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Mini-series Part 1: Definition of digitization and digitalization

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.

 

 

 

Accountants against cyber-crime

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.

Good practices when you design your Excel workbook

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.

The pros and cons of ERP systems in the cloud

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.

Do you know what chart type to use in Excel?

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.

Blockchain – a public ledger for all transactions

BitcoinBitcoin, the digital currency, has taken the world of financial transactions by storm. Its decentralized nature cuts out the typical financial intermediaries like banks or brokers, and is used directly between the trading parties. As such, it is not only used for purposes like enabling trade and financial transactions in areas where this is not possible, such as some emerging economies; it is not only useful to link people to trade that have not been able to even get a bank account to do so; it has also notoriety as the go-to currency for illegal activities via the Dark Web, such as gun or drug trade.

Foregoing its ambiguous nature, bitcoin can become (or already is) a powerful new financial reflection of trading that is not limited by barriers or financial intermediaries. From an accounting point of view, its decentralized nature begs the question how these are recorded, and how these records can be trusted. The answer is blockchain, a distributed database of of a continuously growing set of records (blocks) that are difficult to be tampered with, and that are clearly identified as to who and when did the transaction. In this blog post by Karlin Lillington, she describes the blockchain idea, and how this system of ledgers might supplant the traditional financial transaction system using financial intermediaries.

The impact of technology on the accounting and bookkeeping profession

In past blog posts, we have often talked about the impact of cloud technologies on businesses, especially small and medium ones. The anytime-anywhere access to information and data, the enabling of the paperless office, the real-time response rates and collaboration possibilities are (to put it simply) almost endless! In this blog post by Nicholas Pasquarosa, he details how accounting firms might change if they themselves move their operations and processes to the cloud. Not only does it support flexibility and speed of operations, but enables a direct link with their customers, especially if they are also “in the cloud”.