Software Hardware

  • 1.  Invoice Sequencing

    Posted 02-15-2017 10:14
    I have run across a situation that has me puzzled, and I'm looking for feedback from the group. I have encountered a software program that allows multiple legal entities to be created in a single database (login). This is great, as it minimizes the login/logout, changing company process, however, this particular program numbers Accounts Receivable invoices sequentially at the DATABASE level, not the legal entity level. 

    If this permissible? For my entire working career (36 years) I've only seen invoices numbered by company or by a more discrete breakdown within the company, such as location, warehouse, etc.

    What are the audit implications? What are the legal implications? Personally, I think there is some risk exposure here. The customer I'm working with is concerned about protecting assets within each company and is extremely hesitant to utilize this feature.

    Appreciate any and all comments. Thanks! 

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    Ann Sims CCIFP
    Owner
    Sims Consulting and Accounting Services
    Loveland CO
    (970) 292-7598
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  • 2.  RE: Invoice Sequencing

    Posted 02-15-2017 10:42
    I am not a lawyer.

    It was to my understanding that invoice sequencing (and other things like checks) was a holdover from paper-based accounting systems to help locate physically lost items. With the advent of computer-based accounting systems, the likelihood of misplaced documents is significantly reduced.

    I would consider the analogy of a physical office and a database in your situation. If the argument is that because accounting records are stored in the same database with several entities; that this indicates that these entities are "really all one in the same entity"; one could make the same argument that because the transactions were performed in the same office, these entities are "really all one in the same entity".

    Courts have considered where records are stored or how they are organized is less indicative of co-mingling of entities as actual transactions not maintaining "arms length" status.

    Therefore I would argue that database co-location and sequencing of invoice numbers is far less a worry than the substance of the transactions that occur between entities.

    I hope others can provide more guidance.

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    Alex Lee CPA/CITP, CCIFP
    Accounting Manager
    The Wills Company
    Nashville TN
    (615) 352-1228
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    Original Message