-
The Importance of Audit Trail Importance and How Digital Document Storage Can Help
Accurate records are more than a good idea for companies: they’re essential. Missing documents create breaks in audit trails, which can lead to significant issues for your company. Best-case scenario, it’s a hassle for employees. Worst-case scenario, missing documents found by an external audit can lead to fines, legal action, and loss of reputation.
The method your company chooses to store documents makes a big difference in how easy it is to maintain an audit trail. Paper document storage is unreliable at best. Papers are routinely ignored, lost, and discarded without checking to see if they’re an important part of an audit trail. Digital storage is better, but even that won’t be very helpful without an easy way to organize and access documents.
Cloud-based digital document management systems, coupled with quality Business Process Automation (BPA) software, are the most efficient and effective way to create audit trails and manage key business documents. When you’re choosing BPA software or shopping around for a Software-as-a-Service (SaaS) solution, make sure the software can create a solid audit trail and support document management best practices.
Audit Trails in Accounting
Audit trails provide detailed records of every transaction in a company. They include documents for every step of the transaction process as well as comments and other details.
For a business purchase, a typical audit trail may include a purchase order request, purchase order, PO acknowledgment from the vendor, goods received log from the receiving department, invoice, and payment documentation. It also includes transaction details associated with the purchase, including the dates and times for each document and records of processing those documents.
Maintaining complete audit trails makes it easy to check if transactions proceeded as they should. Your company will be able to better evaluate if it’s meeting key performance indicators (KPIs), identify issues in transactions, catch fraud, and sail smoothly through audits.
The Trouble with Missing Documents
There are a host of benefits to maintaining complete audit trails. But what happens when your company loses documents or there are gaps in the audit trail documentation? The downsides of missing documents can provide motivation to improve audit trails and documentation procedures in your company.
Harder to Catch Fraud
Fraud is a common problem in financial departments. It’s much more difficult to catch fraud if you don’t have all the documents associated with a transaction. Without a complete audit trail, proving—or noticing—that money has gone missing is challenging.
Stressful Audits
If auditors can’t access the information related to transactions that they’re auditing, it will raise red flags. Clear audit trails make it easy for auditors to check if transactions are valid, but missing documents slow down audits, raise suspicions, and may lead to expanding the audit’s scope.
Missed Opportunities
If your company is trying to secure a loan or forge partnerships with investors, missing documents and broken audit trails can undermine your organization’s credibility. If investors can’t see evidence that your company handles transactions responsibly, they may choose to take their business elsewhere.
Delayed Close
At month-end close, even a single missing document can lead to significant delays. It’s hard to close when you can’t verify transactions or accurately say where all the money went each month because the documents just aren’t there.
Incorrect Paperwork
If documents go missing partway through a transaction, it can lead to paperwork errors that are nearly impossible to catch. For example, if the original PO is lost, you won’t be able to catch if there’s a discrepancy on the invoice or if the goods received match the original order.
Compliance Issues
Depending on your industry, missing documents may mean that your company is not complying with regulations and standards. This can result in fines and other penalties.
How Digital Document Storage Works
Digitizing data storage lets you store a huge number of documents in much less space than paper would need. Plus, with a top-quality electronic data storage and document management system, you can go beyond simply storing the data. Online document management SaaS systems make the data you’re storing easy to search through, analyze, share with stakeholders, and use for forecasting.
A digital document management system stores digital files and it includes robust tools to help you use that data effectively. NextProcess’s use of Optical Character Recognition (OCR) and document image indexing makes all your documents easy to search. That’s true for paper documents scanned into the system and for documents that arrive digitally. Your company can categorize documents easily, do full-text searches to find specific files, and search metadata related to each document.
The same features that make it easy to search and categorize documents also make audits easier. Since you can easily find specific files, sort documents, and group files, auditors will be able to work much more quickly. You can also do metadata analysis and reporting at the touch of a button.
The Key Role of BPA Software
As we mentioned earlier, documents associated with a transaction aren’t the only component of an audit trail. Ideally, it should also include transaction information, including processing times, internal comments, date stamps, and similar data.
When you automate a business process using SaaS software from NextProcess, the system automatically logs all the transaction details. If you automate the entire process using an end-to-end BPA solution, then the software basically creates the audit trail for you. For example, when you automate both purchasing and accounts payable with NextProcess, the system logs all the documents related to a purchase and links them to invoices and other documents related to paying for that purchase. It’s very easy for an auditor to pull up a transaction and see all the related documents and metadata.
NextProcess Makes a Difference
NextProcess offers the only suite of software that provides a true end-to-end solution covering budgeting, project management, purchasing, accounts payable, payments, and document management. By automating your company’s financial processes and document management with one software supplier, you’re setting yourself up for success. There won’t be any software conflicts, and your system will work seamlessly to create clear audit trails and promote policy compliance.
Contact us today to set up a free demo. We’ll answer any questions you have, and give you a first-hand demonstration of how our software can help your company create strong audit trails and manage documents effectively.