Does it improve the allocation of corporate loans? | Business loan


Push for corporate lending?

Push for corporate lending?

Originally, the S-Balance sheet was intended for simplified data transmission to the tax authorities. As a “waste product”, however, more efficient data processing in lending by banks has also become established. In 2017, the Federal Ministry of Finance set the course for enabling companies with corresponding interfaces to forward the data to banks as well. Starting in April 2018, the S-Balance sheet should simplify and accelerate the overall loan process for corporate loans, thereby boosting corporate credit demand once again. What’s up with this innovation?

  • The S-Balance sheet is used for simplified data transmission to tax authorities.
  • It can also be used in bank credit checks to accelerate corporate credit lending.
  • The number of S-Balances has so far increased continuously. However, it is criticized that so far less data are transmitted, as in paper form.

The S-Balance sheet as a standard

The S-Balance sheet as a standard

From the introduction of electronic balance in a nationwide uniform standard, the Deutsche Bundesbank promised a lot. Company data could thus be processed and interpreted faster, said Bundesbank executive Joachim Wuermeling. As of April 2018, the documents, ie annual financial statements, can be fed directly into the analysis systems of the banks and savings banks. They are “translated” into a machine-readable language, the analysis of the data is computer-based.

The digital financial report is to fill the vision “Industry 4.0” as part of the federal government’s digital agenda. So far, balance sheets have been created, printed and made available to the bank in paper form. The bank, in turn, had to hire an employee to re-enter the data into the bank’s system and then perform a partial manual audit.

The new method is based on the already existing XBRL taxonomy (1). The technical infrastructure exists almost everywhere, there are no major costs for the implementation of the financial institutions. The fact that there is no break in the process, the process accelerates inevitably.

Since June 2017, a pilot project has already been in progress with participants from all three banking sectors, commercial banks, Volksbanken and Raiffeisenbanken and Sparkassen. This was accompanied by tax consultants and auditors. The participants rated the pilot as a complete success.

In particular, the tax offices benefit from the S-Balance sheet, as our following infographic shows:

Benefit for all involved

Benefit for all involved

According to the association “German Banking Industry” the digital financial report convinces by advantages for all involved. The following advantages apply for the companies:

  • The security of the electronic transmission path, which protects the data from unauthorized access by third parties.
  • The administrative effort is reduced considerably.
  • Process costs are cheaper, also by the elimination of paper.
  • Elimination of the faulty media break during transmission.
  • The electronic distribution process is identical for banks, savings banks and tax authorities.

On the bank side, the advantages are as follows:

  • Also significantly greater security in the transmission from access (data security) and protection against illegal data modification (data integrity).
  • Faster process of the credit process and shorter decision-making times.
  • Cost reduction through electronic handling and the elimination of paper.
  • Fully digitized disclosure process
  • Entry into future digitized data acquisition.

The following success factors characterize the digital financial report:

  • The infrastructure already exists for the implementation.
  • High level of penetration by a large number of users right from the start. (2)
  • All involved are involved from the beginning.

Preparation on the part of the companies

Preparation on the part of the companies

Companies wishing to use the S-Balance sheet in future should consider the following:

  • What adjustments to chart of accounts or bookings are required?
  • Is there a system for resource planning (ERP system) and should the balance be mapped there?
  • How can supplementary or special balances be integrated into the process of creating the S-Balance sheet?
  • From which data sources must data for the S-Balance be imported?
  • What possibilities exist for preparing the data in advance?
  • Does the software currently used in accounting control the XBRL format required for the S-Balance sheet at all? If not, are there any updates or upgrades?

Has the S-Balance proved itself?

Has the S-Balance proved itself?

According to the Federal Ministry of Finance, the number of electronically submitted balance sheets is rising steadily. By 2017, 2.5 million records had been submitted at the end of the introductory phase.

However, the tax authorities complain that the number of transmitted data is significantly lower than that of a paper-based balance sheet and thus leaves questions unanswered. The tax authorities want to keep it open for the coming years to continue to request paper-based information in order to ensure correct taxation (3).

 

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