In the second part of this mini-series on digitization and digitalization, I would like to highlight the connection between digitization, digitalization and accounting information systems (AIS). This connection is nothing new in modern AIS that are typically computerized, i.e. business processes are reflected on a digital basis. The collecting, processing, storing and outputting of accounting information is at the heart of any AIS, to enable crucial tasks like financial reporting or management decision-making.
It is (almost) obvious how digitization plays a role in this. The conversion of paper receipts, bills of materials, or other relevant documents into the AIS is an ongoing task. It is also a major undertaking if a company implements a modern AIS – decisions need to be made what type and range of relevant documents need to be digitized (converted into binary form) and transferred into the AIS, so that the data does not get corrupted in the process. Clearly, the focus here is on the technical side of the AIS. The accountant is of particular importance here, since it is part of his/her job description to be in charge of corporate information. Ideally, the accountant is also a major contributor to the design, implementation and maintenance of the digitization processes here, linking management needs to IT capabilities.
Digitalization is now directly linked to the purpose of AIS. The latter’s purpose as stated earlier in this post (collect, process, store, output accounting-relevant information) is clearly in line with leveraging digital technologies to enable, improve, transform, and support business processes and decision-making (see Part 1 of this mini-series). Designing, implementing and running an AIS can at the same time support a rethinking of a business’s current processes and operations, and as such, turn it into decision-relevant information. In other words, AIS can enable digitalization processes in a business. Again, this bears important implications for the accountant who as main information hub should enact his/her influence on the digitalization process to achieve the business’s objectives.
In a nutshell, digitized accounting information needs to enter the AIS which in turn is a leveraging technology to support the digitalization of the business. And this had, has, and will have a major impact on the role of the accountant in businesses in the future. I will discuss this aspect in the third part of this mini-series.
In the next three posts on this blog, I would like to introduce the topic of digitization/digitilization, and the effects on accounting and accountants. If one does a Google or Twitter search about this topic, one finds a variety of articles that indicate its rising importance. In this post, I would like to summarize a few definitions for the terms “digitization” and “digitalization”, largely following the distinctions made in this blog post:
Digitization is the process of creating digital versions of analogue and/or physically represented data. This has per se no business or accounting meaning, but is a necessary part of the digitalization process (see below). The output of digitization can then be used by computers and software for further processing. Archives, for instance, digitize their records to preserve them, make them searchable, and distributable if needed (you can find an example for the US National Archive digitization project here).
Digitalization in turn is the leveraging of digital technologies and digitized information to enable, improve, transform and support businesses, business operations, business processes, decision-making, big data usage, etc.. Digitization is a necessary step in the digitalization process, especially if companies want to reduce (or even eliminate) the dependency and use of physical records (typically on paper). This does not only help improve the business, but also save a considerable amount of costs in paper usage, waste, and archival storage. Where the purpose of digitization is the conversion of records into a digital format, digitalization is geared towards actionable business needs.
Very often, these terms are used synonymous, but in fact, they are not! The difference (or rather complement) between them can be likened to cost and management accounting. There, cost accounting denotes the tools and actions to record, process and output costing data, whereas management accounting adds the purpose of decision-making to the cost accounting toolbox. This entails important implications for accounting information systems, which I will cover in the second part of this mini-series.
As accountants working closely with IT, we need to be aware of threats to sensitive corporate data. The attack by ransomware virus wannacry in May 2017 has clearly indicated that many companies such as the NHS or Deutsche Bahn were not prepared well enough for such attacks. In this short blog post by Nick Huber from CA Magazine, he lists seven common cyberthreats that accountants should not only be aware of, but also take measures against.
Microsoft Excel is the standard and go-to application when using spreadsheets – there is hardly any spreadsheet user who has not worked with Excel at one point in their professional career before. Now that Microsoft has spread out beyond the PC onto tablets, smartphones, and has become cloud-based, its distribution is ubiquitous.
As such, it has become even more important to create professional spreadsheets that can be understood and collaborated on in a seamless manner – there, Google Docs has clearly shown the way. In this blog post by J. Carlton Collins, he details 15 highly useful and – may I state – necessary rules for designing meaningful Excel spreadsheets that start with adequate documentation and a table of contents, well-organised spreadsheets, named ranges/cells, and quality management to avoid errors and misconceptions. These steps are not dealing with style per se, but with good practice that will enhance your reputation as spreadsheet expert.
Enterprise Resource Planning (ERP) systems like SAP, Oracle, or JD Edwards have been influencing business processes for the last three decades. At one point, however, the market was overly saturated, as corporate-wide systems like ERP were only affordable for large companies. For small and medium enterprises, ERP systems were unaffordable, and the value added (i.e. costs saved) through their use debatable.
With cloud technology in the mix now, ERP systems have moved to the cloud. SAP S/4 HANA, for instance, is an offering that runs on the cloud, seemingly providing the most powerful type of information system to businesses large and small. With all technological advances, though, the grass is not always greener. In his blog post about the pros and cons of cloud ERP, Forrest Burnson gives a comprehensive overview what factors should enter the decision-process when a company starts considering adopting cloud ERP systems.
In our book, we discuss the history and use of spreadsheets in accounting, chief amongst them Microsoft Excel. Management accountants in particular rely on the graphical depictions of data and information that Excel offers. However, all too often my Excel students in year 2 of their A&F programmes seem to be unsure what kind of chart type is best to illustrate what kind of information. In this blog post by Ryan Dube, he does not only explain when to use the most common chart types, but also provides hands-on examples on how they are to be created. It is highly recommended not only to have a good read, but also apply what he shows in Excel.