The digital world of business is increasing and paper is being phased out of many interactions.
Banks are pushing for electronic statements. Vendors and buyers are switching to digital invoices and electronic fund transfers. Accounting is becoming computer driven.
Your farm’s paper ledger may not cut it anymore so it may be time to digitize your records.
This process can be a huge undertaking, so what benefits can you expect?
Though it may seem like a large time commitment up front, savings down the road will be worth every second. This means less time sifting through stacks or boxes of paperwork, time that is better spent making important decisions for the farming operation.
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Having digital records helps manage time and also saves time at year end for your accountant.
Generally, when you drop your physical paper records off at the accountant’s, the first thing the accountant does is convert them to a digital format. This is for ease of use and support in the event of future review or audit. A complete digital set of records instantly saves time at year end.
Time savings directly correlate to cost savings. There will be higher upfront costs associated with the transition, but they will be recovered through reduced time requirements and better operational information in the future.
Paper, printing and copying costs can be significantly reduced through digitization. Also, the extra time it takes you or your employees to find documents or organize a records room will become an unnecessary cost.
Another avoidable cost is what is incurred if records are damaged, stolen or destroyed. An electronic format eliminates the physical risks of storing and safeguarding paper.
This is not to say there aren’t risks to loss, theft or destruction of electronic records. However, there are cost effective ways to manage this risk.
Confidential data can be password protected or made available to only those with proper authorization. Backups of electronic data can be easily created and stored.
Digitization also makes the sharing of information more efficient. For example, when you are working with your accountant at year end, the ability to share records without visiting the office has the potential to save many trips. Although the face-to-face time is always valued, it is not always an option.
Accuracy of paper records will almost always come second to electronic records. In comparing the accuracy of a paper and pencil farm ledger to an electronic ledger or digital spreadsheet, the electronic versions are preferred.
Using simple tools such as a basic accounting software program eliminates some of the human error associated with manual entry to a paper ledger. Making changes electronically is simpler than changing a paper ledger because the change can be automatic in the digital ledger.
All in all, moving from paper-based records to a digital system will improve your operation in terms of accuracy of information, efficiency, security and cost.
If you are unsure where to start, experts are available to ensure the process goes smoothly and integrates into everyday operations.
Colin Miller is a chartered accountant and partner with KPMG’s tax practice in Lethbridge. Contact: colinmiller@kpmg.ca.
