You may have heard of accounting automation and probably wondered if it could help your practice or not. Depending on whom you ask, automation is either a big threat or the next big thing in accounting.
In a nutshell, accounting automation is the sum of the automated processes required to eliminate human intervention from accounting tasks. However, "accounting automation" is most often used to refer to the partial automation of accounting tasks.
At its core, accounting automation streamlines accounting work. That way, employees can focus on valuable activities instead of routine manual tasks.
In this article, we'll show you how accounting automation can help your practice.
Is automation a threat to accounting professionals?
While automation replaces human tasks, accounting automation does not mean we get rid of an accountant in accounting.
From movies to books to politicians' speeches, the perceived threats and fears around automation are well known. But are accounting jobs particularly threatened by automation technology?
Historical data seems to say otherwise.
In the last two hundred years, we have seen the introduction of revolutionary accounting technology that operates along the same lines as automation. Examples include the invention of the adding machine in the 1880s and the release of Microsoft Excel in 1987.
Did these technologies make the work of accounting professionals easier or did they take their work away? Looking at the context, we believe that accounting automation is the next logical step toward more efficient accounting.
So why does automation trigger such an emotional response? Before rushing to conclusions, it would be good to review the notions of neo-Luddism and technological unemployment. Both can help understand the fear of being fired by machines.
Let's not forget one of the most important aspects of accounting: contextual interpretation. This is something humans excel at, and it's not a skill that can be easily automated, as it's non-repetitive.
In other words, professional accounting decisions will still require a human being instead. Repetitive tasks like moving data won't do it.
How to get started with accounting automation
Depending on factors such as your current application stack, business needs, and budget, there are three paths to automated accounting.
1. Native automation features in your accounting software
The accounting software you are using probably has some automation capabilities. Some of these features are convenient. However, they can be limited if you need to automate advanced workflows or have custom requirements.
2. Dedicated accounting automation solutions
There are many niche software solutions out there to automate various accounting tasks. While these tools are often effective, they can become cumbersome as they accumulate. Additionally, they may not integrate with the rest of your stack, creating workflow bottlenecks.
3. Large-scale automation platforms
By allowing you to connect hundreds of different applications, automation platforms offer more flexibility and firepower. You get the freedom to customize your processes according to your needs, and not the other way around. On the other hand, you will have to learn the tricks of working with a powerful automation tool.
In any case, your choice should fit the tasks you want to automate. Let's now look at some examples of accounting tasks that you can automate to optimize your business.
What accounting tasks can be automated?
An accountant's job is made up of various tasks and responsibilities, which can sometimes be overwhelming to manage. Automation can help with some of them and empower CPAs to transition into a more strategic role.
Let's review some of these tasks that you can automate today.
Accounts Payable and Receivable (AP/AR)
For those just getting familiar with accounting and bookkeeping, here's a quick reminder:
- Accounts Payable (AP) is what your business owes to vendors for anything purchased with credits. Some examples are bills, rent, etc.
- Accounts Receivable (AR) is money owed by customers who have had credit terms extended to purchase from you
Both have a direct impact on your business. Also, both are necessary to calculate your cash flow and prepare the cash flow statement.
AP mismanagement can result in expensive fees and a poor reputation with providers. On the other hand, companies that do not manage AR run the risk of not getting paid.
These tasks are ready for automation as they depend on clear conditions and do not require much interpretation or human involvement.
Examples of automation you can implement in AR/AP today include:
Debts to pay:
- Extracting data from invoices
- Storing that data in a database or spreadsheet
- Forwarding information to relevant stakeholders for approval.
- Payment processing
- Automatic sending of the initial invoice
- Sending late payment reminders to customers
- Collecting payments
- Depositing the money directly into your bank account
Imagine that a human resources manager or accountant is paid to manage payroll. This professional probably spends a lot of time sorting out employee hours, tax documents, and rates.
These are the kind of tasks that can be automated. Whether you're managing fixed-rate workers or hourly freelancers, automation can help:
- Synchronize with time tracking apps to calculate salaries
- Automatically handle payroll taxes and generate returns
- Transfer money directly to collaborators' bank accounts.
Here, automation can generate significant benefits for your business, with payroll accounting for 25% of accounting service offerings.
Bookkeeping, taxes, and monthly financial closing
Tax season as well as the monthly financial close are very stressful and often time-consuming moments for businesses. A recent survey showed that 90% of respondents were under pressure to close their monthly finances faster.
As everyone scrambles to get everything together, the tasks quickly pile up. Common problems include:
- Identify and correct errors
- Stay up to date with tax reductions
- Transfer data from one app to another
- Retrieve missing invoices and receipts
- Delete duplicate documents and items
- Identification of unknown payments
You can automate these tasks using native features in your automation software or platforms.
Cash flow reporting and forecasting
Accounting professionals are expected to act as advisors, provide insights and drive strategic business decisions. As a result, your ability to collect and present data convincingly is more important than ever.
Compiling large amounts of data into reports takes time, a resource most accounting teams cannot afford to waste. However, since the data is often available in accounting systems, you can easily set up automated workflows to retrieve it.
Modern accounting software also provides reporting features to identify trends, block challenges, and even forecast results.
What accountants and technologists think about automation
We've covered the most important accounting automation features and some of the tasks you can start tackling today. However, what do accountants and business owners think?
- 80% of executives believe that AI will create a competitive advantage
- 49% of accountants want to automate number processing and data entry.
An ACCA study identified automation among the top drivers of change in the accounting profession. Among those surveyed, 55% expect smart automated accounting systems to have the biggest impact than the external factor.
Ultimately, the value of automation comes down to its implementation and how it is used. To quote the founder of Microsoft:
"The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency."
- Bill Gates.
The transition to accounting automation can be understood as a natural step, similar to moving from paper to spreadsheets. In this sense, less qualified accounting roles may be at risk of being automated. However, it is important to remember that the value of accountants does not lie in their ability to calculate numbers.
Accounting professionals are needed to analyze, interpret, and gain insights from data to help drive better business decisions. For everything else, why not harness technology to work for businesses and our customers, and not the other way around? The choice is yours to make.