{"id":94137,"date":"2020-09-03T20:11:53","date_gmt":"2020-09-03T13:11:53","guid":{"rendered":"https:\/\/bahtera.jp\/imagination\/"},"modified":"2025-03-20T14:27:39","modified_gmt":"2025-03-20T07:27:39","slug":"imagination","status":"publish","type":"post","link":"https:\/\/bahtera.jp\/en\/imagination\/","title":{"rendered":"Reasons for Believing That Understanding Operations Is Necessary Even When Promoting DX in Indonesia"},"content":{"rendered":"

Regarding the concern, \u201cDoes advancing IT eliminate the need to spend time understanding the essence of operations?\u201d I would answer that understanding operational mechanisms is beneficial because it enables one to imagine how the world works. If you understand bookkeeping, you can envision the movement of goods, amounts, and cash, as well as the mechanisms of company management.
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Accounting System in Indonesia<\/p>\r\n\t\t\t\t\t\t\t\r\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t

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The cloudification of accounting systems is advancing in Indonesia, with the three major local cloud systemsAccurate, Zahir, and Jurnalleading the market. However, in reality, it is said that fewer than 8% of domestic companies have implemented accounting systems. This is why new cloud-based accounting systems continue to be launched in what might seem like an already saturated Indonesian market. It suggests that both domestic and international IT startups see significant potential for cloud accounting systems to expand their market share locally. In Indonesia, automated journal entries due to the widespread use of accounting systems have become commonplace, and over the … <\/p>\n\t\t\t\t\t\t\t\t<\/div>\r\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t

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The Most Critical Concern: \u201cDoes Advancing IT Eliminate the Need to Spend Time Understanding Operations?\u201d<\/h2>\n

The question, \u201cIs bookkeeping knowledge necessary now that accounting tasks are systemized?\u201d can be rephrased as, \u201cDoes advancing IT eliminate the need to spend time understanding the essence of operations?\u201d For someone like me, whose livelihood involves developing and implementing business systems, this is a profoundly important concern.<\/p>\n

I think it largely depends on whether you\u2019ve experienced doing \u201cjournal entries \u21d2 ledger posting \u21d2 trial balance \u21d2 closing\u201d by hand with a calculator. In that sense, Level 3 bookkeeping is sufficient, but if your work relates to manufacturing, Level 2 industrial bookkeeping (cost accounting) is incredibly useful.<\/div>\n

Even as systemization has progressed, operations still encounter irregular cases requiring judgment based on company circumstances\u2014e.g., \u201cWhat\u2019s the appropriate posting date for sales or expenses?\u201d or \u201cWhat\u2019s a fair valuation for machinery purchased and operated intermittently due to economic cycles?\u201d These situations often necessitate discussions and adjustments among stakeholders, hindering full automation.
\nThis difficulty stemmed from the lack of unified judgment criteria between acquisition cost (historical cost) and current valuation (market value). In the two-dimensional world of accounting software or ledgers, incorporating the concept of time to evaluate and record physically invisible transaction entries was challenging. However, with Indonesia\u2019s accounting standard, PSAK (Pernyataan Standar Akuntansi Keuangan), aligning with the global IFRS (International Financial Reporting Standards), the room for debate in accounting treatments has decreased.
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The Fun and Challenges of Accounting Conceived in Indonesia<\/p>\r\n\t\t\t\t\t\t\t\r\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t

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Accounting is a puzzle-like mechanism where a single transaction is recorded on two sides\u2014debit and credit\u2014incorporating the difference between expenses and revenues into net assets, balancing the equation “Assets = Liabilities + Net Assets.” Cash flow management involves adjusting accrual-based transaction entries to a cash basis to track the movement of cash and deposits.<\/p>\n\t\t\t\t\t\t\t\t<\/div>\r\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t

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\nIn Indonesia, bank ATM cards double as debit cards, and digital payment methods like GoPay, OVO, and ShopeePay\u2014offering cashback and point perks\u2014have become widespread. Personally, I rarely use cash in daily life anymore. If all corporate transactions also become cashless, linked to bank accounts with automatic journal entries and system-bank reconciliation checks becoming standard, accounting tasks would be fully automated, paving the way for automation in other back-office functions like sales and purchasing.
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\nIn such a scenario, once departmental tasks are automated, the necessary knowledge shifts to understanding the company\u2019s overall operational mechanisms as an organization\u2014specifically, \u201cthe movement of goods, amounts, and cash,\u201d which I consider the essence of operations.<\/p>\n

Understanding Mechanisms Means Engaging Imagination<\/h2>\n

What bookkeeping teaches is the essence of double-entry bookkeeping: when journal entries are posted to the ledger and aggregated into trial balance amounts, separating them into balance sheet (B\/S) and profit and loss (P\/L) accounts results in matching differences on both sides. There\u2019s a significant gap in imagination between merely understanding how to read financial statements and grasping how the figures in those statements came to be\u2014imagining the movement of goods, amounts, and cash.
\nFor example, today I topped up ShopeePay with Rp.300,000, bought a light bulb at ACE using ShopeePay (earning points), ordered from KOI Cafe via GoFood and paid with GoPay using points for a discount, and purchased a Rp.500,000 PLN electricity token via BCA mobile banking.<\/p>\n

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    \n
  • Top-up ShopeePay via BCA Virtual Account
    \n(Debit) Prepaid-ShopeePay Rp.300,000\u3000\u3000\u3000\u3000\u3000\u3000<\/strong>(Credit) Bank BCA Rp.300,000<\/li>\n
  • Purchase light bulb at ACE, paid with ShopeePay
    \n(Debit) Miscellaneous Expense Rp.79,600\u3000\u3000\u3000\u3000\u3000\u3000<\/strong>(Credit) Prepaid-ShopeePay Rp.79,600<\/li>\n
  • Order from KOI Cafe via GoFood, paid with GoPay
    \n(Debit) Meal Expense Rp.29,000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000<\/strong>(Credit) Prepaid-GoPay Rp.18,000
    \n\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000<\/strong>(Credit) Miscellaneous Income-GoPay Points Rp.11,000<\/li>\n
  • Purchase PLN electricity token
    \n(Debit) Prepaid Expense-Utilities Rp.500,000\u3000\u3000\u3000\u3000\u3000\u3000\u3000<\/strong>(Credit) Bank BCA Rp.500,000<\/li>\n<\/ul>\n<\/div>\n<\/div>\n

    The points accumulated via ShopeePay today will eventually be used and recorded as miscellaneous income. While I feel I\u2019ve saved money at the point of payment, by month-end, when I check my BCA transaction history and GoPay\/ShopeePay balances without recalling what I bought, it\u2019s hard to imagine the connections between goods, amounts, and cash movements.
    \nYou can understand financial statement mechanics without studying bookkeeping, but studying it enables you to imagine on-site activities\u2014meaning you can envision the movement of goods, amounts, and cash, and thus the mechanisms of company management.
    \nThis is why, beyond English, accounting is often cited in discussions about \u201cwhat students should study,\u201d and recently programming too, for similar reasons. Even if you don\u2019t work in IT, in today\u2019s IT-driven world, knowing the mechanisms of programs controlling visible hardware (akin to systems engineering in the Information Processing Exam) lets you imagine how the world works.<\/p>\n

    Understanding Company Management Mechanisms Remains Necessary Even with Systemization<\/h2>\n

    Recently, a friend running an accounting firm in Jakarta told me they\u2019re starting bookkeeping classes for Indonesian accounting staff at Japanese companies. It made me realize Indonesia lacks accounting vocational schools like TAC or Ohara in Japan.<\/p>\n

    I heard that systemization at Japanese companies in Indonesia has lowered accounting staff\u2019s bookkeeping skills over the past five years\u2014similar to how Japanese university students struggle with touch-typing on PCs due to smartphone proliferation.<\/div>\n

    Accounting tasks, being easily standardized, are prime candidates for systemization among back-office functions. If the work centers on system input, staff with minimal bookkeeping knowledge can manage. As full automation advances, mere input operators may be the first to be cut.<\/p>\n

    With cashless payments advancing, automatic journal entries linked to bank accounts might become standard, making me wonder, \u201cWhat\u2019s left for accounting work?\u201d Hearing this today made me rethink how much operational knowledge is needed as systemization progresses.<\/div>\n

    In a fully automated world, companies won\u2019t need back-office operators. Only highly skilled individuals who can analyze system-generated data and propose business strategies will remain.
    \nFor these skilled individuals, understanding company management mechanisms is essential. In times like now\u2014when the WHO declares a pandemic and an economic crisis worse than the Lehman Shock looms\u2014those who can objectively view operations and management to offer precise survival strategies are invaluable.<\/p>\n

    Company Management Mechanisms Are the Movement of Goods, Amounts, and Cash<\/h2>\n

    A company\u2019s purpose is to conduct business and generate profit. In Indonesia, local subsidiaries remit funds to Japan HQ under names like royalties or sales commissions for investment recovery while contributing to group-wide profit as part of consolidated financials.
    \nTo achieve this, the Indonesian subsidiary procures goods from suppliers, employs staff for production (development for software, management for trading firms), and sells products to customers, generating monthly revenue ultimately recovered as cash (cash and deposits).
    \nThe cost of procured goods, shipping, and employee salaries for development, production, or management form the cost of goods sold (COGS), while salaries for salespeople and campaign costs are selling, general, and administrative (SG&A) expenses.<\/p>\n

    \n
    \n
      \n
    • Sales \u2013 COGS = Gross Profit (Margin)<\/li>\n
    • Gross Profit \u2013 SG&A = Operating Profit<\/li>\n<\/ul>\n<\/div>\n<\/div>\n

      To clarify the costs incurred before selling products and earning profit, you must distinctly separate COGS (Cost of Goods Sold) for the products themselves and SG&A (Selling, General and Administrative expenses) for sales efforts.
      \nWhile monthly SG&A expenses are always period costs incurred that month, the goods in that month\u2019s COGS aren\u2019t necessarily procured that month but are those shipped (or consumed) that month.
      \nMoreover, concepts like procurement, production (development), and sales are recorded under accrual accounting as revenues and expenses when they occur. To monitor cash flow\u2014the primary concern in real-world company management\u2014you must convert these amounts to a cash basis, viewing income and expenditure movements.<\/p>\n

      Examples of Understanding Real Events Based on Basic Knowledge<\/h2>\n

      Here are examples from actual customer conversations in Indonesia where understanding company management mechanisms was key to meaningful dialogue:<\/p>\n

      (From a conversation with a steel trading firm expat)<\/p>\n
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        \n
      • HQ told me to calculate how much sales we need over the next three months starting this month to cover office rent and employee salaries and keep the company running.<\/li>\n<\/ul>\n<\/div>\n<\/div>\n

        For general retail or restaurants, you subtract procurement costs (variable costs) from sales to get gross profit (marginal profit), first covering fixed costs to break even, then building profit\u2014an intuitive basic business model.<\/p>\n

        (From a conversation with an OA equipment trading firm president)<\/p>\n
        \n
          \n
        • I hate borrowing from the bank to pay fixed costs, but with low cash inflows, I can\u2019t pay this month\u2019s salaries, so I\u2019m off to negotiate with the bank.<\/li>\n<\/ul>\n<\/div>\n<\/div>\n

          Fixed costs should ideally be covered by gross profit, but despite large P\/L profits, low cash inflows forced this president to call a Japanese bank loan officer to cover salaries\u2014a desperate move.
          \nP\/L transactions are recorded under accrual principles as expenses and revenues, so to see cash inflows, you must convert P\/L to a cash basis, calculating how much cash operating activities generated.<\/p>\n

          (From a conversation with a precision parts manufacturer president)<\/p>\n
          \n
            \n
          • Last month\u2019s inventory overstatement inflated P\/L profits significantly. This month\u2019s accurate count flipped it to a huge loss, leaving the president pale.<\/li>\n<\/ul>\n<\/div>\n<\/div>\n

            Unlike trading firms focusing on covering fixed costs with gross profit, manufacturers with diverse fixed costs emphasize COGS (variable costs plus fixed costs) and SG&A for sales.
            \nLast month, (beginning material inventory + purchases \u2013 overstated ending inventory = understated COGS) led to (sales \u2013 understated COGS = overstated profit), a brief joy. This month, (overstated beginning inventory + purchases \u2013 ending inventory = overstated COGS) turned the P\/L red, prompting an angry call\u2014not a system issue, but an operational overstatement error.<\/p>\n

            (From a conversation with an electrical parts manufacturer president)<\/p>\n
            \n
              \n
            • We posted depreciation for a machine halted this month to WIP, but an external audit flagged no WIP inventory in the warehouse, so we transferred it to SG&A outside manufacturing costs.<\/li>\n<\/ul>\n<\/div>\n<\/div>\n

              Manufacturing costs occur only in production months, but depreciation, a fixed cost, occurs regardless. Thus, (beginning WIP + manufacturing costs \u2013 ending WIP = manufacturing costs) showed an amount without corresponding goods movement.
              \nSystems automatically record transactions under accrual principles, but discrepancies with on-site goods movement are common, requiring humans to analyze causes and understand cost generation processes.<\/p>\n

              Knowledge to Search Online vs. Knowledge to Retain in Memory<\/h2>\n

              In an era where smartphones let you search for any information, why memorize company management mechanisms? It\u2019s necessary for creative discussions based on real events, as shown above.
              \nThis parallels the debate: \u201cIf real-time translators exist, is English study unnecessary?\u201d While a translator handles reading and writing, ideas born within the Japanese-to-English conversion framework are limited, and risks of miscommunication from differing thought patterns persist.
              \nThe movement of goods, amounts, and cash\u2014the basics of company management\u2014is the essence of operational knowledge. Unlike fragmented facts, it\u2019s a source of new ideas for problem-solving. Rather than memorizing searchable facts, understanding and organizing essential knowledge systematically in your mind remains vital even in a systemized future.<\/p>\n","protected":false},"excerpt":{"rendered":"

              Regarding the concern, \u201cDoes advancing IT eliminate the need to spend time understanding the essence of operations?\u201d I would answer that understanding operational mechanisms is beneficial because it enables one to imagine how the world works. If you understand bookkeeping, you can envision the movement of goods, amounts, and cash, as well as the mechanisms of company management.<\/p>\n","protected":false},"author":2,"featured_media":81307,"parent":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[683],"tags":[],"class_list":["post-94137","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-indonesia-accounting-tax-rule"],"_links":{"self":[{"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/posts\/94137","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/comments?post=94137"}],"version-history":[{"count":0,"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/posts\/94137\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/media\/81307"}],"wp:attachment":[{"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/media?parent=94137"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/categories?post=94137"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/tags?post=94137"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}