The accountant's guide to contract visibility, cost and revenue recognition

As an accountant, you often face problems related to clutter and lack of insight into the company's agreements with customers and suppliers. Fortunately, there are solutions, with several attractive bonus effects.

As an accountant, you need control over the company's contracts for at least two reasons:

• Is an incoming invoice in accordance with the contract entered into with the supplier?
• Is an outgoing invoice in accordance with the terms agreed with the customer?

You know well why this is important: When the invoiced amount is in accordance with the agreed amount for all accounting documents, the recognition of revenues as well as accounts receivable, costs, and accounts payable is correct. Accounting not only gives a more accurate view of the company's finances, but also ensures compliance with important accounting rules.

This article will talk about the challenges accountants face when confirming if a contract matches an invoice. We know that you often struggle to verify if a contract aligns with an invoice. We will explore the obstacles you encounter as accountants in this process. Then we will look at how contract management software can help solve the financial reporting challenges. We conclude by highlighting what other benefits contract management software can have for financial reporting and management in the company.

Is the incoming invoice in accordance with the agreement with the supplier?

When as an accountant you receive an invoice from a supplier, you send it for approval to the person with the authority to do so. Most often, but not always, it is the person who entered into the agreement who confirms that the invoice amount is correct. What challenges can practically arise in this process? Here are five common issues:

1. The employee cannot find the contract but approves the invoice anyway.
2. The person who agreed to the deal has left, the agreement paper is missing, but another employee has approved the invoice.
3. The invoice does not need approval to be added for payment, as it is automatically paid with the company's credit card.
4. The supplier has raised the price, but has not followed the agreed price index.
5. The company no longer needs the delivery, but it automatically renewed it for 12, 24, or 36 months.

Initially, the fifth point is not a problem for you. However, as a team player, you will still want to avoid such mistakes. All the points have in common that not understanding the contracts causes errors and problems for the company.

Lack of control over agreement documents can also have unfortunate consequences for the company's operations and social responsibility. For example, is the actual delivery content in line with what was agreed upon, such as quality, materials, and production location?

Are customers invoiced in accordance with agreed terms?

Invoicing the customers is, of course, one of the most important things you do in the company. Invoicing can also be challenging, for many practical reasons:

1. The customer and the customer success manager decided to increase the number of deliveries. However, the accountant is unaware of the quantity or cost of these additional deliveries.
2. The agreement with the customer is made at a higher level in the company than where the deliveries take place. The person who interacts with the customer on a daily basis delivers items that were not agreed upon.
3. The customer's contract has a provision for price adjustments based on a specific price index. The accountant is unsure about when to make these adjustments.
4. The agreement has expired, and you have not managed to sign a new contract, but deliveries have continued.
5. The salespeople have entered into unique agreements with each customer, or agreements that often deviate from the standard. The more agreements, the greater the complexity related to correct invoicing.

Many users of Complete Control use the solution to handle complex deliveries to their customers. Here you can read about how CSAM and Wenaas Workwear use our software.

The consequences of searching for contracts across the organization

Before we move on, let's talk about how these challenges can negatively impact you and peer accountants before we discuss our proposed solution. This includes issues and stress caused by mistakes in recording costs and income.

• Time to search for contracts: Many times, it is practically the accountant who must find the missing agreements and then check if the amounts on the invoice are in accordance with the terms in the agreement.
• More expensive audit: The auditor will want to see if invoices and contracts match, whether it is an invoice to a customer or an invoice from a supplier. With a lack of overview, the auditor probably also spends more time on the job.
• More time-consuming budgeting: You are often involved in both budget and forecast processes. Many of the supplier agreements are fixed costs, which commit the company year after year. Time spent searching for commitments is neither motivating nor useful for the budget process.

The solution that provides insight into all contracts in real-time

Imagine if all the agreements that your company has with suppliers are instead registered in a central solution? A place where the agreement document is stored, which links the agreement to employees and departments, with payment plans and notifications before the agreement expires? And similarly for the agreements you have with customers?

For you, this will have obvious benefits. Whether it is you or the person who owns the agreement in the company checks if the invoice is in accordance with the contract, such a solution will be very time-saving. When both have access to the document, the company also has an extra layer of security for the quality of the booking.

Complete Control is such a solution. With a central source of truth, it becomes easier for the accountant to ensure that both costs and income are correctly registered. The finance department also gets a very simple and powerful source of accurate budget and forecast figures.

As a bonus, the user receives notifications in advance of important dates, whether it is agreements with suppliers or customers. Then the agreement owner can confirm that the delivery is still important, as well as have the opportunity to renegotiate the terms in time. Similarly, salespeople and customer managers can be ahead when customer agreements expire. You also have the opportunity to ensure that price adjustments happen in accordance with the agreed price index.