The Future of Accounting: How Digitalization Transforms SMEs

Changes in the law make digital accounting necessary!

A new law will come into force on January 1, 2025. In general, it concerns the sending and receiving of e-invoices. These are the new non plus ultra. But what is it all about?

e-invoices fulfill very specific requirements. They are not invoices in PDF format. Rather, they must be machine-readable and capable of being processed fully automatically. One possible format is a PDF invoice with implemented XML data.

From January 1, 2025, all companies must be ready to receive such invoices. SMEs will not have to send this new type of invoice until a few years later. However, it is worth preparing for the changeover today.
This change in the law shows that digitization is an integral part of the modern economy. It is absolutely necessary when it comes to processes in accounting and other areas of the company. However, SMEs should not only rely on digital accounting and expand their IT infrastructure because of the switch to e-invoices.

Advantages of digitalization for accounting

It is not only compliance with current laws that makes digital accounting so important for companies. SMEs also benefit from digitization in many other areas of accounting. The following six reasons speak in favor of switching to digital accounting.

1. Greater efficiency

Efficiency is the be-all and end-all for many companies. Digitization can make this possible. In general, digital solutions are considered efficient and time-saving. This means that they can be a real asset to companies. Digital accounting usually consists of software programs that combine many functions. For example, it is not only possible to create invoices, but also to send them at the same time and to keep track of all income and expenses. These tools are also efficient because they often contain important interfaces. This means that data records can be transferred directly to the tax advisor or to the tax office. The link to the business bank account is also practical.

2. Transparency and up-to-dateness

Transparency is essential for many processes within a company. This way, you can always keep track of all important data. Digital accounting offers exactly that. Companies have all receipts and invoices at their fingertips at all times. Digital products in the cloud are also practical. This gives SMEs access to the desired data from anywhere.

Furthermore, digitization helps to keep up to date. Being up to date is very important for companies that want to remain competitive. After all, being up to date is a sign that a company is keeping up with the times. It is also important to comply with new laws and avoid penalties.

3. More planning freedom

Planning is essential. If processes are not thoroughly planned and thought through, this can have serious consequences. Planning is essential for efficiency. Digitization also helps in this area: accounting processes can be planned and managed much better.

For example, cost estimates can be clearly collected in one tool. Or incoming invoices can be sorted and assigned. In addition, transfers can be planned and checked.

Dunning is also important for SMEs: thanks to digitization, dunning notices can be created with just a few clicks. Digital solutions are also helpful when it comes to tax returns. Both the sales tax and value added tax returns can be created not only in a corresponding program, but also transmitted directly to the responsible tax office.

4. Sustainability

Many companies are taking measures to become more sustainable. This makes them more attractive to customers and business partners, which in turn makes them more competitive. Furthermore, this not only has a positive impact on the environment, but also on their own wallets. In many areas, digitization is making a significant contribution to sustainability.

In the past, accounting always involved a lot of paperwork and therefore a lot of waste. Today, things are different. Thanks to digital solutions for accounting, companies can sometimes do without paper altogether. Important documents, invoices and the like are all available in digital form.

Nowadays, sending invoices, offers and other documents in paper form is very unusual. It is much faster and more environmentally friendly to save paper and transmit files electronically. In addition, archiving is space-saving and easy.

5. Avoid tax fraud

It is important to keep up to date with the latest laws in accounting. After all, failure to comply can have legal consequences for the company. However, it is not only relevant in this regard – mistakes are also made again and again in terms of taxes, which in the worst case can even escalate into tax fraud.

Digitalization offers a decisive advantage here too. Accounting programs are precise and provide practical advice. All tax-relevant legal changes are included. Thanks to regular updates, companies do not have to worry about making a mistake when filing their tax returns.

Nevertheless, it makes sense to get a tax advisor or tax office on board. This means that SMEs are ideally positioned if an audit should take place. Security is essential in this area.

6. Cost savings

As has already been mentioned, digital accounting helps to reduce costs. In detail, this means that companies save on the costs of materials – i.e. paper and stationery. In addition, the automation processes of digital solutions in accounting are accompanied by an improvement in workflow and time savings. Communication with tax advisors and the like is also much faster and easier. Since time is money, the reasons for cost savings are obvious. In addition, there is the space for storing important documents. While in the past, depending on the size of the company, separate rooms had to be rented, it is now possible to store everything in a space-saving manner on a hard disk or in the cloud.

Tips for SMEs on using digital accounting

Digitization is continuing to advance in Germany and around the world. Nevertheless, many people are still not fully aware of how they can use solutions to take full advantage of their benefits. What tips are there for small and medium-sized companies in this regard?

First of all, anyone who wants to use digital solutions in their accounting should expand their IT infrastructure accordingly, or have it expanded. IT service providers and other professionals help SMEs to implement exactly the functions that are needed to ensure that accounting processes run smoothly.

Attempts to digitize a company often fail because employees lack the necessary knowledge. If a paperless office is to be introduced, it is therefore essential to offer training. Everyone who has to deal with the relevant systems should be fully familiar with their functions. This is the basis for improving accounting processes. A technically skilled person can help to introduce a paperless office in a company in its entirety.

Conclusion

Digitization is leading to improvements in many areas. But above all, it represents a real enrichment for SMEs and other companies. It is revolutionizing accounting, resulting in a number of attractive advantages. And the changes in the law that will soon come into force alone should make the switch to digital accounting a priority for small and medium-sized companies.