Fapiaos are an inevitable part of doing business in China. In our previous article we said they are the gold standard for a business’ tax liability and then recommended against performing bookkeeping solely on the basis of fapiao. Regardless of the accountant method used, fapiaos contain vital information that every kind of accountant must key into their accounting system. Its this labor-intensive handling of data that drives up the costs of professional accountants here in China.
At its core, accounting is just numbers, dates and a description here and there. Robots lend themselves exceptionally well to read and handling such data, improving workers efficiencies in the process. You may be thinking about a physical robot that mimics the work of a human, but the technology which is quietly disrupting compliance services in china is software robots. These software robots run automated scripts to identify information and transfer it across multiple software.
Accounting and compliance services in china stands to benefit greatly from such software robots. When the same services in the US and China are compared, the costs are on average 2 times higher in China than in the US.
Progressive accountants are now using Robotic Process Automation (RPA), Optical Character Recognition (OCR) and cloud accounting software features together to dramatically decrease the complexity and the time it takes to generate financial statements for their clients and automating compliance services in China.
In some use cases, automation technologies reduce the time it takes to prepare a financial statement by 15 time according to findings from Deloitte. Data handling by cloud technology coupled with software robots is even more accurate than humans, eliminating keystroke errors and dramatically reducing data re-entry, transaction coding and reconciliation. As a result, accountants find themselves supervising robots and ensuring data handling is done without any glitches instead of manually handing data themselves.
Understanding what technologies are used by accountants enable smalls business owners get the most value out of money spent on compliance services.
Compliance for Small Businesses
Most business owners are not required to know in depth what actually happens behind the scenes when it comes to complying with statutory requirements.
From a small business perspective, employees and business owners should hand over all the contracts, fapiaos, bank statements and inventory movement tables to their accountant, along with other source documents required for bookkeeping. The accountant then delivers a financial statement and prepares an annual tax declaration for the business.
For most accounting firms, this alone is a very intensive process and one which is costly to small businesses due to time required for data handling. This is what the process looks like;
1. Delivery of source documents to accounting firm
2. Verification of fapiao and supporting documents
3. Data entry to accounting software (e.g. expense claims, sales orders, purchase orders)
4. Coding transactions into journal entries
5. Preparation of financial statement
6. Tax declaration
By using technology to assist with the handling of the large amounts of data, accountants are able to greatly reduce the time required to produce financial statements and preparation of tax declaration.
Automating Compliance Services in China
A large percentage of the time spent for compliance services in china comes from transferring business data from one form to another. Often this is in the form of entering the payment amount from a contract into accounts receivable, totaling fapiao amounts for expense claims, or simply moving data from one source to another.
While this type of work is necessary, it is not value adding for small businesses. However, data handling perfectly lends itself to automation.
When robots have done their job, what is often left is the work that relies on specific business knowledge and the professional judgement of an accountant.
RPA retrieves the data from business’ bank statement and loads that data into Megi where a cloud system performs a preliminary transaction categorizing and coding. This saves the accountant from manually keying in the necessary data for individual journal entries and the accountant only needs to confirm the transaction coding before entering them into the ledger.
Accountants extract the information from physical fapiaos using OCR which outputs raw data. RPA feeds the data into Megi where they are preliminarily categorized and coded. The only thing left for an accountant to do is to confirm the journal entries and finalize.
Expense claim software enables employees and business managers to record their expenses on their mobile phone and have journal entries automatically created once transferred into the accounting system. Once expense claims are approved, the journal entry is automatically entered into the ledger without any input needed by the accountant.
VAT fapiao authentication
Accountants must check government system to authenticate the fapiaos received by staff and suppliers. Software enables the accountant to scan the QR code on a fapiao to access the official government records and authenticate the information on the physical fapiao and check whether the fapiao has been entered into the system before to avoid duplicates.
When reporting tax liabilities, accountants need to fill out an electronic form. A keystroke error here can be very costly to the small business. RPA enables accountants to automatically pull the data from the accounting system to be reviewed and then submitted to the tax authorities.
The impact for small businesses
As with any technology, RPA and cloud accounting are impacting how businesses are meeting their statutory requirements. The compliance services they purchase from accounting firms are becoming increasingly commoditized as the role of the accountant in data handling is becoming marginalized. As a result, the time needed to perform these tasks is greatly reduced.
Modern accountants have to examine how they can repurpose the time saved to reduce costs of compliance services in china and provide more value-added services for their clients. Their role as data handlers is gradually being eliminated and what is left is professional judgement which can be used help businesses make better financial decisions.
Many accountants in China appear unconcerned with the high prices being charged for non-value adding services. This complacency of accountants and compliance experts to innovate on behalf of their clients is ripe for disruption by small businesses who demand more from their service providers.