As Alan Sugar, or should I say Baron Sugar, head honcho of the UK TV Series, The Apprentice, once said…
“Business is not about coming in, pissing my money up the wall and saying ‘Oh well, I have learnt from my mistakes and it won’t happen in the future”
So what if we treated our finance processes as if we were the owner of the company? Would we keep all the behaviour and cash leakage that currently exists?
Transactions make businesses tick, but the strategic importance of its processes – how transactions are managed – is often overlooked.
In fact, legacy systems and processes can cause systematic errors, then combined those with human errors, and the total value of errors (in time and cash) are often considerable and wholly unnecessary.
So why are we accepting capital leakage?
Let’s put a number on these transactional errors. In a recent project, Qvalia analysed 17 million accounting entries and postings from 100 Nordic private and public sector organisations in search for one of the most common pitfalls: erroneous VAT.
Value-added taxation is complex as well as common and so it provides an indication of the magnitude and the result was astonishing. It’s also a defined policy and legislation, so fairly unambiguous to check.
So, how much was lost?
On average, process and human error caused a loss of EUR 0.73 per transaction due to VAT complexity alone. That is like having an extra member of staff to process through your payroll, for every transaction. Furthermore, these errors represent 49% of the total cost of posting and codification.
And these errors occur despite the Nordics being in the top of e-invoice usage in the world. They strive for efficiency.
The result indicates the flaws of legacy processes, ERPs and bring together unstructured data. And this VAT project is only the tip on the iceberg.
Over-payments, double payments, wrong price and the time and resources required to fix errors that are detected in the established processes, all add to the unnecessary capital leakage.
Or as Baron Alan would say, Pissing his money up the wall!
Is it time to think differently about this leakage and improve your shareholders wealth by improving your finance processes? Download the full report Lost in transaction – the hidden cost of accounting errors and get inspired to assess an develop your financial processes.
Co-authored by Christopher Argent, Generation CFO and Per Holmlund, Qvalia, a Stockholm-based fintech company.
More big questions here – #BQs