Sunday, October 07, 2007

WAKE UP, SLUGGARDS!

Of all of the major components of a financial system, Accounts Payable (A/P) is probably the most simple to design correctly; yet, it is often the most poorly designed of the entire system.  Why is that?

The truth is that A/P is not the flagship of the design.  It’s more like the supply ship!  Not fancy, not the center of most management meetings, just a valuable tool that manages expenditures. 

We all know that most developers are lazy by nature.  They don’t expend effort unless it’s required.

So what’s missing in most A/P designs?  The list is long, but how about the following for starters:

• We need the ability to research a vendor’s invoice from the vendor screen without having to run a report.  This would include the ability to see a digital image of the original invoice.  Invaluable for research.

• We need the ability to research payments made to a particular vendor’s invoice from the vendor screen without having to run yet another report.  We need the ability to see a digital image of a check or the posting of the electronic transfer of funds for that payment.  Again, invaluable when researching.

• Where are multiple discount options for a vendor?  Many vendors offer different payment discounts based on what you’re buying or the amount owed.

• Why not provide a flexible method for analyzing the benefit of maximizing float according to due dates versus the savings of using maximum discounts.

• We need the ability to access vendors by a meaningful code as opposed to some arbitrary, non-intuitive number or code.

• The package must have full support of 1099 type reporting.  (See article: “To 1099 or not 1099.”)

• Finally, give us detail information.  Don’t summarize into reporting periods or require a formal year-end close, losing prior year data.  How archaic.

There are more items that need to be included before we get a GREAT A/P application.  This is enough challenge for sluggard developers for a while!

Thursday, January 25, 2007

To 1099 or Not 1099

One of the questions I ask software salesman during their presentations is, “How does your system handle 1099’s?” You won’t believe the answers you get!  Not surprisingly, there are some that say, “What’s a 1099?” The best response I have heard is, “There is a flag setting in the vendor master record.” When pressed as to the purpose of this flag the response was, “Oh nothing, it’s just there to tell you to do something.” Even if they understand what a 1099 is (and all its variations) most systems don’t address all governmental reporting requirements.  Why is all this important? . . .

If your business is involved with outside contractors, renting, interest on loans, or any of the many different types of payments subject to governmental reporting, you need to be very concerned with how your software deals with 1099’s.  Government’s quest to relieve us of any spare change isn’t going to go away, and enforcement of reporting earnings through the use of 1099’s will only increase.  Failure to comply will bring heavy fines!

What is needed to comply with these regulations is the following:

a. Identify those vendors who are subject to 1099 reporting and record all pertinent data.
b. Identify those vendors who are subject to backup withholding.
c. Allow for multiple 1099 categories per vendor.  This means identify what type of form (1099-M, 1099-I, etc) and which box numbers are to be used to for the reported amounts.
d. Ability to identify by invoice line item the amount is reportable and to which form.
e. Be able to withhold by invoice, maintain a withholding balance and reflect that in the G/L.
f. Don’t use BUCKETS to maintain totals of reportable amounts and withholding.  Always process dynamically.
g. Provide an auditing report that can be run throughout the year to report on any possible 1099 vendors, type of 1099, line item description from invoice, and line item amounts (including withholding).
h. Provide for the ability to combine different companies that have the same tax ID for unified corporate reporting.
i. Provide for electronic filing.

The above items are BARE minimum.  Now that I have provided design requirements do you think the software providers will do anything?  They should, but I doubt it.  There may be some software company that can provide some of these items.  It’s time for more searching.  All we can do is hope.