Technology has transformed the financial industry. In the past, business owners had to hire accountants to record and process financial data manually. Now, you can hire outsourced accounting services that automate financial reporting and simplify your finance and accounting department.
But what exactly is digital accounting, and why should you consider it? Keep reading to find out.
What Is Digital Accounting?
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 practices 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:
What to Look for in a Digital Accountant
When choosing a digital accountant, it’s crucial to ensure they can handle all aspects of financial management and manage financial data efficiently. Here are some key factors to consider:
- Experience with Cloud-Based Accounting Software: Your digital accountant should be proficient in using cloud-based digital accounting tools for storing financial information and managing transactions. This ensures data is secure, accessible, and up-to-date.
- Specialization in Your Industry: Look for an accountant with experience in digital revenue accounting solutions for enterprises or a digital accountant for e-commerce. They will have the extensive market knowledge needed to navigate the specific challenges of your industry.
- Comprehensive Financial Services: A good digital accountant should offer a full range of services, including financial and inventory management, tax preparation, multi-channel payment reconciliations, and capital raising.
- Real-Time Financial Insights: Ensure they provide real-time updates and insights. This includes the ability to analyze data, create financial models, and offer timely advice on managing financial data.
- Strong Security Measures: Given the sensitive nature of financial data, your digital accountant must have robust security protocols to protect your information.
- Ability to Navigate Complex Transactions: Look for someone who can navigate complex transactions and handle everything from due diligence to negotiating terms. They should be adept at identifying and resolving potential conflicts during transactions.
Now that you know what digital accounting is and what to look for in a digital accountant, let’s discuss the benefits of it:
What are the Benefits of Digital Accounting?
Remote Access
Unlike traditional accounting practices, which rely on outdated formats like paper, one of the primary benefits of a digital accounting system is its ability to provide remote access to your company’s financial data. Digital accountants offer cloud-based solutions and software packages that let you log into the system from anywhere and at any time. This is particularly helpful for cash flow management, allowing you to analyze your cash flow remotely and make quick decisions regarding payments and investments.
Convenience and Improved Productivity
Digital accounting practices offer the convenience of running automated financial tests on easily accessible data, saving professionals time in compiling and presenting reports. By automating many accounting functions, businesses can dedicate staff to other essential functions, potentially generating more revenue with the same resources.
Security and Agility
Cloud-based digital accounting tools are more secure than outdated, paper-based records. They offer cloud storage backed by multiple data centers for data backup. These solutions use SSL technology for data encryption, similar to those used by banks, ensuring your financial information is protected and easily retrievable even if things go wrong.
Easy Invoicing and Payment Tracking
A digital accounting system automates the process of sending invoices and payment requests, minimizing delayed customer payments and improving cash flow. This automation ensures timely follow-ups with debtors, which is crucial for maintaining a healthy cash flow position.
Better Integration and Syncing
Digital accounting solutions integrate seamlessly with other business tools, such as point-of-sale systems, payroll, and website order fulfillment. These integrations often come at little to no cost, enabling data sharing across hundreds of business applications and further extending functionality through services like OneSaas, IFTTT, and Zapier.
Facilitates Tax Preparation
Digital revenue accounting simplifies tax preparation by proactively arranging and separating funds for tax payments and automating tax calculations. This reduces the stress associated with taxation and ensures you don’t miss out on tax write-offs or deductions, which can be overlooked with manual accounting.
Bank Reconciliation Made Easy
Digital accounting tools include reconciliation tools that simplify tracking errors in transactions and processing. These tools also help detect theft and fraud, enhancing the accuracy and reliability of your financial records.
Specialized Functions
Depending on your business’s complexities, you can find a digital accounting solution tailored to your needs. For instance, online retail businesses may benefit from an accounting platform with efficient inventory management systems, while other businesses can connect to specialized apps for specific functions.
Real-Time Advice
With up-to-date data, digital accounting systems enable you to seek real-time financial advice. Financial experts can analyze current numbers and offer timely guidance on the best ways to improve your financial situation, leveraging real-time data for optimal decision-making.
A Streamlined System
Digital bookkeeping systems store all critical data, from cash flow to balance sheets, in one specific area, providing real-time access to essential information. This centralized storage eliminates the need to keep information in various places, as required in manual accounting systems.
Accessibility to Important Financial Information
Digital accounting ensures financial updates are readily available to specific departments or factions within the company. This is especially important for eCommerce businesses, where timely data is crucial for processing purchase orders and freeing up operating capital sooner.
Ease of Use and Improved Speed and Productivity
Digital accounting software is easier to use than manual methods, enhancing efficiency and productivity. These solutions save time processing online transactions, allowing the accounting department to prepare reports and compile data quickly.
Cost-Efficacy
Automation and digital operations save money by minimizing service costs. Hiring a professional to record data in-house is more expensive than a digital accounting solution, making digital accounting a cost-effective choice for businesses.
Reliability and Scalability
Digital accounting systems are known for their accuracy and scalability. Automated software produces accurate data faster than manual methods, enabling businesses to make critical decisions based on reliable information. As your business grows, these systems can be upgraded to support increased operational scale.
Facilitate Standardization
Digital accounting software follows standardized accounting systems, making it easy to use and ensuring consistency in data recording. This standardization simplifies the accounting process and reduces the likelihood of errors.
Want to know more about Fully Accountable’s Digital Accountants? Watch Our Demo to learn more!
Final Word
Digital accounting is fast becoming the norm in the industry. With the introduction of advanced accounting software, more businesses are wanting to implement it into their company infrastructure.
However, many small businesses follow the more traditional route of hiring specialist accountants for day-to-day entries. You cannot blame them for supporting manual accounting procedures. A system that has existed for more than 900 years garners more confidence than a new one.
Whether you’re an e-commerce retailer or any other entrepreneur, Fully Accountable is an outsourced accounting firm that can help you find the right accounting solution. Whether you’re For more information on digital accounting firms, schedule your strategy call today, or answer a few quick questions and get a customized proposal to fit your unique eCommerce business needs now.
Frequently Asked Questions
1) What is digital bookkeeping?
Digital bookkeeping involves recording financial transactions electronically instead of using paper-based systems. It automates data entry, reducing errors and increasing efficiency.
2) What are the benefits of digital accounting?
Digital accounting offers numerous benefits, including remote access to data, improved accuracy, cost savings, and easier tax compliance.
3) How do digital accounting tools enhance financial management?
Digital accounting tools automate financial tasks, ensure secure data storage, and provide real-time financial insights, enabling better decision-making.
4) Is digital accounting suitable for small businesses?
Yes, digital accounting practices are scalable, making them suitable for small and large businesses. They help small businesses save time and reduce costs by automating routine tasks.
How To Transition To Digital Accounting
Making the switch to digital accounting can streamline your financial operations, improve accuracy, and save time. Follow these steps to transition your business smoothly into the digital accounting space:
Step 1: Assess Your Current Accounting Processes
Start by evaluating your current accounting methods. Identify pain points, such as manual tasks that consume time or areas prone to errors. This assessment will provide you with a clear picture of what needs improvement and how digital tools can assist.
Step 2: Research and Select the Right Digital Tools
Not all digital accounting solutions are the same. Look for a platform that aligns with your business size and industry. Prioritize features like cloud accessibility, automation capabilities, security measures, and compatibility with existing systems, such as your POS or payroll software.
Step 3: Organize and Digitize Your Financial Records
Before transitioning, make sure all your financial data is well-organized and up-to-date. Scan paper-based records and digitize them, categorizing them into relevant folders. This ensures a smooth import of financial information into your chosen digital platform.
Step 4: Train Your Team
Digital accounting tools are only as effective as the users operating them. Provide hands-on training to your finance team, teaching them how to use the platform’s features like reconciliation, reporting, and real-time tracking. Many software providers also offer tutorials to support the learning process.
Step 5: Implement Gradually
A phased implementation is often more effective than switching overnight. Start with a small segment of your accounting tasks, such as invoicing or expense tracking. Gradually expand the usage to cover all financial functions to reduce disruptions.
Step 6: Integrate Existing Tools and Systems
To maximize efficiency, integrate your digital accounting platform with other business tools like inventory management, payroll systems, and eCommerce platforms. This ensures seamless data sharing and eliminates the need for duplicate entries.
Step 7: Monitor and Optimize
After implementing digital accounting, regularly monitor its performance. Analyze reports and use insights to refine workflows. If needed, consult with experts for additional optimizations to make the most of the platform.
Step 8: Partner with Professionals
Digital accounting can sometimes require a deeper understanding of advanced tools. Collaborating with digital accounting experts, like Fully Accountable, ensures your system is set up and managed for maximum efficiency. They can also provide guidance on strategic financial management tailored to your business needs.
By following these steps, you can transition from traditional methods to digital accounting seamlessly. This shift will not only save you time but also give you real-time insights, allowing you to make more informed financial decisions. Contact Fully Accountable to learn how we can help you integrate digital accounting into your business today.
