There are about two million companies in Germany that prepare their balance sheets at least once a year. As part of lending credit, under the Banking Act (Law on Banking) banks are required to analyse and evaluate budgets above a certain loan amount. Lending thus essentially depends on the image of the financial situation a bank has from the customer's balance sheet.
Current balance records
Banks use balance records and analysis systems for this process, such as the BARS product from S&N AG. The customer's annual reports are recorded in a manual process by highly qualified analysts and put into a unified, structured form. This process has - like all other manual processes - a number of disadvantages. In addition to the high costs incurred solely due to the required recording time, manual processes are prone to errors. Since a large part of the balance sheets are submitted to banks in a short period of the year, there are sometimes long waits for the evaluation, which hinders a fast decision about credit.
It is thus hardly surprising that the financial industry has been trying for decades to automate the process of recording balance sheets. In 2014, we are one step closer to achieving this goal.
Balance recording in the future
In §5b of the Income Tax Act (ITA, Electronic transmission of balance sheets and profit and loss accounts), the legislators regulated that balance sheets from the 2014 fiscal year could only be submitted to the tax authorities in electronic form and in the XBRL format with very few exceptions. Currently, only the tax authorities benefit from this because banks are not involved in the process. Since last year, almost all companies have therefore been able to produce their tax accounts in electronic form and make them available.
On to ELBA
This completely new starting point is dedicated to the cross-industry cooperation project ELBA (Electronic Submission of Balance Sheets). The aim of ELBA is to expand the written process in the Income Tax Act to trade balance and to establish a comparable process with the balance sheets as part of credit lending and to introduce it as widely as possible.
The introduction of electronic tax accounts has fundamentally changed the situation. The investment of the company in the preparation and transferal of electronic financial statements is carried out in 2014. Today there is a technical basis and a suitable data format which can be used as a base.
However, there are still some hurdles to overcome before banks can also take advantage of the electronic records. The main sites are here: information needs of the banks, liability, data quality, security, and acceptance.
Overcoming these hurdles is almost impossible for an individual bank. Last year, a comprehensive alliance under the name ELBA was therefore formed, led by employees of HypoVereinsbank / UniCredit. S&N is one of the founding members of ELBA and actively works with it. ELBA is trying to collect all the participants involved in the process and to convince them of a mutual solution from working together.