EN News TypeCurrents & Trends - 28.08.20

Quick Check: Digitization in Accounting

10 Questions to Assess the Status Quo

Legal changes and statutory regulations like e-invoicing or the GoBD principles in Germany are paving the way for digitization in accounting. Mobile solutions, workflows or document management systems (DMS) are eliminating risks like double entries and media disruptions. The directors of financial departments assess the progress of digitization quite differently, though. Our quick check helps you answer the question "How well is accounting digitized?" on the basis of 10 questions.

Quick check:

  1. To what extent are accounts payable processed automatically?
    If your invoices are automatically scanned and read into your system, you've already taken the first step towards consistent automation. But this does not necessarily mean that your process is digital. This is only the case if the invoice is checked with regard to form and content, and the necessary posting records are prepared afterwards. German authorities are obliged to use structured invoices already today, for example the ZUGFeRD and XRechnung formats. This is why companies should start to orientate their processes to such formats now.
  2. To what extent do you use workflows for process automation?
    Digital documents alone do not mean that your company is digitized. We recommend that you link the other processes and steps using workflows. This makes it easier to document the necessary steps to reach compliance with the relevant regulations. In addition, workflows help increase productivity. Since employees are directly assigned the next tasks, they no longer waste time looking or asking for them. Accounting principles like the German GoBD also oblige companies to name all processes in a procedure document. These procedure documents will get more and more attention from tax auditors in the future.
  3. Does monthly reporting rely on a central data basis?
    It often takes a lot of time and work to create regular reports for the various departments of a company. But there's an easier and, most notably, a much quicker way: a cockpit automatically provides all relevant data in the desired dimensions. A central ERP system provides the best basis for this.
  4. Is there an agenda for the continuous improvement of data quality?
    Humans no longer function as supervisors when data are transferred from one system to another, as it is usual with digitized processes. This makes data quality a critical success factor. If you now think that it's enough to clean the master data and transaction data every now and then in a big project, you are mistaken. As you know, slow and steady wins the race. This means you have to establish a continuous review process. Our checklist can help you with this.
  5. Do you use a document management system (DMS)?
    When the tax office announces an audit, the auditor might demand a digital audit. Companies which store their documents in digital form comply with these statutory regulations while benefiting from an increase in efficiency. A DMS largely reduces search times and makes employees much more flexible as they can access important documents from anywhere.
  6. Do you use consolidation systems?
    Many small and mid-sized enterprises are obliged to prepare consolidated financial statements. At the latest when they go abroad. Consolidation systems help you create a company group balance sheet – and ideally, they are incorporated in the ERP system. If this is not possible, the ERP provider should alternatively offer an integration that provides for a comprehensive consolidation solution.
  7. What interfaces to external systems do you have?
    A network that reaches beyond system borders is an important basis for digitization. Data must be transmitted automatically from one system to another. By means of a service-oriented architecture (SOA), various systems can be integrated without causing chaos in the interfaces. A so-called databus takes care of the transformation of data from various formats like currencies and dates. It provides the data to the places where they are needed during the process.
  8. Do you have a central master data management?
    The basis for successful digitization is a central and functioning master data management, that can be ideally used across companies. If the different departments work in separate systems without common master data, misunderstandings and unnecessary double work are inevitable.
  9. Do you have an electronic data exchange with customers and suppliers?
    Many think of "EDI" here. Public authorities encourage developments like this, for example by passing regulations about e-invoicing. But there are many more ways to exchange information relevant to accounting, from order confirmation to payment advice.
  10. Is it possible to read in and process account statements electronically?
    With ISO standard 20022 and the regulations for posted account statements in XML format, banks have laid the foundation for the digital exchange of information. This greatly simplifies and accelerates the reconciliation of open items, offering a great benefit in efficiency and transparency.

The leaders of financial departments can use these ten questions to assess the current level of digitization in their departments and prepare for the next steps. In accounting, too, digitization plays an important role and should not be missed.

Don't forget: the checklist on data quality helps you improve the quality of your data, which is the basis for successful digitization.

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