Transaction Error Rate

It is quite common to observe transaction error while conducting the financial transactions. The cost of correcting these errors is far greater than the cost of prohibiting these errors initially. One of the various metrics to avoid the occurrence of the transaction error is to measure the transaction error rate within a business. The error rate is monitored in accordance with the number of transactions carried out by a single person in the company in addition to find out where the most of the errors are occurring and which areas of the accounting software or accounting manual require corrections.

The transaction error rate can be used as a useful measure in order to calculate the efficiency of a certain department with the help of calculating the transaction error rate of that department. If the transaction error rate is higher that means the efficiency of the department is low as the senior management has to allocate time and resources in order to correct those errors.

In order to calculate the transaction error rate all the errors in a given transaction related period are counted and accumulated. The total number of errors is then divided with the total number of transactions of that accounting period. There must be a separate transactions rate for different types of transactions and the calculation we made must match transactional errors to the pool of the similar transactions completed within that accounting period.

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