XBRL-based Digital Financial Reporting

First off, if you are a CAS Firm, have a look at this blog post, Artificial Intelligence Explained for the Small Business Owner . Accounting and finance tends to commonly be a struggle for small and medium sized businesses. Many small and medium sized businesses lack the scale to employ a full time team that includes a CFO, controller, cost accountants, bookkeeping staff, and others. Instead, they might have one or two employees trying to manage everything, those employees are usually over worked and sometimes things fall though the cracks. Or, in some cases, the business owner might manage accounting and finance by themselves. Sometimes a services firm is engaged to help out part time. A Client Accounting Services (CAS) or Client Accounting and Advisory Services (CAAS) firm is an accounting practice or bookkeeping service that provides outsourced bookkeeping, accounting, virtual CFO services, virtual FP&A services (forward looking), financial statement compilation, financial state...

As a certified public accountant serving many different businesses, I’ve heard countless business owners say some version of, “ I run my business on the back of an envelope. ” And for many small, simple enterprises, that approach actually works; key numbers and other important information scribbled down on paper, the rest stored in the owner’s head. But as a business grows, the “back‑of‑the‑envelope” method begins to break down. Add a second location, introduce additional products, hire more employees, expand operations; complexity multiplies. Eventually the enterprise reaches a point where informal mental bookkeeping is no longer sufficient or safe. At that stage, the business transitions from envelope‑based thinking to a basic accounting information system. Maybe the owner buys QuickBooks  or a similar basic bookkeeping system. This may be achieved by contracting with a Client Account Services (CAS) firm. Soon after, they realize not everyone should see everything in QuickBooks, ...

It seems like a very simple question, "What is the truth and who owns that truth?" Does a database hold the truth? This article,   The Relational Model Is Not Enough: Who Owns the Truth in the Battle Over Types and Constraints , point out that "it depends". Fundamentally, a database is a mechanical system for storing and enforcing truth. That system provides a way to persist storage, a way to get information out of that storage (e.g. query), and a bunch of other details like indexing to make things fast, transactions to manage quality, a way to get things into the database, constraints, query execution, concurrency, durability, security, versioning). The fundamental building blocks of a database are: Data and data types Structures and structure types A database schema that specifies what a good structure looks like Then, someone can ask a question of the database; " What is true, right now, and under what constraints? " Data and data types and the schema t...

The purpose of this blog post is to brainstorm the ideal minimally viable accounting information system which will eventually be reconciled to reality.  But initially we (a) minimize complexity and (b) using an approach of idealized design .  The system being constructed is an accounting information system . Fundamentally, the system works as follows: A reporting framework is specified.  It may seem odd to start with a reporting framework.  However, as The 7 Habits of Highly Effective People points out, "Begin with the end in mind."  The reporting framework must be complied with; that is one fundamental purpose of the system; compliance with regulation. This specifies the reporting requirements. A source documentation containing information is received which is effectively a business contract. The source documentation receipt spawns a business event . That business event is entered into an immutable ledger. The business event spawns a financial transaction . ...

The Theory of Documentation is a metatheory which is part of the Seattle Method and describes the information which is provided, traditionally in the form of a document, which is the source of a business event and commonly ultimately part of a financial transaction. The Theory of Documentation considers the standard Semantics of Business Vocabulary and Business Rules (SBVR) which specifies how to create vocabularies and rules for creating them and the OASIS standard and ISO/IEC standard Universal Business Language (UBL) which is a standard for creating business documents. First, it is important to understand the terms "documentation" and "document" as we are using these concepts.  Documentation is the information contained within a document which is the source of a business event .  A document, as we will define it here, is the set of all documentation that wears the "costume" of a document which memorializes the information related to a business even...

Most accountants have created what amounts to what I refer to as a "closing book". For a smaller financial statement, that closing book might be only one or maybe a handful of electronic spreadsheets. For a larger closing book, such as that of a Fortune 1000 company, as Gartner consultancy points out , it might be more than 800 electronic spreadsheets. And those spreadsheets have mistakes.  Consider the fact that 94% of business operational spreadsheets are known to have critical errors . This includes the spreadsheets in that closing book. Now, PWC says that they have been able to get artificial intelligence to accurately read  electronic spreadsheets about 74% of the time with hopes that they can get accuracy up to about maybe 87%. And because an accuracy rate of 87% is not sufficient for a compliance report; humans are going to close the gap between the perhaps 87% accuracy rate and the theoretical goal of 100% accuracy. While this is maybe a viable approach; is this the o...