Saturday, August 15, 2009

Innovation - automating accounting for 20m EU enterprises..

The EC drive to reduce administrative costs by 25% in SMEs by 2012 is surely worth all support - especially as SMEs represent 63% of turnover. But it is not possible to achieve this goal without moving resolutely into the accounting area - reporting to autorities can be streamlined with the same tools.

We now see a quite clear road to how this - and more can be achieved - based on the VAT directive proposal where enterprises with turnover up to 2m (20m+) are encouraged to move to cash-based accounting and structured equal treatment e-invoicing - not loaded down with legal demands for digital signatures - not put on much less secure paper/simple PDF invoicing.

The Nordic step-by-step approach is the following:

1. e-banking - enabled cutting bank's combined costs in for example Finland in half (bank's costs = customers costs - every cent). Now every enterprise benefit from the services and automation with electronic account statement.

2. migration to e-invoicing - most enterprises signed up - usage now taking off as inceasing number of invoice receivers (national, multinational, public sector) accept only structured invoices and invoice senders are starting to charge transparently for more expensive paper invoices.

This migration is opening up several other valuecreating tools - like generic (not partnerspecific!)  e-rfp, e-offer, e-order, e-confirmation tools in the procurement value chains and financing and now also in the accounting area.

3. the next mass market step is automated accounting. This is especially easy to acieve in cash-based accounting and goes like this:

(i) service provider (often bank) stores copy of e-invoice before passing it on to receiver

(ii) when payment is received the account statement acts as receipt (no additional documents needed) and the invoice in question is attached to it - that is ALL YOU NEED - accounting is totally automated (should be massive incentive to only use e-invoicing).


- account statement and attached paid invoices can be sent to accounting service for end-of-year closing books and storage

- VAT auditing becomes orders of magnitude easier

- cash flow estimates can be created automatically by the bank or other service provider - in real time

-  financing can be obtained next-to-automatically with duplicate of invoice sent to receiver for approval and finance company and then automatically entered into accounting

This is not difficult - but we all need to work hard to help EU and other stakeholders to get the message through. One could expect enterprise organisation and chambers of commerce to take a more proactive - but also technology neutral role. Keeping it simple is particularly important in these halycon days of new-technology and attention-fragmenting information avalanches.


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