Study On A Paperless System Information Technology Essay

Many organizations, in an effort to increase their effectiveness and efficiency in order to develop competitive advantages in their marketplace, are eager to develop information technology on their business systems. The age of information technology provides possibilities for an effective coordination of business process. Different partners and parties transact electronically in the modern commerce environment and this creates a push factor for accounting and auditing systems to convert into paperless forms as well.

Over the last decade, climate change became one of the top key concerns for all countries. More and more nations are concerned with the sustainability of the world’s environment and are trying to contribute by various policies such as reducing their carbon footprints, conserving on resources, building greener environments and preserving wildlife habitats. The challenge is to maintain economic growth without threatening the long term survival prospects of mankind.

One of the key issues with regards to the environment is deforestation. Food and Agricultural Senior Forestry Officer, Dieter Schoene, said, at a United Nations Framework Convention on Climate Change workshop in 2006, that

“We are working to solve two of the key environmental issues – deforestation and global warming – at the same time”

The removal of trees causes many problems including destruction of natural habitat and damage to our atmosphere. One reason for deforestation is the production of paper. Paper pulp is made of wood. Paper production accounts for about a large percentage of felled trees, and thus paper conservation has been a key concern for the world with plenty of researchers, conservation groups, campaigns and initiatives with the aim of reducing paper usage.

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A typical sale transaction will consist of but not limited to: the quote, the purchase order, the proforma invoice, the delivery note, the sales invoice. This means that one transaction will use at least five pieces of paper and this does not include other documents like the bank payment advice, beneficiary advice and other functions that lead to the sale. In 2007, Singapore had at least 160,000 small medium enterprises. If each business had a conservative average of 20 sale transactions per month, 16 million sheets of paper would have been used which is the equivalent of 32,000 reams of paper. That would mean to the world a lost of at least 1,800 trees every month just because of Singapore’s SMEs alone.

Paperless system is used for automating the accounting information processes. Automation in accounting system means reducing the paper dependency, and it will provide effectiveness. An effective paperless business system will make paper an option rather than a necessity and thus reducing the usage of paper in the corporate world.

It is for this reason that paperless systems have also become a need for business processes with many professionals believing that going paperless is no longer an option but a must. Another reason is that paperless systems involve technology which could make the business much more effective. The rapid rise of paperless business solutions and providers around the world goes to show that more and more businesses have identified pursuing a paperless office as a strategy that can help them gain a competitive advantage in their marketplace.

It has been observed that internationally (Hannon, Neal 2004) many regions are adopting and shifting towards electronic transactions, electronic business systems and even the development of Extensible Business Reporting Language (XBRL), a standardized digital language for business financial reporting. The EU for example already has a large and extensive list of directives covering the usage of electronic transmission of financial transactions, customs and trade documents, taxation issues, online privacy and security.

Almost all countries in Asia have electronic transaction laws, with the exception of Sri Lanka and Nepal which have pending legislation. In Singapore there are many statutes that govern the administration of documents within organizations. A recent addition is the Electronic Transactions Act 2010 where it is specifically stated that where a rule of law requires any document, record or information to be retained, or provides for certain consequences if it is not, that requirement is satisfied by retaining the document, record or information in the form of an electronic record if conditions are satisfied (Singapore Statutes).

The Singapore Standard for Auditing, namely SSA 500, also deals with electronic documentation. It has specified that electronic evidences are accepted as long as they fulfill the requirements. However it has also stated that electronic evidences are not as reliable as original documents. This contradicts the Electronic Transactions Act 2010 where the original documents may actually be in electronic forms.

It is in the above context that this study attempts to investigate the awareness of the implementation of the Electronics Transactions Act 2010 in Singapore. It further attempts to examine whether such awareness translates into an intention to adopt paperless accounting systems and if there is no intention to adopt paperless accounting systems then the reasons for companies resisting the intention to pursue a paperless office.

For the above purpose, the study will conduct a survey on the awareness of paperless accounting and the Electronic Transactions Act 2010 in Singapore and whether it has impacted the way businesses operate in various industries. It will also survey on the reasons that hamper businesses from adopting electronic transactions as part of their operation models. The study will also attempt to find out what can be possible push factors to help businesses adopt paperless accounting.

LITERATURE REVIEW

The case for paperless accounting and chasing paperless offices have been researched and discussed by many practitioners and researchers, yielding a lot of literature on this topic both in popular and academic sources

2.1 The Case for Paperless Accounting

Paperless accounting is based on electronic transactions where all business transactions are recorded electronically. The literature available on this topic is generally from popular sources with very little scholarly research attempted. The literature on paperless accounting from both popular and academic sources is primarily targeted on the benefits of going paperless, ways to implement a paperless office. They are focused on building the case for businesses to adopt a paperless strategy.

Many researchers and practitioners believed that businesses must adopt paperless processes as part of their strategies. As a company grows and the transactions increase it will require a paperless system for its business processes (Webster 2004). James Blaylock (2005) believed that

“Going paperless is no longer an option, but must for a CPA (Certified Public Accountant)”.

Businesses have to go paperless in order to keep up with their competition. The mentality has changed. For example in 2005, a survey by PCPS/Texas Society of CPAs National Management of Accounting Practice (MAP) showed that 41% of CPA respondents indicated that they would consider going paperless, and 20% already have done it. 25% of the firms are planning to go paperless, but 13% will not consider it. Later in 2008, CCH Incorporated surveyed accountancy practitioners who have implemented paperless system. Of those of were surveyed, 95% would recommend the idea of setting up paperless offices to other users.

However some researchers have also challenged the notion that paperless is the way to go. Paper is still the most widely used form of document medium due to its many benefits that is not easy to replace and will still co-exist with electronic documents in the long term (Liu and Stork, 2000) Paper usage cannot be reduced significantly unless work practices are re-organized and the digital alternative to paper has to be improved. Until that happens, offices will still most likely have paper around (Sellen 2003). This view is further re-emphasized by Gragg (2004) where he pointed out that it is difficult to depend solely on electronic documentation due to swift developments in software technology and hard copies will unlikely go away permanently. It is also wrong to assume that there will be no printing costs in a paperless office since a lot of people will carry on to print out the documents that are sent to them electronically, even if huge investments have been made to obtain technology that help to store documents digitally.

What Sellen and Gragg observed in 2003 and 2004 respectively still hold true today. The world usage of paper is still increasing. Some businesses still stick to paper. Even those which have invested in technology to automate their business processes still rely heavily on paper documents. For example, it is not uncommon to see executives printing out hard copies of their email correspondences. Logistics and shipping companies still require hardcopies of the bills of lading and certificates on goods. Banks and tax authorities still require hardcopies of hand-signed institutional documents. In such cases, businesses should look at usage of recycled paper which is more environmentally friendly although the ultimate aim should still be at reduction eventually.

Therefore the case for paperless offices is very obvious with many benefits that all businesses should strive to achieve. Paperless accounting can bring about increased efficiency while at the same time lowering the costs of accounting (Gullkvist 2002). Brian Steinert, director of specialty software product management at CCH, in a supplement to Accounting Today, said that

“Because of the amazing efficiencies that result from streamlined, integrated workflows; because of the greater productivity brought about when professionals have anytime/anywhere access to what they need and anywhere/anytime ability to collaborate with their peers; because young professionals expect and embrace paperless processes; because all professionals will spend more time on high-level, high-value work; because money will be saved in the long run simply by buying and storing much less paper.”

Cost reduction will be the primary objective for many vendors who are considering implement paperless business processes (Davis 2005). Reduction in paper usage will also reduce the damage to the environment.

The amount of literature available on paperless accounting suggests that it is a widely known concept around the world. However the lack of literature on the adoption rate of paperless accounting systems even in the United States and Europe, which are considered to be more developed in terms of technology, suggests that the actual awareness of the public is much lesser. A survey on the awareness of paperless accounting in Singapore should yield negative results.

2.2 Electronic Transactions Act in Singapore

Many regions around the world are experiencing pressures for legal and regulatory changes due to the growth of paperless offices. The paperless office demands that transactions are documented electronically. Therefore the laws related, for example taxation and contract laws, need to be updated to recognize digital records of transactions as legal documents. As the information technology environment develops over time, nations will also move to improve their laws governing electronic commerce. This can be observed from the United Nations Convention on the Use of Electronic Communications in International Contracts (UN Convention), adopted by the General Assembly of the United Nations on 23rd November 2005 which was based upon the UNCITRAL Model Law on Electronic Commerce issued in 1998. The main driver for the new Convention was the fact that the electronic commerce environment in 2005 was very different from 1998 due to the evolution of the Internet.

Singapore, being the first country in 1998 to follow the UNCITRAL Model Law on Electronic Commerce, on 7 July 2010 was the first Asian country to confirm its alignment to the new Convention, which is aimed at minimizing differences between laws in different countries. Therefore Singapore needs to update its Electronic Transactions Act (ETA) 1998 to complement the UN Convention and this resulted in ETA 2010.

The ETA 2010, although based on the one in 1998, has introduced many key changes, one of it being Clause 9 which provides that

“Where a rule of law requires certain documents, records or information to be retained, the requirement is satisfied by retaining them in the form of electronic records subject to certain safeguards. If the rule of law already expressly provides for such retention in electronic records, the clause will not apply. A public agency may impose additional requirements for the retention of electronic records under its jurisdiction.”

This is the critical change that allows for the feasibility of a paperless office as businesses are no longer required to keep paper records of their business transactions by law.

Besides financial reporting purposes, the other reason that companies archive their financial transactions is for audit purposes. In the Singapore Standard on Auditing under SSA 500, A31 states that

“Audit evidence in documentary form, whether paper, electronic, or other medium, is more reliable than evidence obtained orally (for example, a contemporaneously written record of a meeting is more reliable than a subsequent oral representation of the matters discussed)”

This is consistent with the ETA 2010 and further enhances the notion that companies no longer have to generate invoices in paper forms. Businesses can choose to issue their invoices in digital formats to their clients. The digital invoice will be recognized in the eyes of the law as a legal document.

As the ETA 2010 was passed only in July this year, it is expected that most executives will be unaware of this change in the Act and subsequently, most will not have plans to adopt paperless accounting systems yet. The survey will attempt to determine if this is indeed the case.

METHODOLOGY

The primary research instrument used in this paper is a questionnaire which is piloted among members of the public working in finance related positions across a wide range of industries. The diversity of the members surveyed was as wide as possible in order to obtain a good mix of responses from members in both IT-savvy industries and non IT-savvy industries. The survey was administered and collected between October-November 2010. In keeping with the topic that is being discussed the questionnaires were sent out either via e-mail as attachments or through transfers via thumb drives and respondents were encouraged to complete and return in the same manner.

The questions were structured in order to get feedback of respondents’ awareness of the Electronic Transactions Act 2010, whether it has impacted the way their businesses operate. If it has no impact yet, the survey will aim to find out why the business has not adopted a paperless transactions as part of its operations and what factors will push the business to adopt paperless systems.

Surveys were distributed to 200 possible respondents from through digital survey forms. Although the target members were requested to reply in digital formats with respect to the topic in questions, some respondents replied through their own paper formats of the survey. Instructions and explanations are clearly stated should the respondents face any difficulties in understanding the questions.

RESULTS

4.1 Question one

After 2 reminders, the surveys were returned by 124 (62 percent respond rate) respondents. The breakdown of the respondents according to their industries is shown in the chart below.

Chart 4.1 Breakdown by Industries

Although an attempt to survey a wide diversity of respondents was made, 47% of the respondents came from the Banking and Finance and the IT industry. This is highly due to the fact that almost half of the 200 surveys were distributed at 2 commercial buildings physically where the tenants at both buildings consisted mainly of companies providing financial services or IT-related services. In order to obtain a more accurate response rate for different industries, the survey should have been distributed in a fixed number per industry.

It must also be mentioned that a larger sample of respondents is needed in order to obtain more accurate results that can be indicative of the total population.

4.2 Question 2

The second question of the survey was to find out whether the respondents were aware of paperless accounting. The results of the survey are shown below.

Q1

Q2

Yes

No

Banking and Finance

32

19

13

Fashion

5

1

4

Food & Beverage

13

1

12

IT

26

9

17

Logistics

4

0

4

Manufacturing

11

2

9

Pharmaceutical

1

0

1

Property

1

1

0

Retail

20

1

19

Trade

10

4

6

Government

1

0

1

Total

124

38

86

Table 4.1 Question 2 results

Out of the 124 respondents, 69% of the respondents were unaware of what is paperless accounting. This is consistent with what was concluded in the literature review. Although paperless accounting is widely discussed in both popular and academic articles, the adoption and awareness rates are much lower. This is especially the case as shown by the results above, where almost 74% of the respondents who are aware of paperless accounting come from IT-savvy industries. And even within the IT-savvy industries, only 28 out of the 58 respondents (48%) are aware of what is paperless accounting. Clearly, more has to be done in order to increase the awareness.

4.3 Question 3

The third question of the survey asked if respondents are aware of the Electronic Transactions Act 2010. As discussed in the literature review, the awareness level should be low since this Act was only in effect since Jul 2010. The results of the survey are listed below.

Q1

Q3

Yes

No

Banking and Finance

32

6

26

Fashion

5

1

4

Food & Beverage

13

0

13

IT

26

6

20

Logistics

4

0

4

Manufacturing

11

0

11

Pharmaceutical

1

0

1

Property

1

0

1

Retail

20

0

20

Trade

10

1

9

Government

1

0

0

Total

124

14

110

Table 4.2 Question 3 Results

The results are almost one-sided with 88% of the respondents stating that they are unaware of the Electronic Transactions Act 2010. Most are unaware that invoices no longer need to be in paper form and can be sent via electronic means. This can be considered as a failure on the part of the government when the residents of a country are unaware that the country is the first Asian country to ratify the UN Convention. The government will need to raise awareness through more media coverage, campaigns and gazettes.

4.4 Question 4

The fourth question of the survey tries to find the adoption rate of paperless accounting by businesses in Singapore. The results are tabulated below.

Q1

Q4

Yes

No

Banking and Finance

19

0

19

Fashion

1

0

1

Food & Beverage

1

0

1

IT

9

6

3

Logistics

0

0

0

Manufacturing

2

0

2

Pharmaceutical

0

0

0

Property

1

0

1

Retail

1

0

1

Trade

4

1

3

Government

0

0

0

Total

38

7

31

Table 4.3 Question 4 Results

Since the results of the previous 2 questions have indicated that there is a lack of awareness of paperless accounting and the Electronic Transactions Act 2010, only 38 respondents answered this question. The rate of adoption of paperless accounting systems cannot be high. Based on these 38 respondents, only 18% of the companies implemented paperless systems. Based on the results of this survey, Singapore is on a long road to becoming a paperless society. It is worthy to note that among the 19 respondents in the Banking and Finance industry who are aware of what paperless systems are; none of them were in companies that implemented such systems. This is highly likely due to the nature of their industry where paper documents are required.

4.5 Question 5

Question 5 asked respondents, whose companies have not implemented paperless systems, the reasons behind their companies’ decisions. A list of 5 options was offered to the respondents and they were allowed to choose more than one. The following chart shows their responses.

Chart 4.2 Reasons for not adopting Paperless Systems

Out of the 38 respondents, only 3 felt that paperless systems were costly. A majority of 30 felt that their suppliers and clients required paper documents and thus there was no need for them to adopt paperless systems. This clearly shows that the respondents and their clients/supplier as well are unaware of the new Electronics Transaction Act 2010. Half of the respondents felt that paperless systems are not adopted as it was not a standard procedure in their industry. Thus if their competitors started adopting paperless systems, they will highly likely follow suit as well. 13 respondents felt that there was no need to implement paperless systems since it is not mandatory by law and 7 felt that there were not many incentives to adopt such systems.

4.6 Question 6

Question 6 surveyed all the respondents on the factors that will push their companies to adopt paperless accounting. Again, a list of 5 options was offered and respondents were allowed to choose more than one option. The chart below shows their response.

Chart 4.3 Push Factors for Paperless Accounting

The biggest push factor for companies to adopt paperless accounting systems is for the government to make is a legal requirement. This is indicated by the response of 66% of those surveyed. 76 of the respondents indicated that they will consider adopting paperless systems if it is one of their industry standards. Half of the respondents felt that there is a need to create more awareness of paperless accounting. It is also worthwhile to note that less than 30% of respondents are looking at incentives and costs of adopting paperless accounting.

CONCLUSION

This survey, carried out in late 2010, found a low level of awareness and adoption rate of paperless accounting. The results of this study must be interpreted in the light of the response rate of 62%, which were obtained after 2 reminders. The final sample size of 124 respondents is definitely not a good indicator of the total population. The fact that 47% of respondents came from 2 out of at least 8 different industries shows that the distribution of the survey was not conducted wide enough although the time given for the survey to be conducted has to be taken into consideration. Basically this means that more time and resources need to be allowed in order for a similar survey to be conducted on a wider scale. A survey that yields at least 1000 respondents that are equally distributed across different industries will be a better indicator of the total population.

The results of the survey indicate low awareness of both paperless accounting and the new Electronic Transactions Act 2010. Survey respondents have indicated that there should be more awareness made about paperless accounting. This indicates that there is a lot of potential in the Singapore market for companies that provide digital document management services. The government can increase the awareness of paperless accounting by setting up a national framework for a paperless society as well. This framework should be aimed at resolving the issues that are creating resistance to paperless accounting and helping Singapore businesses to switch to paperless accounting systems progressively.

When businesses adopt paperless accounting systems, there are a few authorities that will have to be involved as well. For example, the Monetary Authority of Singapore will have to look into solutions that can enable banking and financial institutions to adopt paperless business processes without compromising on risks and securities. The Accounting and Corporate Regulatory Authority will have to look into the acceptance of electronic financial statements. The Inland Revenue Authority of Singapore will have to come up with solutions that enable business to file their taxes electronically. By creating such frameworks and support, businesses can be assured of a smoother and easier transition as they adopt paperless accounting systems. This will greatly reduce the resistance to the adoption of paperless business processes that currently exists.

The survey results should be interpreted with caution as they indicate only respondents’ awareness of paperless accounting and the Electronic Transactions Act 2010. However it does indicate that there is a need for more research to be done regarding actual business adoption rates of paperless systems and the benefits that both companies and the environment enjoy with the reduced usage of paper.