Digital accounting is integral to the accounting landscape and has transformed how businesses operate and manage their finances. The traditional methods of managing financial data through the use of spreadsheets and manual inputting are shifting to keep up with the demands of modern-day technology.
Digital accounting is something to embrace and within this blog article, we discuss the adaptation of accounting and identify the significance of integrating modern processes. We also highlight the benefits of digital accounting and provide you with the steps you need to take to harness the digital transition of accounting successfully.
Digital accounting refers to the ways accounting processes are completed using electronic methods.
Digital accounting records are created, transferred, managed and stored in a central location within the cloud, allowing accountants to find and manage all financial data wherever they are.
The digital transformation in accounting facilitates invoice processing, management and automation, making it easier for accountants to manage invoice ledgers, ensuring timely payments are made and records are archived effectively.
This aligns with the UK Government’s plans to digitise the tax system, which aims to reduce the amount of tax lost to errors and make the tax system more efficient for businesses and individuals. This is set to be phased in from April 2026.
While manual accounting processes have been the backbone of many accounting teams, there are now more effective ways of working.
Manually inputting accounting data is time-consuming, leaving space for error — even with multiple checking processes. A transition from traditional to digital has to occur to scale your business and stay ahead of the curve.
What this means for businesses is implementing a transition to digital accounting processes.
Swagelok, a Manchester company, saw an increase in paper-based documents — including those related to accounting matters.
Since manual workflows were already established, it offered an opportunity for DocuWare to mirror the paper-based processes digitally. What did this achieve?
70% of the approximately 100 invoices generated daily are now sent electronically. The majority of monthly invoices going to 700 established customers are now emailed.
By embracing digital accounting through DocuWare, Swagelok has achieved significant improvements in efficiency, security and accessibility, allowing them to better serve their customers and reduce their environmental impact.
Digital transformation in accounting provides numerous benefits to businesses of all sizes. By modernising your AP processes, you can:
Process and manage financial data in real time using an automated system. This ensures that businesses make informed decisions based on up-to-date insights and reporting, enhancing economic performance and identifying any gaps.
Process automation reduces the need for manual data entry, ultimately reducing the risk of human error. This further increases efficiency, saving time and leading to better-informed business decisions.
Digital accounting provides enhanced security and routine backups, minimising data loss or damage risks using encryption against unauthorised access.
Paper copies are susceptible to water and fire damage, as well as getting lost. Those risks are eliminated by keeping data digitalised and in a central place within the cloud.
Any loss or damage to current or archived information can severely affect the business.
Cloud-based systems allow businesses to store their financial data in secure data centres. In any disaster, businesses like yours can easily retrieve their financial data from cloud-based systems from anywhere in the world, ensuring business continuity.
Automation integrated within digital accounting systems ensures financial data is backed up regularly, reducing the risk of data loss.
The enhanced data security and backup provided by digital accounting systems offer businesses peace of mind, knowing that financial data is secure and easily retrievable in unforeseen circumstances.
Integrating a digital transformation in accounting provides capabilities such as invoice automation, which can have a beneficial impact on invoice ledgers and the invoicing process through invoice reconciliation, as well as automating e-invoices by significantly reducing the time spent on these tasks by employees.
Traditional accounting systems are expensive and it takes extensive time to complete a single task.
Implementing an invoice management system or DMS can help with digital accounting by the time accounts spend on tasks and saving the business money.
Printers and paper are no longer needed and the reduction of errors means you don't have to waste valuable time and effort fixing them.
A cloud-based system, like a DMS, can continue working without being trained on new processes and methods. At the same time, accounting automation means these systems grow and adapt as the digital world does without disrupting accounting processes.
Transitioning towards digital accounting allows you to reduce your reliance on paper-based accounting processes, significantly reducing paper usage, printing costs and waste.
Digital accounting also enables businesses like yours to reduce their carbon footprint by eliminating the need for physical storage of financial documents and transportation and delivery of paper-based financial documents.
This is particularly important for businesses that are committed to reducing their environmental impact, promoting sustainability and shifting to a paperless office.
Digital accounting utilises electronic or cloud-based systems to create, transfer, manage and store financial data in a centralised place.
A key feature of digital accounting is its ability to integrate with other business systems. This enables automated data transfers and reduces the need for manual data entry, ultimately streamlining the accounting process.
Digital accounting software can also provide deeper insights into the analysis of financial data to highlight business performance and identify potential areas for improvement.
AI and machine learning also automate repetitive tasks such as intelligent indexing to extract information about the sender, recipient, amount and creation date.
Document management is closely linked with digital accounting as the two work hand-in-hand to streamline financial workflows.
A document management system facilitates the organised storage, categorisation and retrieval of digital financial documents.
Integrating digital accounting software with a document management system creates a seamless workflow. When an invoice is received, it can be scanned or uploaded to the document management system and automatically populated in the accounting software, preventing errors associated with manual data entry.
Document management systems also include version control features, which allow you to track any changes made to financial documents over time. 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 secure 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) or GDPR can be better managed through the combined efforts of digital accounting and document management.
Transitioning from traditional accounting methods to digital accounting is a straightforward process that can be completed in just five steps.
The first step you need to take before beginning to digitise your accounting process is to evaluate each process that’s already in place, determine pain points and identify areas that can be significantly improved by digitisation. By understanding these challenges from the start, you can make informed decisions about what’s most important for your business.
Once you've highlighted what you need from digitising accounting processes, it's time to choose the right digital accounting software that aligns with it.
The solution you choose needs to be user-friendly, offer the relevant features and functionalities you require and cater to your business. Research, compare and consider factors such as scalability, integration capabilities and security to ensure you make the right choice.
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.
Migrating all of the data stored through the old accounting processes is a critical step in the transition process.
Gradually migrate data while keeping the old system operation in parallel to allow for a period of adjustment and enable the accounting team to familiarise themselves with the new system.
When the full migration is complete, all employees are trained on the new system and any challenges are ironed out without greatly disrupting existing business operations.
It's vital to regularly update and audit your digital system to ensure the software complies with new and existing data regulations.
Regular audits help identify and address any potential compliance issues before they become significant problems.
Optimisations help enhance the system's overall efficiency to provide a smoother user experience. It also helps to identify any inefficiencies within workflows, which can be amended to further improve UX.
By following these five steps, organisations can successfully transition from traditional accounting methods to digital ones. This digitisation 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 businesses adapt to the changing accounting landscape, digital accounting will continue to play an increasingly important role in financial management and decision-making.
Ultimately, digital accounting streamlines all your accounting needs and solidifies the security and management of financial data you don't get by using paper copies and storing them in folders in an office.