Thursday, September 6, 2007

What's in a number?

In a number of my implementations, I have come across clients who:

  1. Prefix invoice numbers, purchase order numbers, etc with the year and the month. So if the invoice number is 1001, it would be prefixed with 2007/08/1001, or some combination to that effect.

  2. Prefix the above documents with an acronym of the document type. For instance CN1001 for credit notes or PO1001 for Purchase orders.

  3. Number payment vouchers.

Prefixing document numbers

While there is nothing wrong with doing this, when using a computerised accounting system, it does present a problem. In the case of prefixing document numbers, the system does not automatically give you the next number. Most systems do not cater for a prefix and/or a suffix to document numbers and work on the presumption that these are numerical and will increment it by one and give you the next number. Invoice 1001 becomes 1002 and so on. The problem arises when a non numerical sequence is encountered, like 2007/08/1001. The system will then either give you the last reference or nothing for the next reference.

To avoid this you can leave out the slashes, like 2007081001, in which case the system will generate 2007081002 for the next document number. Then again, you will have to remember to manually change the prefix for each month as well as for the year, as the system does not do this for you.

Prefixing document numbers with an acronym helped to differentiate and identify documents. CN1001, PO1001, PV1001. You easily identified the document types without me having to tell you, right?

As these types of prefixes do not change, you can insert these into the document's customised format. It would then not be necessary for you to enter the prefix at the transaction screen, and the system will increment the reference numbers correctly.

What's the fuss about?

Why prefix document numbers and why number payment vouchers?

This practise is essentially a carry over from the manual system of accounting. While it was okay to number them 1001, 1002, etc, it was not so easy to search for and find a particular document

The logic was the if we prefixed a document with the year and the month, that would enable us to establish exactly where the document was filed and zero in on it. If the boss, therefore, asked for a copy of invoice 2006/10/7659, we knew that we would have to look in the October file located in the 2006 cabinet. Easy!

The same applies to payment voucher numbers. These were used to help organise the payments so that we could trace them if necessary.

Payment vouchers

Payment vouchers, on the other hand, pose an additional problem, even if you do not use prefixes. Most systems only have a field for cheque numbers.

Okay, we can live with that, but what about petty cash payments? These do not have a cheque number.

The answer is to use the cheque number as your petty cash voucher number. As long as you do not prefix the number with PV, PC etc, the numbers will increment and you will get the next reference when keying in a new transaction.

Why number at all?

Numbering all accounting source documents with a number not only helps in referencing them, it also helps to ensure that your accounting records are complete.

So, for instance, if you look at the sales register and see a list of invoices numbered 1, 2, 4 and 5, you would know that data from invoice 3 has yet to be entered.

Even if this particular invoice has been canceled, enter it into the system with the description "Cancelled" and amount of zero. This way, months later, at one glance you would know that the records are complete.

The paradigm shift.

Let's look at the need to find documents which gave rise to the practise of prefixing numbers.

With the advent of computerised systems, this has become obsolete. Finding documents is now so much easier.

Most systems allow you to search transactions by any number of criteria, allowing us to find a particular document easily.

Find transactions screen in MYOB

The find screen allows you to search by account, transaction type, customer/supplier/employee.

Advanced find screen in MYOB

The advanced find screen even allows you to search for transactions by amount and description.

This essentially makes prefixing document numbers obsolete.

To prefix or not to prefix?

There is no rule that says you should or should not prefix. If you do, however, the onus will be on you to ascertain and enter the next number in the sequence.

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