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Why I Still Can't Use Document Management Software

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Apr 14th 2016
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The reasons why I can’t make document management software work for me are mainly based around multi-currency, taxes, and workflow.

I want a system that I can throw documents at and have them automatically matched to existing transactions (in my accounting software), or create them if they don’t exist. Every time I go and review document management software, I somehow think “this time it’ll be different,” but I always end up disappointed.

My needs are somewhat niche, but still, it can be frustrating to not be able to get the software to do what you want. I’m a huge advocate for the cloud and going paperless, and I want it to work, but … it’s just not quite there for me yet.

Multi-Currency Issue

I think multi-currency is mainly an issue for non-US people. We use non-US currency credit cards to purchase things in US dollars. The problem is that we’ll receive a receipt in USD, but the payment amount shown on our credit card is in a different currency (in my case, CAD). This means a document management system can’t help because:

  • The system doesn’t know what the exact exchange rate was. The system might use a daily exchange rate to convert a $10 USD receipt into $12.05 CAD, but the actual exchange rate used by the credit card company results in a charge of $12.31 CAD.
  • If the receipt is entered into the system as USD funds, you can’t publish a USD receipt to a non-USD currency account. In accounting software, there’s no way to post that $10 USD receipt as a USD transaction into a VISA account with a CAD base currency.

Multi-currency receipts in document management software work in two scenarios:

  • If you pay for items using a payment method that has the same base currency as the receipt. In my case, I would need to purchase items denoted in USD with a USD credit card and items denoted in CAD with a CAD credit card.
  • Purchases are made with nonbusiness funds (i.e., my personal cash). Whether or not the base currency of the payment method matches up to the base currency of the receipt doesn’t matter because there is no base currency for a personally paid item.

One last issue that arises with multi-currency receipts is that if the receipts aren’t in English, they can’t be extracted (neither OCR nor humans can handle this). I don’t expect a system to be able to translate non-English languages, but it is an issue I encounter.

Taxes

As mentioned, I deal with Canadian currency and thus with Canadian taxes. On the purchasing side, Canadian taxes are a bit more complicated to deal with than US taxes. Thanks, Canada!

I don’t want to bore you with Canadian sales tax law, but we have three sales taxes: PST, GST, and HST. Where and when these taxes are charged depends on the location of the purchaser, location of the seller, and the specific item being purchased. What you need to know is that we need to track the taxes paid (or when we haven’t paid them), as some of the taxes paid will come back as a refund, while some of the taxes that we didn’t pay need to be paid after the fact.

What this means is that even if you have a really good OCR system, or a knowledgeable data-entry person scanning your receipts, unless they know Canadian sales tax law and your particular business, you’ll most likely end up with incorrect information. I’m fairly sure most Canadian businesspeople are making mistakes too, however, so I can’t say I blame the document management systems for not being able to get it right 100 percent of the time.

With US sales taxes, I’m no expert, but I believe you can take the total price of a purchase (including taxes), enter it into the software, and be done with it. Luckily for you US folks, document management software can get that right near 100 percent of the time.

Workflow

When using document management software, you usually need to follow a very specific workflow. It goes something like this:

  1. Send receipt to document management software.
  2. Document management software extracts info from the document.
  3. Verify the accuracy of the extracted info.
  4. Push the transaction to accounting software (creating a new transaction).

If you are processing a document for which a transaction already exists in your accounting software, you end up with a duplicate. The document management systems I’ve tested have no way to recognize that a transaction already exists. Ideally I’d want the system to identify the matching transaction and merge the data together.

Document management systems don’t provide a whole lot of extra information that your accounting software doesn’t already know. Additionally, the data found within your accounting software will be more accurate because it’s coming from a bank feed.

The data that will be more accurate in accounting software are:

  • Payment method
  • Date
  • Amount

The data that may or may not be accurate, depending on the level of detail of the bank feed and the categorization rules in the accounting software, are:

  • Name
  • Description

The data that document management software can provide that accounting software will not have are:

  • Taxes
  • Line-item breakdowns
  • Document type (is it a payment or a paid expense?)
  • Digital copy of the receipt

Document management software will have some information that your accounting software won’t, but on the whole, most data can be already found within accounting software (and it’s generally more accurate).

What to Look for in Document Management Software

I’ve listed some of the problems that I specifically have with document management software, but I realize not everyone will have those same issues. For those of you who don’t have those issues, here are some capabilities you should look for in document management software (note that the software should be able to both extract and publish the information):

  • Company paid vs. reimbursement: Is a receipt paid for using company funds or personal cash?
  • Payment type: What kind of payment method was used? Was it a credit card, debit card, or cash?
  • Paid vs. unpaid: Has the receipt been paid for or is it an unpaid bill?
  • Type of document: Is the document a statement of receipt, a payment slip, an unpaid invoice, an expense submitted for reimbursement, or meeting minutes?
  • Categorization rules: Even though information can be extracted, rules are necessary to make it more accurate and fill in missing details. Is a receipt from ABC Corp. usually attributed to a research and development expense, or is it coded to a furniture and equipment asset account?
  • Billable: Does the receipt need to be billed out to a customer?
  • Links between documents and accounting records: If you’re within your accounting software, can you click a link and go back to the receipt as found in your document management software (and vice versa)? If you are no longer using your accounting software or document management system, is there a way to match up a downloaded receipt with a spreadsheet full of your accounting software transactions? Is there a unique ID used in both systems that allows you to piece back together a transaction and its source documentation?

This is not a complete list, but those are some of the features I’d look for in document management software. Most of these systems have the capabilities mentioned above. As mentioned at the start of this article, some of the features I want that I haven’t been able to find in document management systems are:

  • Tracking taxes: Specifically for non-US purposes
  • Multi-currency: Again, for mostly non-US purposes
  • Workflow: A system that allows for data to be first entered in accounting software

What’s Really Missing

The overarching issue I have with document management software is that it’s not deeply integrated with accounting software. Both systems contain valuable information and have different approaches, but if they were able to communicate and share data better, a lot of the problems and need for complicated-to-use features would go away.

Let’s pretend we’re in a world where the data in both document management systems and accounting software are completely accessible to each other. Think about how the feature functionality would change for the better. On the document management side, it would no longer need to worry so much about figuring out the payment type. Was a receipt paid for with the Platinum VISA card or the gold MasterCard? If the document management system had access to the data found within the accounting software, a simple matching algorithm based on date and amount would probably reveal that the purchase was made using the gold MasterCard.

Duplicates would also be a lot less worrisome. Before creating a new transaction, a check to see if the transaction already exists within the accounting software would drastically cut down on the chance of a double entry.

Instead of having to verify that the data in document management software is correct, and then having to again do the same thing in accounting software, an interface allowing you to view both data sets at the same time would be so much easier. I mean, imagine you’re trying to categorize bank feeds in your accounting software and the display shows you a matching receipt found in the document management software, and the transaction completely categorized for you. All you need to do is accept the match and the transaction would be entered into your accounting software, complete with source documentation –and reconciled against your bank account.

Getting Closer to My Ideal

American Express recently came out with a solution that gets a bit closer to addressing my desire to marry source documentation to accounting records. It’s called the Connect to QuickBooks service. The idea is that you snap a pic of a receipt, and abracadabra, everything is matched with your data in QuickBooks Online. Note: For this to work you need to use the American Express ReceiptMatch app and have an American Express OPEN business account.

The app is able to combine both data from the bank feed (direct from American Express because it owns the app) with the receipt you capture. When the data hits QuickBooks Online, I like how rules are applied to ensure the best possible accuracy:

  1. Any rule from a prior categorization takes priority (meaning that if you’ve created a categorization rule in QuickBooks Online, it’ll use that categorization).
  2. If there isn’t a rule, the user’s input (from the ReceiptMatch app) is used.
  3. If neither of those apply, then QuickBooks will try to “auto-categorize” the expense based on the information from the transaction.
  4. In some cases auto-categorization might not work. In that case, the expense will show as an “uncategorized expense.” Sometimes there isn’t enough information in the expense, or your Chart of Accounts doesn’t have an appropriate account that auto-categorization is expecting.

Beyond attaching a receipt to the transaction, the import also contains more data than a traditional bank feed, as seen in the image below.

AMEX Open Receipt

So, even if you don’t attach a receipt, you still get extra information that you would not get from a normal bank feed.

If I only ever had to make purchases using an American Express card, had an American Express OPEN business account, and only used QuickBooks Online, this would work quite well. If something like this could be worked out for all types of documents, payment methods, and accounting software, that would be cool.

Who Does Document Management Software Work For?

I know this article is about how document management software doesn’t work for me, but it can still be a very useful tool for many people. Even if you don’t use the software to push transactions to your accounting software, it’s still good at gathering and organizing your documents in a single place.

If you don’t deal with multi-currency and taxes like I do, and use a system that can do the data extraction with good accuracy, it will certainly cut down on your time processing transactions within your accounting software. Just remember that if you’re going to use document management software to post transactions to your accounting software, you need to start processing the data in your document management software first.

Does document management software work for you? Do you have any tips on how to use it to suit your needs? Are there features that aren’t available that you’d like to see?

The original post appeared on the Sleeter Group blog. Greg Lam will be speaking at the Accountex USA 2016 event in November. AccountingWEB and Accountex have partnered to bring you this content as we share a belief in the furtherment of the profession through greater insights.

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By Clinton Lee
Apr 22nd 2016 09:02 EDT

Excellent article, Greg. If it wasn't for politicians making tax so complicated in the first place we wouldn't be struggling with many of these reconciliations!

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