In Israel, there are strict bookkeeping and customer billing rules and regulations covering all businesses. Approved Israeli software or printed books must be used – not Excel, Word, QuickBooks or Sage. Otherwise, the Israeli Tax Authority not only levies fines, it can also estimate taxable income, which is never good for the taxpayer.
In practice, smaller businesses typically outsource the accounting and tax reporting to an accountant or bookkeeper who has all the approved software and can deal with the filings by the 15th of each following month, or by the 19th if the reports are filed electronically and tax paid electronically.
These businesses must let the accountant or bookkeeper have all the paperwork on a regular basis throughout each month. They should also provide read-only access to their bank accounts and credit card accounts on the internet.
Larger businesses usually have in-house accounting departments.
In short, if you own or manage a business, large or small, you need reliable up-to-date books to tell you (and the taxman) how you are doing. Is the business profitable? Is the cash flow adequate? How much do you owe suppliers and when do you need to pay them? How much do customers owe you and what is the age of their balances? Are you meeting your budget or milestones? Do you need to report to investors?
Help is at hand
On the sales side, there are software products approved by the Israeli Tax Authority which help you generate tax invoices electronically. You then have the sales data for the books.
As for bank account and credit card statements, there are now software products which can read the movements and transactions.
There are trip report products, but unfortunately not all of them generate the data needed to calculate amounts allowed as expenses under the Israeli tax regulations.
There are inventory programs which will help you track your inventory levels. The Israeli tax regulations require this, as well as year-end physical counts.
And there are comprehensive ERM (enterprise resource management) and ERP (enterprise resource planning) systems which help give a combined view of your business.
But one of the big “nuisance” areas is that of accounts payable (A/P).
Accounts Payable
Accounting software and ERM/ERP systems have become considerably innovative in recent years, but newer technology (e.g. from DOKKA.com) aims to optimize the financial process further. Using a combination of Artificial Intelligence and other features, accounts payable teams, bookkeepers and accountants are becoming more efficient. Here’s an overview.
Optical Character Recognition (OCR) is widely used globally, but doesn’t always work effectively in non-English documentation, and even with English documentation, there are issues. Turning unstructured data into structured data is now possible in each language with nearly any financial document.
In the old days, a bookkeeper would look at a document and spend time creating the bookkeeping entry. Today, the bookkeeping entries can be created automatically using a combination of the extracted data from the documentation, (date, reference numbers, amounts, etc.) and the information from the accounting software/ERP (general ledger account, VAT code, vendor, etc.). Within seconds, and a one-click approval, both the bookkeeping entry and the documentation can be transferred to your approved accounting software system. And the system can be trained to remember all this for the future.
The new technology can now not only recognize an invoice but match and extract data from a related purchase order or goods received voucher.
What about approving payments before they are made? Digital approval flows can be established so the right people can approve the documents before they are processed or paid.
What about liaising with colleagues/superiors/clients? A chat feature can be linked to documents so that you can speak to them. This can be a huge time saver, allowing the avoidance of the ping-ponging via email or phone when you need to resolve questions on documents.
Purchase documents can also be managed in a digital way. In the old days, you’d file the documents, write sticky notes on them, and staple them together. Today, you can use a google-style search to find any document instantly. You can virtually link documents as well as add virtual sticky notes to documents. But the smart document features can go further with virtual folders, tagging and virtual duplication.
On the run? Not a problem, the document collection, approval flows, chat collaboration and smart document management can be built into mobile apps, so you can continue wherever and whenever suits you best.
As always, consult experienced advisers in each country at an early stage in specific cases.
leon@h2cat.com, eric@dokka.me