Many businesses in the Philippines are now exploring ways to transition different parts of their businesses to digital. While companies may not be able to move all business functions online, there is one area that can be transitioned effectively and efficiently to digital – the accounting, bookkeeping and finance function.
With operations limited, staff working remotely and a real need for robust finance management at this time, businesses are now realising the tangible benefits of moving their accounts and finances online. We recently wrote about the benefits of moving to online accounting in light of the pandemic affecting Manila and the Philippines.
But what does online accounting, bookkeeping and finance actually mean for businesses in the Philippines? How does it work? What does it involve?
We explain all below!
What is Online Accounting, Bookkeeping and Finance?
Online accounting, bookkeeping and finance is a method by which companies can manage the full spectrum of their finances remotely, or digitally, by leveraging cloud technology and other online solutions.
Online accounting enables businesses to increase efficiency, transparency and collaboration across their internal finance team as well as with their outsourced accountant.
At CloudCfo, when we speak about online accounting and bookkeeping services in the Philippines, we’re not simply talking about recording transactions on an online ledger – it’s much more than that!
We view online accounting and and bookkeeping as an eco-system of tools and solutions that, when integrated together, enable and support the end-to-end management of a company’s finances.
Below are just some elements that support the online accounting eco-system in the Philippines. We discuss each of these in detail below:
- Cloud Accounting Software
- Online Books of Accounts
- Online Tax Filings
- Automated Financial Reports
- Audit Process Online
Cloud Accounting Software
Cloud accounting is enabled through an online accounting solution that helps companies to manage, review and monitor their finances all through one platform. In particular, it enables the analysis of financial transactions, recording of journal entries, management of ledgers, preparing trial balances, generation of worksheets and financial statements and much more!
Cloud accounting solutions also help with the performance of all accounting, bookkeeping and finance-related tasks without the internal accountant or outsourced accountant leaving their office! Invoices can be generated, statements of account can be sent, taxes can be computed, payroll can be processed and budgets can be monitored!
Check out our previous article which identifies which type of cloud accounting solution is the best fit for your business!
Online Books of Accounts in the Philippines
Individuals and entities in the Philippines that are engaged in trade or business or in the practice of a profession are required to maintain Books of Accounts. Subject to certain administrative requirements, the registered taxpayer can select, from the following options, which type of Books of Account they want to use for their business:
- Manual Books of Accounts
- Computerized Books of Accounts
- Loose-Leaf Books of Accounts
We previously released a detailed analysis of the requirement to keep and maintain Books of Accounts in the Philippines, which you can check out here – Books of Accounts What is the best fit for your business?
Newly registered companies in the Philippines will start with the Manual Books of Accounts. This requires businesses to manually write every transaction processed by the business in the Books of Accounts.
However, if companies want to maintain an online accounting and finance function, they can register for Loose-Leaf Books of Accounts. By doing so, companies can use a cloud accounting solution to manage their finances online throughout the financial year. Then, when the time comes to file accounts with the BIR, the company can simply print off the ledgers from the cloud accounting solution, bind them together and submit using the approved loose-leaf format.
Online Tax Filings
More and more businesses in the Philippines are now filing their taxes online. This is evident from recent media reports about the increase in tax e-filers and how COVID-19 has resulted in more businesses transitioning to filing taxes online.
There are three main mechanisms for filing taxes in the Philippines. Two of these methods, manual filing and eBIR Forms, require a degree of offline or manual administrative requirements. Our previous article on the complexity of the taxation system in the Philippines outlined the 3 main methods of filing taxes in the Philippines.
Businesses in the Philippines can now file taxes much more efficiently since the introduction of the BIR’s online filing system, the Electronic Filing and Payment System, also known as eFPS. You can access the BIR’s eFPS website here.
By transitioning to the eFPS method of filing, taxpayers can access the BIR’s online facility, complete the tax return with the required details and file it online. Upon successful online filing and payment, the system will generate a filing reference and payment confirmation as proof of successful tax payment. The eFPS system will likewise store eFPS tax return filings for future reference by the company.
If companies are seeking an efficient digital solution for filing taxes, eFPS is a real step forward for the compliance and regulatory framework in the Philippines.
Automated Financial Reports
Companies that use and optimize their cloud accounting solution, should be able to generate financial reports with just a few clicks as regularly as they wish.
This contrasts with companies using manual accounts or excel sheets that require a significant level of administrative work, cross-references, data validations, etc, to generate a financial report that actually makes sense. Even then, there remains a greater likelihood of inaccuracies, human error, data loss and even fraud.
Through the use of a cloud accounting solution where all financial data is stored in one place and accessible anywhere, key reports such as Cash Flows Statements, Balance Sheets, Profit and Loss Accounts and Budgets and Forecasts can be generated with confidence as required by management!
The key here lies in the set-up and automation of the solution! If the cloud accounting solution is set up correctly, the Chart of Accounts has been aligned with business operations, the correct entries are being recorded and the full technical abilities of the solution are being utilised, the online accounting solution can provide for a fully automated, efficient and seamless process for managing a company’s finance function!
The Audit Process Online
In recent weeks, the benefits of an online accounting and finance function have been evident here in the Philippines, as many companies have been able to complete their statutory audit requirements for 2020 despite the quarantine measures in place.
The use of cloud accounting solutions means that auditors can continue to perform and complete most of their audit procedures and reviews through the accounting platform.
Despite the fact that auditors could not visit client offices or exchange physical documents during the audit process, the auditors have been able to examine documents, reports, transactions and much more through access to the accounting solution.
Collaboration between the company accountants and the auditors (for the request of documentation, clarity on transactions, etc) can be properly facilitated through the utilisation of an online accounting solution – even at a time when the parties cannot meet each other face-to-face!
You can check out the requirements for the filing of the Audited Financial Statements in 2020 for companies in the Philippines here.
Benefits of Online Accounting, Bookkeeping and Finance Services
There are numerous benefits to transitioning your finance function to digital/online. While this article deals more with what “online accounting” actually means, check out some of our previous article which deals with the benefits and advantages of transitioning to online accounting and bookkeeping services in the Philippines:
- How online accounting services can save businesses time and money
- Cloud accounting in a crisis
- 8 reasons why SMEs should embrace cloud accounting
CloudCfo – Online Accounting, Bookkeeping and Tax Compliance Services in Manila and the Philippines
CloudCfo offers end-to-end accounting, bookkeeping and finance services for startups and SMEs in the Philippines. We help companies in the Philippines transition to online accounting. We then manage their accounts through cloud-based technology on behalf of their business. This ensures that the company has full oversight, understanding and confidence in their finance function at all times!
Contact our team directly at firstname.lastname@example.org or visit www.cloudcfo.ph to find out more about how CloudCfo can help your company transition and manage your finances through a fully online and integrated online accounting service!