Making the transition to digital financial administration
The pursuit of cost saving
The economic slump has been continuous for six years. Only a handful of industries have managed to generate real growth, and most companies are forced to put in a lot of work to even maintain their previous turnover. Simultaneously, cost-saving processes are underway by of updating and evaluating new improved solutions to replace outdated ones.
Forced saving protocols also lead to good solutions
Routines related to financial administration have remained manual surprisingly long. The 4.800 accounting companies in Finland have used computers for a long time for their services, but the underlying processes are outdated and ineffective. Only under necessity, have the SME’s been forced to search for new cost-effective processes and listen to the pioneers of digital financial administration. Necessity is a good consultant states the old Finnish expression, which seems to stand the test of time.
Manual work replaced by digitization
What is digital financial administration really about? The primary opportunity provided by digitization is that data can be be transferred among multiple software’s. Manually copying and saving data to multiple locations leaves plenty of room for errors and is neither cost- or time-efficient. The outcome is that time is wasted looking for errors and then correcting them.
Services provided by specialists always comes at a corresponding price, which makes automated service packages a valuable asset for any company. A higher level of automation relieves capital for better use and leaves less room for error.
What do we mean by digital financial administration?
The Finnish banking system has long been one of the most advanced in the world. Bank payments by way of reference number were adopted in 1979. Finnish banks utilized advanced technology that lead to payment related data transfers in digital form to become the norm. We are accustomed to the highly developed banking technology which has enabled the creations of process analyzing software’s for some time.
SEPA revolutionizes financial administration
The creation of the SEPA area binds the European banks to evolve their data transfers to a digital form similar to the one accustomed in Finland. This will lead to enormous changes in the way financial administration is conducted in the rest of the euro area.
Digital financial administration is based on important innovations
Digitization of financial administration is made possible by several processes the banking sector has created. These processes are software’s that allows bank statements to be created as vouchers, and e-invoicing. Additional features like e-pay slips, and systems that allow data modification and transfer in-between software’s, make digital financial administration possible.
Bank statements as vouchers
The software that converts bank statements into vouchers allows the accountant to retrieve and handle the data digitally. The retrieved data holds a vast amount of coded information such as payment reference numbers, which enables the account ledgers to be almost completely automated.
The introduction of the software replaced payment vouchers with the digital bank statements. The previously used printout payment vouchers have become non-existent in Finnish banks.
e-Invoices are completely digital and have a standard form. The sellers sale invoice is the customers purchase invoice. The seller can use a standard account scheme in the Finvoice program that divides the products and services according to their nature. Once the opposing contractual party receives the invoice, they will also receive the account scheme which suggests what account the purchased goods or services belong to.
Which operations should be automated?
Digitization of financial administration aims to get rid of printed vouchers and their manual processing. Everything cannot be digitized, but majority of the manual processes are replaced by automation.
 Single Euro Payments Area (SEPA).
Importance of embracing the e-invoice
Transition to e-invoice
The most important phase is to convert all invoices to e-invoices. The seller saves all the billable items to the system and transfers them to the e-invoice operator who sends them to the corresponding receivers via e-invoice or traditional mail carrier.
The invoices are processed and delivered swiftly and flawlessly. The receiver can transfer the invoice with all the attachments and additional data into their own software directly from the operator. E-invoices are more cost-efficient than sending invoices by mail carrier, and the risk of them disappearing is practically non-existent. In addition, the manual handling of all the outgoing invoices can be abandoned and time is spared for better use.
The receiver of e-invoices also benefits
The receiver benefits from e-invoices even more than the seller. Invoices in paper form need to be scanned and interpreted for the appropriate data. Programs able to interpret the data are fairly reliable, but they need to be optimized to extract the correct data and the data needs to be double-checked manually.
The data in e-invoices is perfect, the data inputted by the sender transfers automatically to the system with impeccable precision. Only the invoices you send need to be monitored and adjusted according to agreed terms, there are no technical mistakes. Received invoices need to intrinsically examined to confirm amounts and items are in accordance to the agreed terms before submitting them to payment. The accountant’s responsibility is to make sure the transactions are placed in their equivalent accounts.
Digital purchase invoice handling is a necessity
Processing e-invoices is not possible without digital financial administration tools. Digital software’s enable the circulation of invoices so that the person responsible for the orders can grant it for further treatment and finally move it to the account’s ledger.
The invoices that are confirmed for payment must be payed with the feature found in the same software. If a client decides to make a transaction directly from their own bank account, the transaction will not be updated to the accounting software leading to excess manual work and additional expenses.
Pay slips via internet
Payroll management is a stage in financial administration that still requires some manual work. Many of the payroll management stages can be automated only to a certain extent. Actual payments and pay slips can be sent directly to the bank, from where employees can view and download a copy of their pay slip. Paper pay slips can be abandoned, costs related to them are saved, and the employees have an archive of their pay slips online.
Benefits of digital financial administration
Majority of the accounting entries derive from account statements and sale and purchase invoices. These should be the first automated processes to gain the greatest benefits. Accounting is almost entirely made of these entries. Once these are automated as far as possible, most of the accounting is up-to-date continuously. The accounts can then be use to extract valuable information on areas that need examining.
The main aspects that make digital financial administration so beneficial are absence of mistakes, real-time information, and the effectiveness provided by automation.
Precise real-time information available at any moment, creates many opportunities for management. Decision making progress can now be based on figures that directly correspond the company’s current financial situation.
Easy and simple – or difficult and complicated?
Transferring a business to digital financial administration demands capable professionals with the expertise to match. The accounting company must have the proper resources, and the applicable software’s are the key in making the transition a success.
In addition to having exceptional accounting and tax related skills, the team in charge of the process needs extensive it-skills and proficiency in the software’s that are in question. The beginning requires adequate time, energy and resources, because learning to navigate new software is always time consuming.
Once a company has adopted digital financial administration as part of the daily processes, there is no return. The current procedures are without a doubt a huge leap forward from the traditional methods. The savings, and availability of real time information provided by digitization, is so soothing that you will notice that going back to traditional financial administration would be regressing.
We at Tietotili, will effortlessly help your company get started with digital financial administration!
Urpo Salo, KHT