Computerized accounting system

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JESSIE CARPIO

JESSIE CARPIO

One needs to undertake 16 steps for more than a month (34 days) to start a business in the Philippines, according to the World Bank’s Doing Business Report 2015. Newly appointed Trade Secretary Adrian Cristobal Jr. said that among his first priorities is to reduce the process to three steps in three days.

If Secretary Cristobal makes true his word, the business community, especially the foreign investors, would be relieved. Many of them had a hard time understanding why it takes so long to start a business here. The government may be doing its best to make the process easier and on theory it can be easier, but the reality is different.

There are different processes in setting up a business in the country, but let me focus on the approval to use computerized accounting systems (CAS) by the Bureau of Internal Revenue.

Why would a company need CAS, you would say? Taiwan, India and New Zealand, for example, do not see the importance of the approval of CAS and thus, do not require such systems.


The BIR, in essence, says it needs to ensure that the accounting systems produce accounting records and documents that reflect the accounting transactions and the correct tax. Further, the BIR even prescribes particular accounts (some BIR examiners consider these as fields or columns) in the accounting reports.

One would think it is the company’s responsibility to ensure that its accounting systems properly reflect the correct taxes to be reported to BIR. The format or columns should not matter.

The BIR, however, can sometimes take it to the extreme. One story I heard was about a BIR examiner insisting on rearranging some columns (one column goes first before other columns) in an accounting book despite pleas from the company that such change would be costly as they have to get consultants from abroad to fix this unnecessary rearrangement of columnar fields.

Given the rigid approval process, companies are expecting the BIR examination would rely heavily on the output of the its approved CAS in the future when the company is already operating. However, the BIR examination is still primarily paper-based and rarely does one hear of computerized audit conducted by the BIR.

The CAS can be developed off-the-shelf or in-house. Regardless, the BIR does not differentiate and the CAS application would still be subjected to rigorous review.

While the BIR personnel might not be totally faulted for doing their job, there are better ways and faster processing of CAS applications.

One thing that the BIR should consider is to recognize that top-tier Enterprise Resource Planning (ERP) systems such as SAP, Oracle and others have already been reviewed, evaluated and used by several large multinational companies. The efficiency of these ERP systems has been established, which is why the management of these companies had relied on the financial reports generated by these ERP systems. These top-tier ERP systems can be counted with your fingers. Considering their wide use and adoption, these prominent accounting systems would have already been subjected to scrutiny and detailed review by the BIR in previous applications of other companies.

Given familiarity with the said systems, the BIR should concentrate the review on the modifications or customizations and give such applications an easier path toward approval. Thailand and Singapore have already been doing this; they have evaluated and approved certain computerized accounting systems so that companies using such systems need not get separate, additional approvals.

Moreover, the BIR should not treat each application as if it were developed in-house, requiring detailed scrutiny and review all the time. This scenario was confirmed to us by an outsourcing company, which does the registration for its clients, using its existing and previously scrutinized and approved top-tier accounting system. The outsourcing company made the same presentation to the same BIR personnel and the approval process still took months. In one instance, the BIR insisted on additional requirements not previously required, unrelenting despite being shown its previous approval of the same system.

I am sure some BIR examiners know the difficulties and may even sympathize with the company-applicants. Given that the current regulations were crafted over a decade ago, the BIR should again take a serious look at its processes and procedures to consider rapid developments in Information Technology.

As it is, instead of relying primarily on the paper output of the CAS, the BIR should consider using computerized audit as well to validate a company’s representation. This method of review and approval, however, necessitates that the level of skills of BIR personnel needs also to be consistently upgraded.

If the government is really serious in improving the ease of doing business in the country, it should consider scrapping the approval of CAS or consider pre-approval of selected software. At the very least, the BIR should streamline its review processes and procedures and make proper use of IT to validate the company’s representation on the CAS. At the end of the day, the burden of making sure the correct taxes are paid rests with the companies.

If it prescribes to our suggestions, the BIR can free up some of its precious time and resources to do more audit.

Postscript: The BIR, in recent months, centralized the approval process of CAS from the different Revenue District Offices (RDOs) to the National Office. This move resulted in further delays.

Jessie Carpio is president of P&A Grant Thornton Outsourcing Inc. Today, P&A Grant Thornton is one of the leading audit, tax, advisory, and outsourcing firms in the Philippines, with 19 partners, over 500 staff members and four offices around the country.

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3 Comments

  1. is there a BIR regulation pass for the centralized approval of CAS applications in BIR National Office?

  2. I worked once with an Auditing firm with the distinction of the best in ASIA. Rigid and tiring but rewarding in later portion of my life. I came accross BIR examiners and made a lot of tax work for my clients. I came to conclude that the taxman only knows one way to carry-out examinations of my cliens’ books that is by the olden handed down method of DESK TEST. Any objection to the resultant deficiency, this is where the taxman is very cunning, to the point that you bestowed him some bundles of moolah and yet you are thankful to him..and his parting words are stll clear in my memories..Son I did this to help your client. What is the use of CSA…just asking.

  3. Hi Jess, can you imagine how BIR process application for CAS if they are not techi enough to appreciate modern tools and processes? In my previous company it took me a year to get an approval for a ‘cloud based’ ERP. Sad, am the first to apply for a cloud base in the large taxpayers’ group.