Accounting Automation

Accounting automation statistics show that a whopping 80% of executives believe that accounting automation will create a competitive advantage for their business. Then, 49% of accountants want to automate repetitive tasks such as number processing and data entry. But will automation drive layoffs, and will the resulting negatively affect the accounting industry in general? What is the accounting process automation to begin with? Read on to find the answers to all these questions and more. 

What is Accounting Automation?

As the name suggests, this is the process of automating the manual elements of the accountants’ work with the help of technology. Thanks to accounting software systems, accounting associates no longer need to spend hours building complex ledger files and entering countless rows of data in Excel. These systems have built-in key formulae that allow accountants to create reports in just a few clicks. Automation in accounting and finance removes the least efficient and most time-consuming tasks from accountants’ workload and streamlines their work. 

Will Accounting Automation Replace Accountants?

The impact of automation on accounting is huge! Technology can eliminate the need for human effort in repetitive tasks. The business world will still depend on accounting degree jobs for compliance with laws, strategy, advice, and decision-making. Entry-level positions involving routine work will likely be replaced with technology. This leaves room for accountants to focus on gaining new skills and developing professionally at a faster pace because they no longer need to worry about tedious, repetitive tasks that don’t drive progress. The accounting automation trends and the modernization of the industry will challenge new accountants to focus on gaining deeper expertise.

Historically, the accounting industry has relied on technology since the 1880s with the invention of the adding machine. With the introduction of the Excel program in 1987, the accounting field has once again reinvented itself. Even with these innovations, the demand for accountants, accounting specialists, and other specialized roles has remained high over the years. The automation of accounting is just the next logical step in the evolution of accounting.

Benefits of Accounting Automation

Automated accounting services can positively affect your business in many ways. Here are just some of the accounting automation benefits:

Saves Time & Increases Productivity

Traditional accounting is eating up valuable resources. Accounting automation software, on the other hand, is a huge time saver for every organization as it eliminates manual data entry from every step of the accounting cycle. It instantly takes care of routine bookkeeping and accounting tasks that would otherwise consume hours to get done. It allows accountants to focus on more critical tasks and boosts their productivity. 

Accountants can enter credit, debit, and other financial details and leave it to the accounting automation software to process the information automatically and organize it with the existing records in the system. These systems can generate well-structured, accurate reports for further analysis. 

Reduces Errors

According to accounting fraud statistics, human error and false reporting are among the biggest downfalls of traditional accounting. Accountants can spend hours and sometimes days to detect and fix these mistakes. Although errors can happen in the robotic accounting automation process, they are much less frequent. Accounting software performs automatic updates, ensuring that all data is accurate and up to date.

Increases Security

Accounting automation relies on encryption technology and other security systems that provide maximum data protection. It also gives organizations more control over who has access to the records. Thanks to the automation of accounting, they can give different levels of access to financial data to different employees and protect their documents from cyberattacks.

Improves Cash Flow Management

Cash flow management is detrimental to business success. Bad accounting practices can lead to a cash flow crisis which could affect the livelihood of an organization. By using sophisticated software, owners can easily see how much cash they are generating, which areas cause the most significant expenses, and when they can expect to receive money without having to go through all of their transactions manually. Accounting automation provides the financial status, cash flow forecasts, and other real-time analytics at a glance, allowing business owners to make informed decisions.

Provides Comprehensive Analytics

Automation in accounting provides next-level analytics for every part of the business. These systems can visualize the financial data for different purposes and users of accounting information.

The readily available reports bring immense value to owners, accounting analysts, and higher levels of management, allowing them to make educated business decisions.

Simplifies Tax Filing

Tax season is stressful for both individuals and business owners. Tax accounting automation eliminates the frenzy of manually tracking expenses, receipts, mileage, sales taxes, and calculating, which could lead to severe mistakes and consequences. Plus, automation can help you maximize deductions. The accounting software performs automatic updates when transactions are made, ensuring accuracy at all times. 

With accounting automation, CPAs can provide faster and more reliable tax and accounting services as they have all the records ready, and only need to verify them for accuracy instead of manually collecting and organizing the information. An automated accounting system can also help you figure out how much you should pay in taxes as soon as the transactions are recorded.

Drives Professional Development

Repetitive work can become dull and uninspiring for accountants. By automating accounting, organizations leave room for these professionals to develop new skills, and focus on more important things like managing finances, and developing strategies.

Offers Greater Flexibility

Accounting automation can satisfy the needs of different businesses. These technologies are typically adaptable to match many industries and sizes, offering a variety of templates, business ledgers, features, etc. Some products are specifically designed for certain industries. For instance, landlords and property managers can get rental property accounting software with built-in features for rent collection maintenance, etc. 

Provides More Storage and Better Organization

Automated accounting systems allow businesses to store their data conveniently and indefinitely. Once the information enters the database, the software takes care of the things that would otherwise take accountants’ the vast majority of their time. Older accountants know the agony of having to go to the next room or another building to retrieve or review a document. With the automation of the accounting process, the right paper is just a few clicks away. These systems also allow accountants to categorize and name documents for better organization. 

Documents in physical storage can quickly end in the wrong file or even get lost. With automatic backups, those scenarios are a thing of the past. The storage and organization available through accounting software gives businesses a chance to go beyond their capabilities without creating more clutter in their office. 

Disadvantages of Automation in Accounting

As with everything, there are certain downfalls of the accounting automation process:

Technical Issues

The biggest accounting automation risk is technical issues. It could be a temporary glitch in the software or something as common as an unstable internet connection. That said, the best accounting automation software providers won’t leave you alone in the technical jungle. They typically offer resources like best practices for using your software, FAQs, solutions to common problems, live customer support, etc. 

Training Time

Whether you’re a business owner who wants to cut costs and get a better grasp on the finances, or an accounting firm looking to modernize your practices, the automation of accounting process comes with a learning curve. You should be ready to invest time into getting everyone on board with the new software. Slower seasons of the year could be more convenient for implementing new technology. Almost every reputable accounting software company will offer training videos, live demos, and additional support to help you in the transition process. When you sum up the advantages and disadvantages of automating a manual accounting system, the benefits outweigh the initial learning hardships once you get things going.

Complex Software

Accounting automation is getting more momentum by the day, meaning that many tech companies are pushing out products that aren’t always of the best quality to get a piece of the cake. To make an informed decision, you should outline your needs and research what the best accounting software providers offer. If you have simple needs, why complicate your life with robust accounting automation tools? If you’re looking for a feature-rich product, ask for a software tour to test drive it before making the final decision. The good news is that the top companies focus heavily on improving the user-friendliness of their systems. Plus, they offer different plans to satisfy a variety of business needs.

How to Use Accounting Automation

You can automate more areas of your business than you might be aware of. Some accounting automation examples include: 

Bookkeeping

Automating the bookkeeping process means no more: 

• Manual data entry
• Creating financial reports into a spreadsheet
• Collecting documents from clients
• Manually reconciling bank statements with financial records 
• And countless other repetitive tasks.

If you automate accounting, the system will take care of these tasks in a fraction of the time needed to complete them manually. It will skyrocket your team’s productivity and efficiency.

Accounts Payable and Receivable

Proper accounts payable and accounts receivable management is vital to the business cash flow and overall success. If you have a pile of invoices sitting on your desk, chances are you are losing early payment discounts and risking not getting your cash on time. Paying your suppliers one by one is another time-consuming task that accounting automation turns into a breeze. Late processing of accounts receivable can hurt your cash flow. Automation in accounting can streamline the entire payment process for you, from extracting data from invoices and entering it in the database, to forwarding the invoices for approval to stakeholders and completing them. 

Regarding the accounts receivable, the software can automatically send the invoices for you, along with late payment reminders to clients who haven’t paid on time, collect payments, and deposit the money directly into your bank account.

Expense Reports

Completing expense reports manually can be a daunting task. Accounting software can help you fully automate the process and minimize errors instead of entering the data in spreadsheets.

Payroll

Traditional payroll accounting involves an HR professional or dedicated manager to track employees’ hours, calculate rates, and prepare their tax documents. Some organizations outsource this service to accounting firms. Whether you’re dealing with hourly, fixed-rate, or freelancer contracts, accounting software can significantly simplify the payroll process for your organization. Some automation opportunities include synchronizing with the time tracking apps and automatic calculation of salaries, payroll tax and return processing, and direct money transfers to employees and collaborators. 

Taxes & Monthly Financial Closing

Nearly 100% of accountants are stressed at work, and the tax season and the monthly financial close are among the most significant contributors to work-related stress for them. During these periods including the closing month of the accounting year, accountants must detect and correct errors, keep up with tax deductions, locate missing invoices and receipts, delete duplicate items, transfer data from one place to another, and do other repetitive tasks that could easily be automated.

Cashflow Management

Sophisticated accounting automation systems eliminate the struggle of collecting and translating large amounts of data into reports. Instead, accountants can save hours by setting up automated workflows. Accounting and finance automation can also provide error-free, real-time reports that help accountants identify trends and potential issues, address challenges, forecast results, etc. 

Documentation Audits

Traditional audit of documentation has many downfalls. For instance, an auditor can request to see records from the previous year. If your organization hands over these records, you have no control over who can see them, which is a significant risk for documents with confidential information. A secure, automated system allows you to know precisely who has seen your personal information by authorizing access to only a few people in charge of your audits. 

Procurement

Automating the complex procurement process can save many business owners from headaches and leave room for them to build stronger relationships with suppliers. This process involves tasks like requesting quotation files, document approval, and inspection sheets, preparing shipment receipts, supplier data, freight bills, and invoices, forecasting regulatory sheets, preparing product research documents, etc. All these tasks could be simplified with accounting automation.

Qualities and Features to Look For in an Accounting Software

Your business needs will determine what to look for in accounting software, but typically the best options on the market will check all or some of these boxes:

• User-friendly, intuitive interface
• Robust features (auto-sorting sales, expenses, and sales tax, invoice processing, and payment processing, among others)
• Integration with other tools
• Cloud access
• Business intelligence capabilities
• Insightful reports
• Cash flow management
• Inventory tracking
• Multi-user access
• Time-tracking
• Mobile app
• Various templates
• Advanced API
• Scalability.

Additionally, you can choose an accounting software based on your industry. For instance, if you are selling things online, ecommerce accounting software with specific features that support your digital retail operations will be the best fit.

Accounting Automation FAQs

What is automation in accounting?

Automation in accounting is simply replacing repetitive data-entry tasks with software. It could be an accounting firm automation or any business automating their data entry processes. 

Will accounting become automated?

Accounting statistics indicate that automation in the accounting industry is inevitable. The repetitive, data entry tasks of accounting will become automated with time. Accounting software is cost-effective, more secure, and provides greater accuracy while saving time. That said, there will always be parts of accounting that will require contextual reasoning. 

Will automation replace accountants?

The automation in accounting firms will replace entry-level positions like accounting technician that cover routine tasks, typically data entry. The world of business, on the other hand, will always need expert-level accountants for strategy and advice. 

What accounting functions can be automated?

Some of the accounting functions that can be automated include:

• Bookkeeping
• Payroll management
• Expense management
• Bank reconciliation
• Accounts payable and accounts receivable
• Tax preparation
• Financial reports
• Cashflow reporting and forecasting
• Procurement.

Are accountants at risk of automation?

Accountants are not at risk of accounting automation but entry-level positions like bookkeepers, accounting clerks, and accounting assistants will likely get affected. The demand for accountants with various degrees in accounting will remain stable as the economy progresses. Businesses can always use professional advice, results-driven strategies, and expert knowledge to manage crises, among other things.