What is Digital Accounting?
Digital accounting refers to the creation, representation, and transfer of financial information into an electronic format. Instead of using papers, all accounting transactions are conducted in an electronic environment.
Digital accounting refers to the creation, representation, and transfer of financial information into an electronic format. Instead of using paper, all accounting transactions are conducted in an electronic environment.
This concept stemmed from the need to establish a more efficient tax system. Digital accounting surfaced in 2003 as a project of the federal government to modernize the Tax and Customs Administration (PMATA). Then came the Electronic invoice (NF-e) and the Digital Bookkeeping System (Sped) in 2009. In 2015, the Digital Bookkeeping System Tax, Social Security, and Labor Obligations were introduced.
Now that you know what it is, let’s discuss the benefits of it:
Benefits of Digital Accounting
Remote Access
One of the primary benefits of a digital accounting system is that it provides you with remote access to your company’s financial data. Digital accountants offer cloud-based solutions and digital accounting software packages that let you log into the system from anywhere and at any time.
This is particularly helpful for cash flow management and cash flow is the lifeblood of your company. For efficient cash flow, decision-making is a crucial role. With a cloud-based accounting solution, you can analyze your cash flow remotely and make quick decisions regarding payments, investments, etc.
Convenience and Improved Pace of Productivity
Digital accounting provides the comfort of running different automated financial tests on easily accessible data. Professionals save time compiling and presenting reports and numbers to accelerate online transactions.
This increases efficiency and productivity. By automating many of the accounting functions through digital accounting, you can dedicate staff to other essential functions. This means you can potentially generate more revenue with the same amount of resources.
Security and Agility
Cloud-based accounting solutions are an effective solution to outdated, paper-based accounting records. They are also more secure. These solutions come with cloud storage backed by multiple data centers for data backup.
Many rely on SSL technology for data encryption like those used to secure financial information in banks. With a digital accounting solution, you should be able to retrieve or backup your data even if things go wrong.
Easy Invoicing and Payment Tracking
Without keeping up with invoicing and payment tracking, there’s no way to minimize delayed customer payments. Too many distractions can keep you from following up with debtors.
This can adversely impact your cash flow position. A digital accounting system is perhaps the best solution to the problem. It automates the process of sending invoices and payment requests.
Better Integration and Syncing
One of the biggest challenges associated with manual accounting systems is poor compatibility with the other tools used in your business. The best digital accounting solutions integrate simply with other business tools such as the point of sale system, payroll, website order fulfillment, and more.
The cost of these integrations is often zero or negligible. These applications comprise ecosystems of hundreds of business applications that enable data sharing freely.
On top of that, integration services such as OneSaas, IFTTT, and Zapier can extend the number of programs your accounting program can connect with for some cost.
Facilitates Tax Preparation
Manual accounting practices make it difficult to gather tax-related documents and prepare to file upcoming returns. It also leads to poor financial tracking and makes it difficult to set aside funds for tax payments. Not preparing for tax filing as the deadline draws near poses serious risks.
Digital accounting not only helps you arrange and separate funds for tax payments proactively, it also simplifies the calculations for taxes. This should exempt you from agonizing stress associated with taxation.
The poor financial tracking inherent to manual accounting can cause you to miss tax write-offs or deductions for your company. To avoid overlooking payments you can use for tax deductions, consider switching to a digital bookkeeping and accounting system.
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