Digital accounting has transformed how businesses operate and manage their finances. The traditional methods of managing financial data through spreadsheets and manual input are shifting to keep up with the demands of modern-day technology.
In this article, we discuss its role and identify the significance of integrating digital processes. We also highlight the benefits of digital accounting and provide you with the steps to take to harness the digital transition successfully.
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Digital accounting refers to the ways accounting processes are completed using electronic methods. It’s a much more efficient approach than relying on manual data entry and countless spreadsheets. It involves the use of digital capabilities to manage transactions, recordkeeping, reporting, document retention schedules and compliance.
Internally created and incoming financial documents are managed, shared and stored in a central location in the cloud or on-premises. This enables authorized users to access documents and manage accounting workflows from the office, remotely or on the road.
It facilitates automation of routine tasks like invoice processing, document management and workflow automation, making it easier to manage invoice processing, expense management, audits, month-end close and other essential processes. It also helps ensure timely payments are made and records are archived according to federal, state and industry standards.
While manual accounting processes have been the backbone of many accounting processes, there are more effective ways of working.
Manually inputting accounting data is time-consuming, leaving room for error — despite multiple reviews. A transition from traditional procedures to digital ones makes it possible for your company to grow your business efficiently and stay ahead of the curve.
Digital accounting uses cloud-based or on-premises systems to create, transfer, manage and store financial data in a centralized place.
Digital transformation provides numerous benefits to businesses of all sizes. By modernizing your accounts payable (AP) processes, your company can:
A document management system (DMS) facilitates the organized categorization, storage and retrieval of financial documents.
Integrating document management with your ERP or accounting software can create seamless workflow. When an invoice is received, it is scanned or received digitally and filed in the document management system. The then the data can automatically be shared with your ERP or accounting software, preventing errors associated with manual data entry. If accounting staff wants to refer to the documentation, it is readily available directly from the familiar interface they are working in.
Document management systems also include version control which allows accounting staff to track changes and who made them. This keeps you compliant with regulatory requirements and keeps documents accurate and up to date.
Protecting sensitive financial information is vital. Access controls, encryption and authentication are features of a document management system that help maintain the confidentiality and integrity of financial documents.
Compliance with regulations such as Sarbanes-Oxley (SOX), and GDPR can be better managed through the combined efforts of digital accounting and document management.
Based in Northern California, Mengali Accountancy provides accounting, money management and tax services for its clients. A DocuWare customer since 2007, the company is continually improving its workflows to adapt to changing business needs.
Recently the company added the functionality of DocuWare Intelligent Indexing. It uses machine learning, a subset of artificial intelligence, to learn to recognize document types and where data is positioned on them. When similar documents are imported the index terms are filled in automatically. After the system has seen an invoice a few times, indexing is automatic.
Hospitality management company Culinaire uses DocuWare to manage accounting documents from 30 remote sites. Headquartered in Texas, Culinaire operates in 17 states and has almost 2,000 employees.
Before implementing DocuWare’s digital capture and automated workflow, Culinaire’s central accounting office dealt with a large volume of paper documents. Each remote location sent weekly FedEx packages that contained copies of accounts receivable, accounts payable documents.
Now, members of every accounting team log into Culinaire’s accounting portal daily. Then they create a digital report that can be reviewed in real time. Supporting documents are available digitally when needed. Instead of waiting for a week to get access to sales figures, costs and other information, this information is available that same day. This provides a snapshot of daily revenue and spending. In addition, accounting processes are initiated more quickly and bottlenecks are eliminated.
Take the first step by evaluating each process that’s already in place, determining pain points and identifying areas that can be significantly improved by digitization. By understanding these challenges from the start, you can make informed decisions about what’s most important for your business.
Involve your team in the design process. End users often understand more about the day-to-day work than their managers do.
Once you've determined what you need from digitizing accounting processes, it's time to choose the digital accounting software that aligns with it.
The solution you choose needs to be user-friendly and offer the features and functionality your business needs. Research, compare and consider factors such as scalability, integration capabilities and security to ensure you make the right choice.
Look for a solution with these features:
Migrating documents and data stored in the old accounting processes is a critical step in the transition process. Typically, companies use a day-forward approach, working with older accounting documents in their previous system with a planned cutoff date, and storing and working with new documents in the document management system. Then they migrate inactive documents for archival purposes. Sometimes they only migrate a year or two of data, sometimes all old data.
Some companies keep the old system operation in parallel to allow for a period of adjustment and enable the accounting team to familiarize themselves with the new system. In other cases, accounting departments will stop using their old system and do a strict cutover to DocuWare, stopping any processes in the old system and restarting them in the document management system.
Depending on the design, deploying your office automation solution might begin with the creation of a test system or occur in several phases. Test early and often. Testing is often glossed over, but it’s a great way to avoid surprises during the implementation that could cause business disruptions later. Resolve outstanding issues and demonstrate progress in regular review meetings. This is also the time to begin training IT administrators and power users. Once the system has been deployed, run through one of your processes with sample documents or files, and use this as a training exercise
Training sessions should be conducted to ensure that employees understand how to use the software effectively and are aware of the benefits it will bring to them and the business overall. Training time can vary from a few hours for the end users who are assigned to a small number of workflows to one or two days for system administrators and power users. Make sure you create ongoing technical documentation.
Training time can vary from a few hours for the end users who are assigned to a small number of workflows to one or two days for system administrators and power users.
It's vital to regularly update and audit your digital system to ensure the business rules that your software enforces comply with new and existing regulations continue to meet your needs. Regular audits help identify and address any potential compliance issues before they become significant problems.
Optimizations help enhance the system's overall efficiency to provide a smoother user experience. It also helps to identify inefficiencies and implement improvements to resolve them.
Don’t forget to create ongoing technical documentation. Your documentation should identify the system administrators are so that everyone knows who to ask when questions come up.
The systems supporting your digital transformation should meet your changing needs. Digital accounting processes are not something you set up and never think about again.
By following these five steps, your company can successfully transition from traditional accounting methods to digital ones. This digitization process helps future-proof the business, improve productivity and accuracy, and streamline accounting processes.
Digital accounting is transforming the way businesses operate and manage finances. As economic conditions change and businesses need to adapt, digital accounting will continue to play an increasingly important role in financial management and decision-making.
Your company can no longer rely on paper or a lack of integration that leads to a struggle with disconnected software systems. Ultimately, digital accounting streamlines every accounting process and improves the management and security of financial data. It’s a solution that you need to stay competitive and remain at the top of your game.