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A Comprehensive Guide to Accounting Automation for Businesses in 2023

A Comprehensive Guide to Accounting Automation for Businesses in 2023

22 Nov 2023 A Comprehensive Guide to Accounting Automation for Businesses in 2023

Business owners can utilise accounting automation as a great tool to get rid of manual financial issues. Moreover, by 2026, the global market for accounting software will be projected at $12 billion, growing at a CAGR of 8.6% every year.

Many accounting professionals are excited about the possibility of a more simplified strategy for accounting principles. However, others worry that software technology may cause them to lose their employment. That ought not to be.

Accounting automation software can aid financial professionals in carrying out their duties more precisely and effectively, much like a trustworthy automated assistant. However, accountants will always have the vital responsibility of evaluating the data produced by the software.

Accounting Automation – A Quick Overview

An automated accounting system streamlines account reconciliation, financial data updates, and financial statement production. Automating financial operations does not mean it replaces human intervention. However, it only frees up time-consuming duties so the accounting staff can focus on higher-value work. Moreover, according to 65% of respondents, implementing automated processes will become essential for accounting experts in the next five years.

Recent technologies like Artificial Intelligence (AI) and Robotic Process Automation (RPA) have greatly improved accounting procedures. Moreover, AI-powered accounting solutions may soon monitor and store data. It frees accounting staff to focus on budgeting and investment planning by eliminating data entry and calculations.

Market Forecast of Accounting Automation

What are the Challenges of Manual Accounting?

Individuals running a company that uses traditional accounting methods are aware of how challenging this is for anyone involved. Errors can be expensive and cause a lot of issues for organisations. However, recent statistics show that manual accounting presents more than 14% error rates, which causes businesses to lose their customer trust ultimately.

There are undoubtedly drawbacks to manual bookkeeping and accounting that newly established business owners might need to be made aware of. Thus, traditional accounting:

1) Requires More Time

Business Owner should avoid the mistake of doing their accounting even when they are managing a small company. Users could be misled to believe that bookkeeping is simple if they engage in activities like budgeting and essential purchasing.

Still, there are a lot of other factors to take into account while managing a company’s finances. An accountant helps a business stay alive by, among other things, calculating tax reductions and storing receipts for future use. For this reason, traditional accounting requires a lot of time.

When sales begin to come in, it can become challenging to maintain a company’s accounts in addition to its daily operations. Moreover, when it comes time to set aside money for taxes, the owners will need clarification.

2) Subject to Mistakes

Errors are more likely to occur in manual bookkeeping processes. Changing statistics, mistakenly entering incorrect information into specific accounts, and recording data backward are a few of the most frequent errors. Moreover, manual accounting has more of these concerns, and there are no regular internal audits or reviews.

Finding and correcting these items can take several hours for accountants responsible for error detection. However, it can be far worse to have numerous Certified Public Accountants (CPAs) manually working on various general ledgers.

3) Contains Security Loopholes

There are more secure ways to protect critical business information than storing financial data in simple computer programs. However, cyberattacks target many small businesses annually, threatening clients, staff members, and confidential company data.

Similarly, physically filing paper papers may be less secure due to the possibility of document misplacing. It is also simpler to access an organiser containing vital client information than a computer that needs credentials and a password to access.

Every client assumes that their partner companies will protect the information they provide. A company’s credibility and customer base can take a severe hit if it isn’t careful with its customers’ personal information.

How Accounting Automation Can Help Businesses

Accounting automation uses a software solution that may easily take the job to address many of the frequent issues described above.

These are a few ways that businesses might profit from automating financial accounting today.

1) Avoid a Cash Flow Crisis

The primary issue that can lead any business to bankruptcy is mismanaging finances. In the end, incorrect accounting practices prevent a business from growing and developing.

Business owners can see a complete picture of their cash flow right away when specific accounting procedures are automated. Moreover, businesses experience 15% revenue when they adopt cloud accounting services. To find out their financial situation, they no longer have to go through every transaction carefully.

Additionally, owners can instantly understand how much they are making, where their spending is concentrated, and when they may expect their money by automating accounting tasks. When it comes to making decisions, business owners can benefit from this kind of visibility.

Importance of Accounting Automation Software

2) Saves Time

CPAs can quickly enter credit, debit, customer data, and other crucial financial details due to automation in accounting. Traditionally, to identify the reference, accountants have to consult several books and analyse the information within.

Software for accounting automation quickly processes data and connects it to all of the records already in the system. These applications upload the accurate dates of all connected data and provide relevant structural reports. It can even completely replace human data entry by automating the majority of transactions. Thus, in the future, there may be no need for manual data configuration. Instead, it can be automated.

3) Provides Cloud Access

Businesses that have adopted cloud-based software solutions already know the benefits of having instantaneous access to and sharing of documents. As a result, CPAs can be at a different workstation to complete transactions or analyse necessary documents promptly.

4) Make Systems Flexible

Good accounting automation software may frequently be tailored to meet the specific needs of companies. These apps include a variety of business ledger templates in addition to the conventional reference format. These characteristics give accounting automation systems exceptional flexibility across different sectors.

5) Provides Data Storage

Finance departments can now do more because of automated accounting software. Knowing where to find specific information is much more convenient when data entry, processing, and storage are accurate.

Once information is entered into a database, automation systems ensure that it is kept there forever. As a result, these systems carry out routine, automated backups to protect against losing essential company data.

6) Offers Enhanced Security

Advanced security features and encryption technology are employed in accounting automation. By providing the highest level of safety for business data and documents, these solutions help in preventing cyberattacks.

Business owners will have greater control over who in their company or back office has access to particular financial data. This feature lessens the possibility that unauthorised workers may access particular accounting records.

7) Ensure Fast Retrieval of Data

Keeping files in actual storage spaces with endless documents is a challenge that many accountants are familiar with. It’s inconvenient to look all over the place, possibly even in a different building, for a file that needs to be studied.

These days, practically any desired file can be found quite easily. With accounting automation software, particular information may be found almost instantaneously.

The purpose of automated file management software is to simplify the naming, classifying, and secure storage of ledgers and documents. These characteristics make it easy to locate critical corporate records.

8) Provides Comprehensive Analytics

Accounting automation offers improved security and the timely display of accurate financial data. Anyone in the organisation which requires a report can access it, which makes the process of reconciling data and audits easier. Moreover, this kind of software offers a more precise way to analyse predictability, variations, and trends. Thus, accountants can make faster, more informed business choices with access to financial reports.

9) Prepares Records for Tax Deductions

Company owners who are having difficulty keeping track of sales tax deductions are aware of the anxiety that comes with tax season. Rushing to keep track of costs and receipts can result in errors that could have detrimental effects.

Using automated accounting and bookkeeping services, this kind of chaos can be avoided. Every time a transaction is made, these systems update the records automatically.

Real-time accounting systems take care of the data entry, so accountants don’t have to worry about it. CPAs will just need to verify these details at a later time to make sure they are correct.

Once transactions are received, an automated bookkeeping system can calculate deductibles and inform business owners of tax preparation costs.

10) Provide Professional Development

With the proper tools, any job requiring a lot of repetitive, manual labour may be simplified. Automation has a significant advantage over the activities performed by a typical accountant.

An accountant must make this kind of adjustment to be more effective and productive. Moreover, it also offers a chance for personal growth. In addition, according to 58% of accounting experts, automation has greatly improved their working efficiency and overall productivity. 

As accounting software is limited in what it can accomplish, experienced accountants are required to oversee these systems and ensure their operation.

For CPAs, automation is a significant turning point. Through these programs, accountants can share their expertise, broaden their professional experience, and increase their overall importance within an organisation.

Accounting automation should remove the majority of the annoying and tedious aspects of accounting work when used correctly. In this scenario, they would have more time to plan strategies, handle bank accounts, and improve communication with coworkers.

Will Accounting Automation Replace CPAs?

Accounting professionals will continue to be necessary for firms to grow profitably and successfully in the future. 

Finance automation does not imply that positions in the accounts department will disappear. Instead, it updates the classic aspects of CPAs and associated professions to increase their level of proficiency.

Automation reduces accountants’ tiresome but crucial jobs of manually collecting and reconciling quantitative data. It reduces the amount of time needed to complete these tasks and lessens the likelihood of typical errors carried by human error.

With more time on their hands, CPAs will be able to focus on the many facets of financial management that demand their expertise. These include developing the company’s plans and budget, advising the CEO on money matters, and raising overall earnings.

The availability of modern accounting software does not relieve a company from using bookkeepers to understand, evaluate, and explain its financial operations.

Most people anticipate that machine learning and artificial intelligence will replace workers in various roles. This belief needs to be revised, particularly in the field of accounting.

Accounting automation software helps CPAs work more efficiently by enabling them to gather and analyse data more quickly and accurately. The company’s data analytics and reporting are enhanced in this circumstance, accelerating the process of making strategic financial decisions.

Important Areas Where Automation Technology is Implemented

How to Implement an Accounting Automation System

In the accounting sector, automation presents an excellent chance for businesses to take advantage of its long-term advantages. However, since many accountants use traditional accounting techniques, the transition can take time and effort.

These are the simplest places for business owners to start if they want to incorporate accounting automation into their present workflow.

  • Automating the Accounts Payable Process

When it comes to invoice management, big and small companies now differ significantly. This task’s efficiency impacts the productivity of the organisation as a whole.

Every invoice that the AP department receives must be approved right away. However, this manual method is complex. Paper bills may be lost or left on desks for weeks while they wait for approval.

Automated invoice processing helps account payable departments to quickly and swiftly streamline all financial tasks, including paying receipts or managing business ledger. Accountants can take quick action to resolve issues that arise since they are identified right away.

  • Audit Documentation

The conventional method of audit documentation has several drawbacks. An auditor might ask to view last year’s invoices, for example, and most business owners would provide them with a full year’s worth of documents.

Accounting records often include sensitive information. Therefore, organisations should refrain from giving them out. Any business owner would want to know who opened these records and when, just in case they are accessed.

Organisations should make using user-friendly technologies for audit documentation a top priority. Thus, Inadequate record-keeping should be optional in business.

  • Procurement

The process of translating business demands and placing orders for products that are necessary to run a business is known as procurement. It also necessitates that owners oversee their interactions with suppliers. This procedure involves a lot of paperwork, so organising it all digitally can make businesses run more smoothly and efficiently.

Accounting automation greatly simplifies several duties, including when:

  • Requesting approval documents, inspection sheets, and quotation files
  • Making shipment receipts, transportation bills, industrial records, invoice processing, supplier information, and other business-related documents
  • Identifying vendor data, product research papers, and regulatory sheets
  • Recording testing results, problem-resolution procedures, and inspection reports
  • Preparing predictions, agreements, and purchase orders

The above methods necessitate a large amount of paperwork and the implementation of numerous systems to guarantee accuracy. By automating these business procedures, organisations can reduce many paperwork requirements and let CPAs focus on other essential activities.

What are the Top Accounting Trends for Businesses to Look Out?

The top accounting trends that will revolutionize the financial sector are as follows:

  • Implementing Cloud-Based and AI Accounting Applications

The accounting and financial industries are rapidly adopting cloud computing and AI applications. Accounting automation has a promising and prosperous future due to AI and cloud-based software.

Moving to the cloud simplifies the process of giving customers visibility to their account information in real time. AI-enabled cloud finance helps the finance team make strategic choices faster by providing insights into vital company data. Automation can save time when entering and processing massive amounts of financial data that used to take days or weeks.

  • Implementation of Big Data and Analytics

The application of analytics on financial data has become increasingly significant overall. However, an IMA poll indicates that 67% of financial institutions have either already utilised big data or aim to do so.

Businesses may better understand their finances, streamline operations, and enhance management with the use of data analytics. Businesses can learn from big data analytics, forecast future events, and automate odd financial chores.

Big Data enhances the customer experience and enables businesses to offer more comprehensive offerings. Reports may now be produced with greater precision and speed than ever before due to the usage of big data. Data analytics offers various benefits and has enhanced accounting as a whole.

Top Accounting Automation Trends to Look Out
  • Outsourcing of Accounting

No one knows the challenges of managing a company’s finances like the finance team does. There is a chance of mistakes, and the procedure might become tedious at times. Accounting automation services that are outsourced might be a great help to businesses. 

A growing number of businesses are seeing the benefits of outsourcing as a means to serve their customers better and grow their businesses. Professional accounting, bookkeeping, management reporting, and controller services are all part of the accounting outsourcing package.

  • Adopting Blockchain

Many in the financial industry view blockchain technology as having revolutionary potential. As a result, the financial team is better able to concentrate on planning and assessment with a clear picture of all available assets and obligations.

Using blockchain technology, businesses can record transactions in a shared ledger, creating a decentralised and unchangeable accounting record system. This technology streamlines the process of keeping distinct records based on transaction receipts, which was previously a pain. It is impossible to change or delete any of the data because all the entries are shared and securely locked.

Digital assets may be safely recorded and stored on the blockchain, and financial transactions can be easily monitored. Experts agree that this technology is perfect for meeting the expanding demands of the financial sector.

  • Prioritising Data Security

Research indicates that over 60% of small firms fail within six months of being targeted by a data breach or cyberattack. Therefore, businesses of all sizes must find, disclose, and take action against any suspect network behavior.

Protecting critical information, which is a vital resource for the company, is one of the many important benefits of data protection. In addition, security implementation helps prevent accidental data loss. Protecting sensitive information also makes it harder for hackers to get their hands on it.

Data security must be implemented from the time it is created to combat and prevent cyberattacks. For many businesses, the threat of a cyberattack is real and growing. Thus, precautions can be taken to reduce risk and safeguard critical information.

How Does RecordMe Fit in the Puzzle?

The automated accounting platform, RecordMe, optimises business finances. Modern accounting automation can handle everything from invoice and billing creation to payment reimbursements while maintaining client connections. RecordMe loads data from Word Docs, PDFs, and photos into your accounting program. Thus, our effective, free of errors, automated accounting systems help organistions grow. 

Still, wondering how automation might boost your modern success? Talk with us!

Frequently Asked Questions (FAQs)

Q. What is AI in Accounting Automation?

Ans) The term “artificial intelligence” (AI) in accounting describes the application of NLP and machine learning techniques to automate several procedures within the accounting industry. Financial reporting, data analysis, auditing or compliance, and the identification of fraud were all part of this.

Q2) What are the Accounting Automation Benefits?

Ans) With accounting automation software, businesses can avoid costly mistakes, save time, and have easy access to all their key papers. It also makes month-end closure more efficient and improves cash flow management or cash visibility whilst contributing to higher data accuracy.

The following are the perks of accounting automation:

  • Prevent cash flow crisis
  • Offers enhanced security
  • Provide cloud access
  • Saves time
  • Prepare data for a tax deduction