Posted by Mary Milorrie Campos
Aug 29, 2024
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Tired of the old, slow-moving accounting processes? Accounting process automation comes to your rescue. Learn how to automate your company’s accounting processes so you can speed things up in your day-to-day operations.
Speed is a requisite in business, whether you’re making a decision, fulfilling orders, or processing your finances. But some tasks become too repetitive and time-consuming. Good thing, automation can help you complete these kinds of tasks accurately, efficiently, and quickly.
To give you more idea about accounting process automation, this article covers:
What is accounting process automation?
Accounting process automation is the practice of using technology to complete specific accounting tasks with little to no human involvement.
When you automate accounting tasks, you’re converting manual processes into automatic ones. A set of technologies — such as cloud accounting software and business intelligence tools — completes the task on your behalf.
For example, instead of manually calculating an employee’s gross income and tax deductions, you can simply input all the necessary information into an automated payroll software, and the latter will do the computation for you.
Read: Accounting Process Improvement: How to Reduce Inefficiencies
Benefits of accounting automation
Automation in accounting allows your company to manage, measure, and analyse business finances faster. This capability enables you to track in real-time the movement of your cash flow — letting you determine where you need to allocate more resources.
Finance and accounting teams can also achieve the following benefits when they automate manual accounting processes:
1. Reduced human error
Repetition and human error usually come in pairs, as revealed by this 2014 research article on manufacturing industry workers — an industry that’s susceptible to routinary work.
Repetition can cause workers to feel tired and indirectly cause them to lose their concentration while performing the same movements over a long period of time. In the end, this will most likely lead to the prevalence of human error.
— Jian Ai Yeow, Poh Kiat Ng, Khong Sin Tan, Tee Suan Chin and Wei Yin Lim, 2014. Effects of Stress, Repetition, Fatigue and Work Environment on Human Error in Manufacturing Industries. Journal of Applied Sciences, 14: 3464-3471.
In accounting, the accuracy and reliability of financial information are paramount to making informed company decisions and maintaining a smooth cash flow. If it’s still imbued with repetitive processes like manual data entry — as the above research suggests — human errors are prone to happen, no matter how detail-oriented an accountant is.
Automation aims to address this.
An automated accounting software solution has been programmed to perform a pre-determined set of commands. Following such logic, it evaluates if certain conditions meet the desired output to produce consistent and accurate results.
With the right implementation of automated processes, accounting departments can reduce human error and improve the accuracy of their financial statements.
2. Efficient accounting operations
Aside from addressing human errors, automation also resolves the time wasted on slow-moving processes.
Accounting automation software can perform multiple tasks at once — an ability that’s useful for processing large volumes of documents and financial transactions.
And because it operates automatically, it does not have to deal with the cognitive overload experienced by humans when multitasking or working non-stop. As a result, it can finish time-consuming tasks at a faster rate.
A string of positive outcomes ensues — increased time savings, faster access to financial data, and a more informed and timely decision-making process, to name a few.
3. Opportunity for professional development
With repetitive and time-consuming processes out of the equation, accounting professionals can refocus their energy and time on doing more complex and high-value work. To begin with, you can think of advisory, data analytics, financial modeling, and management.
These jobs require skills and expertise that cannot be replicated by AI and machine learning, such as critical thinking, leadership skills, and a technical understanding of how trends and regulatory changes can affect the business.
Of course, pursuing this track is still optional. However, it’s something that professional accountants must seriously consider, especially for those who work as crunchers.
“Crunchers who are early in their careers have the opportunity to retain an accounting job if they adapt. They have more room to acquire new skills and pivot,” writes S.J. Steindhart in The Trusted Professional.
Accounting tasks you can automate
Below are some of the accounting tasks you can start automating today:
- Invoice
- Payroll
- Reconciliation
- Payment alerts and reminders
- Bookkeeping
- Accounts payable and receivable
- Expense management
- Month-end close
- And other repetitive tasks
Aside from saving time, automating also minimizes errors caused by manual data entry.
How to automate accounting processes
Automation can streamline your accounting operations and thus, reduce inefficiencies.
However, not because you’re ready to invest in automation doesn’t mean that success is guaranteed.
You can use all the advanced automated accounting systems you can think of, but without the right people, processes, and tools, your efforts and investments can mean nothing.
How can you implement a successful accounting process automation initiative then? Here are some steps to consider.
1. Evaluate your existing processes
Knowing your accounting processes from the inside out is one of the best ways to start your automation journey. When you have a full grasp of your day-to-day tasks, it’ll be easier to tell how long each one takes and which tasks are ready for automation.
2. Identify tasks to automate
Each accounting task varies in complexity and importance. There are those that you can easily automate because of their repetitive and time-consuming nature, such as bookkeeping, payroll, and reconciliation.
Some tasks can also be assisted by AI but should still be handled and finalised by humans. These include reporting and interpretation of data, financial modeling, and advisory. And of course, some high-level responsibilities like management and negotiation remain to be a task that only humans can perform.
That's why when identifying tasks to automate, you must first assess how much human involvement they require.
3. Figure out the tasks to prioritise
Automating everything at once can be unsustainable and expensive. It can be also overwhelming for your team.
What you should do instead is to automate your processes one step at a time so everyone can keep up well.
To do this, start by organising each task according to its level of importance. Based on your list, which of the tasks are the most repetitive, time-consuming, and prone to error?
Prioritising these kinds of tasks can improve the productivity and efficiency of your accounting department. It also lets you pace yourself. Moreover, it’s the easier and more realistic way of tracking your progress and measuring the effectiveness of your automated processes.
4. Choose the right tools
Choose the right tools based on the following:
- tasks you plan to automate,
- features you need,
- your budget,
- your long-term needs, and
- possible integrations with other other applications you’re using.
In the UK, for instance, VAT-registered businesses that exceed a certain threshold must follow the Making Tax Digital (MTD) rules in submitting their VAT returns.
That’s why when selecting a cloud accounting software, you should also check if it’s MTD ready. Even if you don’t meet the required threshold yet, choosing software with a wide range of features will let you upgrade easily.
Read next: What is Business Intelligence and How Does it Work?
5. Move relevant data into your chosen software
To ensure a successful data migration, create a plan on the data you need to transfer and the old information you must archive.
You can also ask your software provider if they can assist you in migrating your data. Asking for the help of an accountant who has experience in using cloud accounting software can also guarantee you a smooth transition.
6. Setup your automated accounting workflow
Once your data is ready, you can now start automating your accounting processes. You can begin with these activities:
- Customising pre-build reports
- Linking your credit cards, bank accounts, and supplier accounts to make reconciliation easier and faster
- Integrating/Syncing relevant tools such as your CRM, billing and payment apps, and customer support software
However, before launching and using your automated workflow, you must test it first to minimise potential issues. You should also check it regularly to ensure that everything’s working properly.
7. Hire a reliable accountant
Another way to take accounting off your hands is by hiring a trusted accountant.
Armed with the right technology, an accountant with a wide knowledge of your industry and processes can manage your finances well. Through this, you can have more time to focus on the other income-generating activities of your business.
[Grab our free downloadable guide] The Rising Frontier: Harnessing the Power of Business Analytics
When to automate accounting tasks
You must consider automating your accounting tasks when you’re:
- spending most of your time on repetitive accounting tasks that don’t require a lot of human interaction and mental energy,
- having a tough time to keep up with deadlines,
- experiencing a high burnout rate,
- often making errors, and
- aiming to remain competitive in your respective industry.
However, you must also acknowledge the potential obstacles to automating manual tasks. Budgetary concerns, resistance to change, and a lack of internal awareness and proficiency in using automated accounting software can hold off your accounting process automation efforts.
By considering the steps we discussed above, it’ll be easier to follow through and modernise your accounting department’s processes.
Back-office accounting support for modern finance teams
Automating your accounting processes is an ongoing collective effort. Along with the continuous technological developments must come your willingness to adapt and innovate. It’s the only way to remain competitive, relevant, and at par with industry standards.
And you don’t have to do everything alone.
If you need assistance in your accounting automation efforts, our professional accountants are always ready to help.
Talk to our team today to discover if our accounting outsourcing solutions are the right fit for your organisation.
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Download our whitepaper, D&V Philippines: Your Talent Sourcing Partner, to learn more about what we do, how we develop our people, and the culture we take pride in.
This article was first posted on 14 April 2021 and updated on 29 August 2024.
Edited and updated by: Mary Milorrie Campos
