What is Dematerialization?

Also known as DEMAT, dematerialization is a process that moves away from the use of physical documentation in order to maintain financial records. Instead, dematerialization makes use of electronic record keeping tools in order to keep track of all types of financial transactions. The range of documents that can be effectively managed with software applications include just about everything from basic accounting records to stock certificates.

One of the major advantages of this approach to electronic bookkeeping is that the need to physically store copies of balance sheets and other accounting documents no longer exists. Thanks to scanning technology, it is even possible to make electronic copies of the support documents that provide references for the line items in the electronic accounting records. Everything can be housed with ease on a hard drive or server. In order to guard against loss or corruption, backup files can be easily made and stored off-site.

Along with basic accounting records, dematerialization also makes it possible to do away with the need for physical stock certificates. The electronic copies of the stocks can be archived for easy retrieval. In the event that the stockholder needs copies of the stocks quickly, they can be accessed and transmitted by electronic methods, such as email or a protected FTP transmission.

Dematerialization also makes it possible for authorized individuals to work with the same documents at the same time. With physical bookkeeping methods, it is often difficult for two people to work on the books at one time. When the accounting process is totally electronic, several people can perform different functions at the same time. It is possible for a team to create new invoices, post payments received for past invoices, and prepare a wide range of reports all at the same time.

There is no doubt that the process of dematerialization can benefit users in several ways. Record keeping requires much less space, can be accessed with ease from remote locations, and allows multiple users to access the accounting books simultaneously. Currently, there are fee-based as well as free accounting and financial record software packages that can assist any company or organization to achieve a full status of dematerialization with ease. In the case of accounting software, there are also online products that allow an individual or a company to establish a set of virtual books. Securely loaded onto the servers for the product, authorized individuals can access and work with the records from any location with an active Internet connection.