Long before the COVID-19 pandemic, hail and farewells to paper-based business processes had begun. But saying goodbye to old habits is notoriously difficult. Working from home has suddenly made analog processes look very old, and the business world is drawing the first conclusions.
According to the digital association Bitkom, one in three companies in Germany works largely paperless by now. Despite the progress, many documents — such as order confirmations, proof of deliveries, or tax documents — are still created, maintained, and exchanged on paper, causing high friction and inefficiencies.
To address this issue, SAP and IT service provider DATEV developed a digital system to handle such processes in a joint-effort research project. With SD Ledger, companies can verify the identity of a person using digital decentralized identities. This helps guarantee that all relevant transactions from all parties are automatically and digitally notarized and used as a basis for auditing. At the same time, decentralized identities also help ensure that master data of the documents are correct, and that companies communicate with the appropriate and trusted partners in the ecosystem.
Get to Know the Customer
The SD Ledger system digitalizes so-called “Know Your Customer” (KYC) and document verification processes. KYC describes the mandatory process of verifying a client’s identity; for instance, when opening a new bank account. These compliance standards are designed to protect financial institutions against fraud, corruption, money laundering, and terrorist financing. They usually include checking the client’s age, tax status, liquidity needs, and risk tolerance to determine their financial situation.
Traditionally, KYC and document verification processes are costly, time-consuming, and error-prone because information are verified manually. SD Ledger accelerates these processes and increases the efficiency by transmitting receipts securely and digitally.
Tax advisors, small businesses, and large companies receive a verifiable digital identity to be clearly identifiable. Whether they need to login to a web shop, confirm the reception of goods from an order, or initiate a payment, all these steps can be performed with SD Ledger.
At the same time, these steps are automatically being notarized on an immutable, publicly readable distributed ledger, generating and updating a complete, cryptographically secured audit trail. A particular document can be checked against SD Ledger at any time to determine whether or not it truly is the original.
Digitalize the Tax Process
Take the example of an order-to-cash business process: A company orders goods from a supplier in another EU country. Supplies of goods and/or other services in the EU domestic market are provided free of VAT in the country of origin if certain conditions are met. In the recipient country, the purchaser must pay VAT on these deliveries. Previously, the logistics provider had to act as an intermediary to ensure that a paper-based proof of delivery of shipments to another country was signed for tax purposes. With SD Ledger, this is no longer necessary.
Instead, an employee of the ordering company can hold a credential issued by a DATEV tax advisor that gives them authority to sign such proof of delivery digitally. As part of this step, an automatic payment of the associated invoice could also be triggered.
SD Ledger therefor helps to significantly reduce the time it takes for performing required steps. Tax advisors on the other hand can now also be involved early in the process, giving them the opportunity to use the increased transparency about orders for advising their clients even better.
SD Ledger allows for automating and digitizing document flows between large and small businesses, significantly speeds up and streamlines processes, and takes a big step toward fully digital accounting. The notarization and document transfer systems create a secure audit trail and decrease overhead during order delivery. SD Ledger transforms antiquated and onerous steps in the order-to-cash process into modern, manageable work with traceable integrity.
Alexander Schaefer is head of SAP Innovation Center California.