The practice of keeping accounting books has been subject to a massive shift from reliance on paper form to the digital arena lately. Our own firm, LERIKA, has also been subject to this shift, and so we have decided to bring you a brief summary of our observations and experience. You can consider this article as a welcome distraction from the usual discussion of tax regulations, but also as a useful lesson for your own path towards digitalization in your organization and as a proof of the fact that there is nothing to worry about.

A bit of history and the first glimpses of digitalization

We first took interest in the process of digitalization and mining of documents in 2016. Purchase of a new more powerful copy machine enabled the coupling of the process of scanning a document with its data mining. The digitized data were supposed to be copied to our server for further processing. It is difficult to believe it today, but at the time, our proposed concept of digitalization assumed that most invoices were received in paper form. The concept only considered secondarily how to treat documents which were directly obtained in a digital form. In the end, we abandoned the proposed concept, as the solution seemed to be too complicated, and came at a huge cost.

Fast forward to 2017 and we gave digitalization a second try. Although our idea of what we aimed to achieve with the process of digitalization and what we expected from it was much clearer, the second attempt failed, too. There was a huge gap between our expectations and the proposed solution which was introduced to us by a vendor after the initial analysis. We also felt the cost was too high.

In the meantime, the domain of data mining and digitalization has seen a rapid technological process, and the process of digitalization of documents has also been clarified and anchored in appropriate legislation. New solutions appeared on the market which could be rolled out in practice. And from the past, we had a very clear idea of how we wanted to set up the end-to-end process, from receipt of a digital document, via its processing all the way to its digital storage.

What have we been looking for?

Solutions offered on the market for digitalization of documents often take, as their starting point, that documents in digital form are received on just one e-mail address in the format invoices@company.cz, a channel through which the documents are automatically transmitted for approval and further processing. We did not want to go down that route, as we consider an e-mail as a relatively impractical means of transmittal of documents, especially if a large amount of them is sent regularly, and also due to the fact that this route would necessitate a significant change in processes on the part of our clients.

We wished for a cloud storage and web interface, which our clients would use to not only to upload the documents to be transmitted, but that would also serve for them as an access point for these documents.

We also dealt with an issue of how to transmit digitally processed accounting documents to our clients in cases when a client decides to leave and transfer their accounting books somewhere else. Relating to this was a requirement to maintain a logical two-way link between a specific PDF file and an accounting entry in the general ledger, after the relevant digital documents had been exported to an external storage.

The cost that we would have to pay for the data storage necessary to maintain the digital documents also played an important role.

Which solution won, in the end?

The best answer to our requirements for transmittal of digital documents and their storage was provided by SharePoint Online, which is completely hosted on Microsoft servers, and that we have already used as part of Office 365 package for many years.

The idea of using SharePoint as a communication platform with our accounting clients was first pointed out to us by our external IT consultants. They knew about our long-term digitalization efforts and about our intention to combine digitalization with data mining with SharePoint Online system. Eventually they recommended to us the Avetec technologies company, which has created a system for data mining and processing of documents called LiDok. This system not only promised a straightforward mining of documents, but Avetec also provided a proposal on a solution that was customized from the process point of view to our needs and its cost was acceptable. The third, and final, attempt at digitalization was finally a success.

The subsequent process was smooth and at the end of 2019, we put the LiDok system through a test phase. In 2020, we have started digital mining and digital processing of our internal accounting as well as accounting of several of our clients. As of January 2021, we have brought LiDok to bear on most other accounting entities that we administer.

Before and after – what has digitalization brought us?

When processing accounting in a standard way, where the relevant accounting documents are stored in paper form, the document that has been entered into accounting software must be assigned a number (usually in a written form, directly on the document), and there may also been a need to add other relevant accounting markers. After that, the document is put into a folder.

The intermediate stage is when the accounting document in paper form is converted (usually by scanning) into a digital form or is directly received in a digital form and is then handled as a digital document throughout. Instead of the automatic mining of data from the digital document, it is still necessary to enter the relevant accounting data from a digital document into the accounting software. Subsequently, the accountant must create a logical link between the accounting entry in the accounting software and the digital document itself and then store the document (most often a PDF file) in a pre-defined directory. However, there is no longer any need to add physical markers on the document or order them in a physical folder, arrange transmittal of the processed documents to clients or other relating administration.

Full data mining and digitalization of accounting eliminates not only the process of manually inputting data into the accounting software (replaced by a data mining correctness control process) but also the manual creation of a logical link between a digital document and an entry in the accounting software. It is no longer necessary to manually save a digital accounting document into a pre-defined directory, as all these processes are now automatic.

“Personally, we consider the main benefit of digitalization of accounting to consist not so much in the data mining, but in the automatization of subsequent processes, where the system itself creates a logical link between an accounting entry in the accounting software and the digital document itself, and then transfers the digital document correctly into a pre-defined directory”, stated Monika Borkovcová, LERIKA firm director responsible for the accounting department.

This process also eliminates the risks of human error and the tendency to slack off in terms of bringing the manual process of saving documents to their full completion.

The data mining also results in the obtaining of additional information about vendor/customer and their storing in the relevant directory, including e.g. bank account details. Whenever a document from the same vendor/customer is mined again, an automatic control of the mined data takes place in terms of their consistency with data already stored in the directory, which provides a double control mechanism. This reduces the risk that e.g. an accounting will, by mistake, generate a payment order for a client with an incorrect bank account details, or will overlook that a vendor has changed their bank account.

What comes next

Not all accounting entities are good candidates for the digitalization process. Among our clients, we also find those who prefer to keep accounting documents in paper form. They find it reassuring to have something that is tangible, existence of which can be easily verified, and what they consider to be a guarantee of correctness.

There are also accounting entities out there which only register a small amount of accounting documents annually, for whom the process of data mining and digitalization would not be as efficient.

Digitalization makes most sense for those accounting entities where a large amounts of recurrent accounting documents are processed every week, and where the clients lean towards digitalization. Such accounting entities are the ideal candidates for data mining and digitalization of accounting, and they are the main target group for the innovations that are being implemented.

What comes in the future

As we already pointed out, we have selected SharePoint Online as a platform to handle transmittal of digital documents between us and our clients. It is natural that we share the web channel under SharePoint Online with the client not only to archive the processed accounting documents, but also as a space where to save all our outputs, from the monthly VAT returns, via reporting, all the way to annual financial statements and corporate income tax returns. The client can thus use the platform as a one-stop shop which is always accessible online.

Sharepoint Online includes a variety of functions which can be rolled out. Microsoft Teams app enables the creation of a virtual team with a dedicated website which can serve as a communication channel and a vehicle to share various documents and information. Part of the communication process can thus be transferred from cluttered and overcrowded e-mail boxes to dedicated groups on SharePoint.

We would like to further develop these possibilities in the future and put some of them into practice.