a makeover.

Here are nine ways that companies of all sizes can improve their AP structures and develop more efficient, productive approaches to this important accounting function.

1. Re-evaluate Your Basic AP Operations

It’s time for thorough introspection and an honest assessment of how you’ve been handling accounts payable up until this point. Are you managing it manually? Are you receiving and scanning paper invoices from vendors when electronic version are an option? Are you consistently receiving follow-up requests from them about unpaid invoices?

Other red flags to look for during this exercise include:

• Accounting staff and managers who are spending too much time processing invoice approvals.
• Vendors that are kept in the dark about overdue payments (and when they’re going to get their money).
• Lower levels of service from the vendors that aren’t being paid on time.
• Inconsistent AP processes (this is especially prevalent in larger companies that have multiple divisions or locations).
• Decentralized invoice processing and payments distribution.
• Work redundancies across different AP departments.

By mapping out their AP processes, companies can get an accurate view of what functions their AP software will have to handle while at the same time identifying potential gaps in their current accounts payable efficiency.

2. Rethinking Outdated Processes

If invoices continue to pile up month after month—waiting for that dreaded phone call from your suppliers, requesting money—then your accounts payable process probably needs an overhaul.

Your choices include outsourcing AP, automating the process or updating your current accounts payable process. Each of these options is vastly better than manual and paper-based processes, which are especially inefficient and tend to introduce errors, redundant data entry and other issues into the AP workflow.

If your company is spending entirely too much time managing AP, it’s time to reassess your current approach and find new ways to make the end-to-end AP process more efficient.

3. Standardize Inefficient AP Processes

Start by making sure your suppliers know exactly who to send their invoices to. And, develop a process that clearly outlines exactly what procurement professionals or field approvers should do if they receive invoices from vendors (versus letting the invoices sit on their desks, gathering dust while suppliers wait to get paid). Inefficient invoice receipt practices are a great place to start standardizing your AP processing. For example, if vendor invoices are sent to individual departments and frequently get lost or misplaced, then have them flow into a central location instead.

As those invoices arrive, make sure they’re ordered according to priority and due date. Use an accounts aging report to manage those due dates, with labels like “current” and “past due 1-30 days” to organize and stay on top of bills. By standardizing how invoices are received and approved, you can speed up the procure-to-pay cycle and maintain good relationships with suppliers.

Strive for simplification as you work through these and other standardization techniques, knowing that the time you put into this exercise will not only ensure that vendors get paid on time, but will also free up valuable time for accounting staffers, department managers and the CFO.

4. Accept Electronic Invoices

Many companies rely on manual approvals and paper-based invoicing processes. Here’s the good news: Thanks to advancements in technology and software, this otherwise time- and resource-intensive process can be automated and much easier to manage.

With computers handling much of the heavy lifting that accounting employees once handled, receiving and paying invoices electronically helps companies save money and time while letting employees focus on more important tasks.

Electronic invoices also help to transform the repetitive AP process into a more optimized system that requires fewer “touches,” minimizes errors, and ensures that suppliers are paid in a timely manner.

5. Figure Out How You’ll Pay Invoices

Determining when you will pay invoices sounds like a no-brainer, but it’s actually an important step that will help set expectations for your vendors and your own company. Some of the more popular options include:

• Batch the payments according to due date and pay multiple invoices that are due within certain timeframes simultaneously.
• Pick certain days of the month (i.e., the 1st and the 15th of every month) when you’ll pay invoices.

Also consider how you’ll pay the invoices. Will you cut a paper check and mail it? Are you using ACH for recurring invoices? Will you use a credit card online via a service like Stripe if offered?

As you make these decisions, be sure to document them in a manual that all employees can refer to. That way, the entire organization will understand the AP procedures and be able to share them among team members and with vendors who inquire.

6. Use AP Automation

Accounts Payable is a time-consuming process that has to be managed on an ongoing basis, and has historically relied on manual processes. In other words, it’s ripe for automation. As companies grow, adding more vendors and payment responsibilities along the way, the need for automation grows.

Accounting software can automate payments and other AP processes, reducing the burden on the accounting department. By moving to an automated system, companies:

• Avoid losing paper invoices
• Can expedite payment authorizations
• Better organize their records
• Can remit payments or take care of other AP tasks from anywhere (with a cloud-based system)

Automating processes that were once handled manually using paper, spreadsheets and disconnected systems also leads to major efficiency and productivity gains. It also helps save money, frees up employees to focus on more meaningful work, cuts down on errors and reduces the chance of fraud.

7. Delegate Where You Can

As you assess your current AP processes and determine which steps you’ll need to take to improve them, look for ways to delegate tasks and responsibilities to colleagues.

For example, if you’re still expecting to receive several paper invoices every month, select a specific point of contact for receiving, scanning and inputting them into your AP system. That way, if an invoice is lost or a payment is issued late, there will be one point of contact for the vendor. You can also assign team members to other roles to distribute the AP responsibilities evenly and free everyone up to get more important work done.

8. Eliminate Manual Data Entry

Time-consuming, tedious, expensive and error-prone, manual data entry reduces accounts payable efficiency and opens up a lot of opportunities for mistakes. As accounting team members take the data from vendor invoices and manually enter it into their computers, errors are both inevitable and expensive.

For example, even just one missing number or misplaced decimal point can translate into major costs for a business. If an automated system is programmed to pay a supplier $35,000 instead of $3,500, for instance, that mistake can significantly impact the bottom line. Once identified, the problem then has to be resolved—yet another time and resource drain for the organization.

Multiply this mistake across several invoices and it’s easy to see why eliminating manual data entry is a critical reason for streamlining the AP process. Implementing an ERP system with AP automation allows companies to capture all invoice data, sync it with their accounting system, check all the data for accuracy (e.g., against issued purchase orders) and minimize the chance of data errors.

9. Archive Data Effectively and Automatically

The AP process doesn’t end when the invoices are paid. It also includes the post-payment archiving of data that can be retrieved, reviewed and acted on (as needed) at a later date. Be it paper-based or digital, this historical record of all vendor bills that have been settled is a vital part of a company’s financial records.

Along with reducing data entry errors, AP automation software provides this “digital paper trail” and gives employees control and time back in their day to work on more important projects.

With cloud-based software there is a centralized database of AP information that authorized team members across all departments can interact with and access from anywhere.

Should You Consider AP Automation for Your Business?

According to Ardent Partners, 55% of businesses view their AP departments as either “very” or “exceptionally” valuable to the overall enterprise. Despite the perceived value, processing invoices still costs companies more than it should. While best-in-class AP departments had average invoice processing costs of just $2.18 per invoice, laggards spent $12.60—nearly 500% more.

With delayed invoice approvals, an abundance of paper and poor visibility into invoice and payment data, companies are increasingly turning to AP automation. In return, these companies are benefitting from better AP analytics, eliminating paper, lowering processing costs and improving supplier collaboration.

With an estimated 81% of companies impacted by payments fraud in 2019, AP automation helps businesses safeguard against fraud by controlling which employees have access to invoice approval and the release of payments. They can then build approval workflows with multiple people and increase the chances of catching fraudulent invoices before the payment is processed.

Article published by Oracle Netsuite, written by Scot Beaver
Source: https://www.netsuite.com/portal/resource/articles/accounting/streamline-accounts-payable.shtml

The Commissioner of the South African Revenue Service (SARS), Mr Edward Kieswetter, and the Chief Executive Officer (CEO) of the South African Institute of Charted Accountants (SAICA), Mr. Freeman Nomvalo, have agreed to establish a mutually beneficial partnership to build capability in SARS.

As part of its process of ensuring that it has the requisite skills to fulfil its mandate, SARS has reached out to SAICA to assist with recruiting specialists with tax and forensic experience to help capacitate the organisation by mobilising resources from within SAICA’s Chartered Accountancy membership base.

The collaboration will assist SARS in meeting the demand for skills in areas such as Specialist Auditing, Transfer Pricing, Base Erosion and Profit Shifting, Illicit Economy and High Wealth Individual Unit. According to the Memorandum of Understanding (MOU), SAICA will assist SARS in identifying and recruiting talent based on experience, qualifications and career trajectory in the following areas:

1. Trainees: Students who have completed their under- and post-graduate university studies who would train towards qualifying as CAs(SA) at SARS;
2. Recently qualified candidates: Young professionals who have recently qualified as CAs(SA) and who have a keen interest in tax and related disciplines will have the opportunity to start their careers with the revenue collector;
3. Experienced candidates: Experienced CAs(SA) with specialist expertise in tax and related disciplines will have the opportunity to lead/assist teams and investigations at SARS.

SAICA will work with SARS to promote the various SARS employment opportunities to its members to assist with SARS’ capacitation exercise as it looks towards building a capable state through a more robust and effective revenue collector. In addition, SAICA is committed to its members’ continued development through its ongoing professional development opportunities.

Article published by SARS | 6 July 20-21
Source: https://www.sars.gov.za/media-release/sars-and-saica-sign-mou-to-help-capacitate-revenue-collector/

As most finance teams know all too well, a manual accounts payable process can be tedious and error-prone. Working through piles of paper invoices, individually contacting relevant approvers and mailing checks is not only slow, it opens the company up to fraud and makes audits painful.

Accounts payable automation (AP automation) technology aims to provide a more efficient, expeditious and accurate way to handle this back-end financial process. By eliminating manual processes and stacks of paper, AP automation can improve your relationships with suppliers and partners while saving time and money, reduce days sales outstanding (DSO), thus improving cash flow.

In short: What Is AP Automation?

What Is Accounts Payable Automation (AP Automation)?

AP automation technology automates routine steps such as receiving invoices, coding, routing for approval, payment and reconciliation. You may come across the term “touchless” processing, which generally means that AP automation eliminates the need to manually input data at any stage, although approvers may still need to sign off on payments with a mouse click.

AP automation software typically also provides dashboards and analytic tools that that help you manage the AP process and diagnose problems. Because all accounts payable data is digitized and stored within a single system, it’s easier to search for and audit the information.

How Does Accounts Payable Automation Work?

AP automation software converts your suppliers’ invoices into a standard digital format and then pushes them through a digital workflow that culminates with paying suppliers.

At the start of this process, AP automation uses optical character recognition (OCR) to extract information from invoices. Some products use machine learning to recognize patterns over time and improve accuracy; for example, they may suggest specific general ledger codes or approval routing based on past experience. By customizing rules for your business, such as acceptable variances or approval hierarchies, you may be able to eliminate the need for manual intervention for most invoices.

Why Automate Accounts Payable?

There are many reasons to automate AP. Some involve a tangible and rapid return on investment. By reducing the need for manual effort, AP automation can drive down your processing costs. It can also help you scale AP more easily as your business grows by reducing the need to hire more people.

AP automation also provides tools that can help you manage payments and cash flow more tightly. By making the payment process faster and smoother, AP automation can also increase your ability to capture supplier payment discounts.

Other benefits include less fraud, fewer errors and smoother audits.

Top Accounts Payable Tasks to Automate

The AP tasks likely to benefit the most from automation are those where you can cut processing time or increase accuracy, both of which save money. Compared with manual processing, AP automation can greatly improve the following steps:

• Data entry. Automating data capture of all source documents is faster and less prone to error than entering data manually.
• Invoice matching. Invoices can be automatically matched to supporting documents, like purchase orders and receiving documents (three-way matching). This automatic matching is faster and more accurate than manual matching, especially for businesses that otherwise might have to match documents stored at different locations.
• Coding invoices. You can establish rules that automatically set the correct general ledger code for each invoice, eliminating the time and inconsistencies inherent in manual coding.
• Approval routing. Electronic routing to all the necessary approvers is faster than manually sending documents to each of them, and it also provides better tracking throughout the workflow.

How to Automate Accounts Payable?

Companies generally apply AP automation software by implementing AP software, either in a software-as-a-service model, where the application is hosted in the cloud, or on premises, for companies that that prefer to host and manage their own systems.

Once a system is in place, finance staff as well as approvers need to be trained, and it’s worth spending time to configure rules so you can automate as many steps as possible. And while the AP process is pretty standard, companies may have some unique requirements that you will want to make sure the solution can accommodate those workflows. This will provide the most return on investment.

What are the Benefits of AP Automation?

AP automation can also provide benefits not just for the financial group but across the entire organization:

• There’s less need to store paper and pay postage and delivery costs.
• Fewer manual errors reduce the need for multiple departments to spend time investigating problems and handling supplier complaints.
• Audits and compliance efforts are easier. Built-in security and accountability features can flag suspicious activity, helping to detect fraud.
• Paying promptly and predictably may enhance your reputation and help you in future negotiations with suppliers.
• Staff can be redeployed for higher value tasks, such as analyzing payments data, instead of spending their time on manual data entry.

How to Select AP Software?

Selecting the right AP automation software for your business should include the following four steps:

• Planning. Put together a cross-functional team that can define your company’s goals for AP automation.
• Requirements gathering. Your AP department documents how your current accounts payable processing works and creates a list of requirements for an AP automation solution. At the end of this stage, you create a request for proposal (RFP) and send it to select vendors that meet the criteria.
• Vendor evaluation. You evaluate the proposals from vendors that answer your RFP, examining aspects of their proposed solutions, such as features, costs and implementation approach.
• Vendor selection. You delve deeper to find out exactly how well the most promising vendors meet your requirements; this may involve developing detailed discovery documents and requesting demos. Then, select your supplier.

Article published by Oracle Netsuite, written by Scot Beaver
Source: https://www.netsuite.com/portal/resource/articles/accounting/ap-automation.shtml