Digitisation of accounting

Amendment to the Accounting Act with effect from 01.01.2022 – the unstoppable technological shift within global industries has not bypassed accounting and the associated circulation, processing and archiving of accounting documents. A section of the accountancy community called for change and this was heard with the amendment. Are accountants and software developers sufficiently prepared for the changes that will take place from 01.01.2022? In today’s article we will look at what the amendment to the law changes in accounting, how this change will affect the client, but also the organisation of the work of the accountants themselves.

Automation and digitalisation in accounting

First of all, we will explain the different concepts that are associated with the digitisation of accounting.

Digitisation of accounting

Digitization – a subset of which is archiving and automation. The aim of digitisation is to replace paper documents with electronic structured reports (data) that can be archived digitally by accounting units and circulated via e-mail, online document sharing or ElectronicData Interchange(EDI).

Accounting automation

Automation – is a process that streamlines internal or external processes within accounting and data transfer. It replaces routine manual activities such as transcribing data from invoices into accounting software or physically handing over documents to the accountant (document cycle, including archiving).

The 5 main benefits of digitalisation:

1. Saves costs on administration, archiving, printing, paper and last but not least on electricity (more environmentally friendly)
2. Physical presence of an accountant in the office is no longer necessary
3. Faster transfer of data/accounting documents from client to accountant and vice versa
4. 24/7 access to your document archive in an online interface – no more basements and closets full of folders
5. Easy search for booked documents in the electronic archive

5 main benefits of automation:

1. Automatic extraction of data from documents without time-consuming transcription (reduction of errors on the accountant’s side)
2. Automated tool can process a larger number of data in a short time, without the need for rest
3. Reducing costs for printing, delivery of documents, archiving of documents and also for staff salaries
4. The time saved translates into added value in terms of advice and complexity of accounting cases that AI cannot provide.
5. Setting up automated cash flow processes can save a company the human labor costs associated with sending reminders and prompts to pay invoices at a fraction of the cost.

Accounting laws: digitising accounting

Before digitisation, we should study the individual laws and the associated legislative requirements. We draw your attention to the individual laws that should not be forgotten:

1. Act No. 18/2018 Coll. on the protection of personal data and on amending certain laws (GDPR)

Especially when digitising payroll accounting and HR, employment contracts

2. Act No. 431/2002 Coll. on accounting

Preservation and archiving of accounting records, transformation of an accounting record, the verifiability of an accounting record as well as the definition of the accounting record itself

3. Act No. 222/2004 Coll. on VAT

Invoice storage, invoice and its content

4. Act No. 395/2002 Coll. on archives and registers
5. Act 305/2013 Coll. o electronic form of exercising the competences of public authorities and on amendment and supplementation of certain acts ( e-Government Act)

In particular, conversion and guaranteed conversion, the procedure for guaranteed conversion, the certification clause, the limitation on conversion.

How to digitise accounting?

An entity may decide within its internal guidelines whether to keep its accounts electronically (digitally), on paper (as most entities do now), or in a combination of electronic and paper formats. The amendment introduces the equivalence of the paper and electronic form of the accounting record, subject to the following criteria:

The paper form of the accounting record:

• The credit note must be made on paper or printed using software, sent or received as a paper document

Electronic form of the accounting record:

• The accounting entry must be made and received in an electronic format (determined by the accounting entry originator or by agreement with the accounting entry recipient) and sent by electronic means (directly from the software) or by electronic mail (e-mail)

The following three requirements apply to both paper and electronic forms of the accounting record:

1. The authenticity of the origin of the accounting record must be ensured (the maker must be able to prove that he has actually made the record, e.g. on the basis of a written order, the beneficiary accepts the accounting record by the act of paying it)
2. Integrity of the content of the accounting record (the record must be processed or scanned so that no alteration occurs when the record is transformed or sent and made available)
3. Legibility of the accounting record (human readability must be ensured)

The accounting entity has the obligation to ensure requirements from the moment of making an accounting record, during its transformation, receipt and transmission, disclosure, until the end of its retention period.

The authenticity and integrity of the accounting record (verifiability of the accounting record) may be ensured pursuant to §32:

• Signature record of the responsible person (handwritten signature, qualified electronic signature, similar demonstrable signature record – code, code, or character)
• Electronic data exchange
• An internal control system for accounting records

An important fact to remember about reliability and integrity is that it is the responsibility of the entity to ensure the integrity of the accounting record so that it cannot be modified and potentially misused. An internal directive (or internal directive) should be used to define how accounting records are to be secured.

The most important section in the digitization of accounting is §33 of the Accounting Act, which speaks about the transformation of the accounting record. The question remains how the majority of accountants will cope with the digitalization of documents (I dare say that most accounting software is partially ready for digitalization) and whether they will be able to “shed” their habits (iron shirts) and adapt to the online trend, which to some extent is also offered by the amendment we are discussing.

Transformation of an accounting entry and its elements

1. By transformation we mean – a change of the form of an accounting record (whether from paper to electronic or vice versa) while the integrity of the accounting record is preserved
2. The transformation can only be carried out if the accounting entry is provable.
3. Transformation from paper to electronic form can be done:
   

1. By guaranteed conversion in accordance with specific regulations
2. By scanning into a file format in raster graphic form (e.g. an image saved in .pdf, .png, .jpg, .tiff format), preserving the completeness of the accounting record, the content and visual consistency, the legibility of the entire area of the accounting record and the integrity of the content.
3. The transformation from electronic to paper form can be carried out:
   

1. Guaranteed conversion in accordance with special regulations
2. Using a computer output device that allows printing on paper, while maintaining the completeness of the accounting record, the content and visual consistency, the legibility of the entire area of the accounting record and the integrity of the content.
   

Bingo in the digitalisation of accounting ?!

And now BINGO!!! You ask if it is necessary to keep the original cash receipt from the purchase of small assets up to 1700,- EUR? The amendment says the following: ‘An accounting record whose form is the result of a transformation of an accounting record and is deemed to be evidential shall not be required to be presented in its original form, unless special regulations provide otherwise.

7 tips for digitising your accounting

7 tips on what an entity that decides to keep and archive its accounts digitally should keep in mind.

1. The entity should determine how to store accounting records (appropriate accounting software), for example electronically, so that it can make the electronic records available (to the auditor, tax authority, or disclose them to the public)
2. Accounting records must be archived by the entity for 10 years following the year in which they were last used (it is therefore advisable to choose secure storage that is also backed up at sufficient intervals)
3. When exchanging and sending electronic invoices, the parties should sign a written agreement on sending electronic invoices
4. When circulating electronic documents, a safeguard mechanism must be provided to ensure that the content of the accounting record is not misused or modified. At the same time, the electronic documents must contain a signature record of the responsible person
5. When transforming from electronic to paper form, the transformation may only be carried out for electronic documents that do not contain a qualified electronic signature or a qualified electronic seal
6. A change of an accounting record from paper to electronic form by scanning may be made only once (provided that it is legible and complete). The provision implies that transformation cannot be carried out if the documentary record has already been subject to transformation
7. In digitization, the most important parameter , which ensures the four most important factors namely:
   1. approval process for electronic documents
   2. archiving of electronic documents
   3. transmission and protection of electronic documents
   4. and Object Character Recognition (OCR) extraction of electronic documents.

Have you kept your accounts in paper form so far and are you wondering whether it is possible to transform the accounts into electronic form for previous years?

The amendment to the Accounting Act also had this in mind and states that the relevant provision on the protection of accounting records as amended from 2022 may also be applied to the retention and protection of accounting records created before 2022, provided that the other relevant provisions of the Accounting Act are complied with.

In other words, an entity may transform all accounting records from previous years if the requirements are met:

• the reliability of the origin of accounting records
• the integrity of their contents
• Readability
• and demonstrability.

At Highgate Group , we are ready for the pace of digitisation, where we are trying to make our clients’ work easier with the handover of documents and their archiving. The right cocktail of automation, archiving and digitisation saves time and money on the client’s side, which they can invest in the development of their business. On the side of the external accounting company, the automation of processes gives time for individual consultations in the field of accounting or economic consulting or tax optimization.

If you are interested in this topic, please do not hesitate to contact us.