There was a time when business accounting departments relied on human data entry. An accounting team would perform the repetitive tasks of reading receipts and invoices and then manually adding credits and debits to the company’s financial records. These manual accounting processes cost considerable time and money, while exposing the accounting department to potential human error.
Thanks to computerized accounting software, modern accounting operations work very differently. Accounting professionals still play a key role, but manual data entry has given way to automated accounting systems that process most transactions.
Here’s an overview of accounting automation and how you can use an automated accounting system in your business.
What is accounting automation?
Accounting automation is the use of technology and software to streamline and simplify accounting tasks. It leverages tools like accounting automation software, artificial intelligence (AI), machine learning, and robotic process automation (RPA) to automate repetitive and time-consuming accounting activities. Automating transactional accounting tasks minimizes manual effort while increasing efficiency and data accuracy throughout the accounting industry.
Benefits of accounting automation
- Efficient time management
- Data accuracy
- Real-time insights
- Enhanced compliance and reduced risk
- Cost savings
Businesses can reap many benefits from accounting in automation. Among other things, an automated accounting process can save time, help generate precise financial data, and save money compared to traditional accounting methods. Here are specific ways that automated accounting systems benefit businesses large and small:
Efficient time management
Automation reduces the need for manual data entry and repetitive tasks. This lets finance teams focus on more complex, strategic tasks and professional development, increasing productivity and operational efficiency.
Automating accounting minimizes human error by passing tasks like data entry and calculation to automated accounting software. Using software to replace manual processes reduces the likelihood of accounting errors while helping your finance team generate more accurate financial records.
Automated accounting systems provide real-time access to financial data and insights across a business—from invoices in accounts payable and accounts receivable to balances in bank accounts. With current accounting information readily available, businesses can adapt quickly to changing circumstances, identify trends, and adjust strategies accordingly.
Enhanced compliance and reduced risk
Automated accounting workflows can help you comply with regulatory requirements and your business’s internal policies. By setting up accounting process automation controls within the software, you can enforce adherence to financial regulations and produce timely, accurate financial statements. Automation also provides an audit trail, facilitating more accurate audits.
Most accounting automation involvescloud-based software, and such programs will require an initial investment. However, the long-term cost savings can be substantial. With reduced manual labor, fewer errors, and improved efficiency, businesses can save on labor costs and potentially see higher profit margins.
Additionally, accounting software solutions can easily scale with business growth, handling increased transaction volumes without requiring a proportional increase in staffing.
Accounting tasks that can be automated
- Data entry
- Invoice processing
- Expense management
- Financial reporting
- Compliance and auditing
Businesses can use an automated accounting solution to replace manual accountingtasks like filing receipts and reconciling bank statements. Here are some ways you can replace your current accounting processes with automation:
You can automate accounting processes related to financial data entry. This includes inputting invoices, receipts, and bank statements into accounting systems. Advanced accounting software can upload this data into multiple systems—like an internal bookkeeping ledger and a separate ledger you use to generate public financial reports—simultaneously.
Most software can categorize transactions, reconcile accounts, and generate financial reports automatically, reducing the need for manual bookkeeping.
Systems can scan, interpret, and process invoices, matching them with purchase orders and payment receipts. Your accounts payable department can use this software to pay vendors without manual intervention.
Automation tools can track and manage employee expenses, ensuring compliance with company policies and automatically integrating data into accounting systems. Automated expense management software can also reimburse employees for their out-of-pocket expenses with minimal human intervention.
Whether you’re reporting financial data to the government or your shareholders, you can use automated accounting services to generate financial statements, balance sheets, and other financial reports without relying on large teams of workers or outside accounting firms.
Compliance and auditing
Automation helps you ensure you adhere to regulatory requirements in your industry and always supply accurate data. Businesses that automate accounting tasks may also find it easier to comply with audits (from the government or investors) because they should have a trove of accurate and easily accessible financial data.
How to start automating your accounting
- Assess your current accounting processes
- Set clear objectives
- Choose the right automated accounting software
- Migrate your data and integrate your software
- Train your team and implement automated accounting
Automating accounting requires setting goals, choosing an accounting solution, and training your team to use the software. Here’s a five-step sequence of how that can work:
1. Assess your current accounting processes
Identify repetitive tasks, manual data entry points, and areas prone to errors. Understanding your current workflow will help pinpoint where automation can be most beneficial. If you have an accountant on staff, ask what their pain points are and where they could use the most support.
2. Set clear objectives
Define your goals for automation. Perhaps you’re trying to offload transactional accounting tasks or optimize your accounts payable process to reduce errors and save time. Having clear objectives will guide your choices in selecting the right automation tools.
3. Choose the right automated accounting software
Research and select accounting software that aligns with your business needs and goals. Look for platforms that offer automation features like automatic invoice generation, bank reconciliation, expense tracking, and customizable reporting. Consider factors like scalability, user-friendliness, integration capabilities, customer support, and protection from data security breaches.
4. Migrate your data and integrate your software
Start your new automated accounting system with the most accurate financial information possible. Data integrity is crucial, so verify that the new software integrates seamlessly with existing systems and that data migration won’t compromise accuracy. You may need your software vendor to assist you in the migration process.
5. Train your team and implement automated accounting
Invest in proper training for your team to effectively use the new accounting software. Employees need to understand how automation impacts their roles, how to navigate the system, and how to troubleshoot potential issues. Some workers will find themselves doing tasks similar to what they’d done before; others will find themselves in brand-new accounting jobs. Implementation should be gradual to minimize disruption to daily operations.
Accounting automation FAQ
How does automated accounting work?
Automated accounting uses software and algorithms to streamline and execute financial tasks, reducing manual intervention and increasing accuracy. You can use automated accounting systems to rapidly fill out a business ledger, produce readily available financial reports, and manage payroll, among other things.
What is the best software available to automate accounting?
The best accounting software will vary based on the size of your business, your slate of vendors and clients, and your budget. Look for automated accounting software that offers robust features for your specific business needs, including seamless integration, customizable reporting, scalability, user-friendliness, and strong security measures.
Are there any risks to automating accounting?
Automating accounting can expose you to risks related to data security, potential implementation challenges, dependency on technology, and maintenance costs.