Accounting, the way to unify information devoted to internal management of the enterprise
Accounting is often considered the ultimate outcome issued from other functional information flows existing in an enterprise. For sure it is! However one can not sum up accounting in such a short view. Accounting performs two distinct and equally consistent functions:
- the first one consists of recording any, and all events that happen within the entity,
- the second, that is the result of the previous one, is to provide aggregated information to distribute :
- toward internal circuits on the one hand (e.g. share holders, work's council, etc.) and
- on the other hand, to be spread outside the entity (information to public, stock regulation authority, banks, etc.)
In that respect accounting takes advantage of its dynamic situation and preferred information dispenser position. It enables entity for quicker reaction to face competitors and to adequately fulfil market demand. Moreover the entity is the most natural place for information to circulate; to last out enterprise has to keep data exchanges under its full control; in particular constant check of information flow with suppliers, customers, lenders, government agencies and social bodies is required. Therefore accounting needs to keep under strong control any element relating to its information system.
Why EDI accounting?
Accounting is made up of many elements such as classical double accounting entries, journal, ledger, trial balance, financial statements, reporting, etc. Sooner or later most of these documents need to be exchanged with:
- other entities within a industry/financial group (consolidation entries, provisions, reporting, etc.),
- customers or suppliers (accounts reconciliation),
- accounting firm performing some advice or audit mission (accountants, auditors, lawyers, consultants, etc.),
- public bodies such as tax investigation, fraud squad, computerised accounting control team, customs, detective police division, price controls, etc.
Some standard messages have been designed to be enclosed into computerised accounting systems:
- under EDIFACT standard language: ENTREC (accounting entries) relates to collection of entries into a journal, LEDGER that is useable to provide a series of accounts such as general ledger, cost accounting, budget ledger, BALANC refers to any kind of trial balance, CHACCO (chart of accounts) to transmit any type of chart of accounts, INFENT (enterprise information) the generic container for any electronic declaration procedure (e.g. fiscal return, VAT declaration, reporting, financial statement, etc.)
- under XML syntax: the message “Accounting Entry” relates to collection of entries into a journal, "Accounting Journal" to describe the content and transmit any type of journal, “Accounts Chart” to describe the content and transmit any type of chart of accounts, "Ledger" that is useable to provide a serie of accounts such as general ledger, cost accounting, budget ledger, “Accounting Message” to enable the sender to inform the receiver about the application messages sent, "Balance" refers to any kind of trial balance, "Nomenclature" to describe the way debit, credit or balance amounts of accounts need to be mapped toward labelled items of a report to calculate the result that is the content of these labelled items for a defined internal or external report, statistics, declaration, etc., "Reporting" (enterprise information) the generic container for any electronic declaration procedure in the fiscal, social and accounting domains.
These messages are standard formats used by entities for electronic archive of accounting files and accounting information; they make information totally permanent, and independent of the system that created them. Data export is thus possible either toward internal (e.g. system migration, merging) or external e-archiving file services.
EDI accounting, how does it work?
On strict organisational level accounting is about implementation of a whole set of rules and procedures that makes possible to get the periodical result of entity's activity.
To this end, it applies a universally known technique, whatever the country that is represented here:
Accounting standards documents flow
Equivalence EDIFACT messages and
EDI Standards and recommendations
EDI accounting is based on the international standard EDIFACT (ISO 9735) and/or XML recommendations which define the application rules. So far, standards and recommendations are used within entities naturally by IT experts, but sales and production departments as well. EDI also aims for facilitating direct relations (that is computer to computer) between economic partners of different entities.
These languages are neither limited to the sole accounting domain, nor to the data processing field. They don’t belong to rules defined by software providers and as a result, they make possible a direct dialogue between the users (requirements) and the programmers (constraints).