The 10 Biggest Challenges of Manual Accounting and How Automation Can Help
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How does your financial management firm handle its accounting and reporting tasks? Managing funds and reporting financial data effectively are among the top responsibilities of the accounting and bookkeeping businesses. However, multiple companies struggle to do so for several reasons, including manual processes, limited bandwidth, or a lack of capabilities. Inefficient and disorganised financial data makes it harder to get a clear picture of customer’s financials, negatively impacting taxes, budgeting, and accounting.
In this blog post, we will dive deeper into the biggest challenges of manual accounting and how automated accounting helps overcome them.
Challenge 1: Prone to Human Error
One of the common shortcomings of traditional accounting is its susceptibility to human error. From basic mathematical mistakes to complex errors like misclassifying transactions, there are a lot of things that need to be corrected. When it comes to managing your financial tasks, even a minor mistake can have significant repercussions. Nobody certainly wants inaccurate financial reports due to mistakes which are avoidable.
Challenge 2: Time-consuming
Another challenge that manual accounting comes with is that it is time-consuming. From entering data to reconciling accounts, the conventional process takes up your team’s time – time that could be used on business growth-oriented tasks. Spending hours each week on financial tasks removes the team’s ability to do other demanding projects.
Challenge 3: Lack of Real-time Insights
One of the biggest problems of traditional accounting is that it does not offer real-time insights into the business finances. Relying on manual reports means you can only get a picture of your finances at some specific point. This makes it challenging to keep up with the latest trends or spot any issues early on to take the required action to keep your firm on track. Not only this, but it also limits your team’s decision-making ability because you do not have access to the latest information.
Challenge 4: Difficulty Scaling
With the growth of your business, the amount of data that needs to be tracked and managed also grows. There comes a point when performing accounting tasks manually becomes impractical, and they need to be more scalable. As your staff increases in number and your transactions multiply, it becomes challenging to fulfil the demand with manual methods. The only best option is automating your accounting processes to support your firm’s growth.
Challenge 5: High Costs
Many businesses still use outdated manual operations because they believe they can keep their expenses down by not switching to automated accounting. However, the fact is traditional accounting is more costly than they might assume. Consider the expenses associated with hardware and training and the opportunity costs of the team allocating their time to accounting tasks instead of other responsibilities. Thus, it becomes evident that there are more cost-effective options than a traditional accounting method. Furthermore, when mistakes and inefficiencies arise, they also cause long-term costs to your business.
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Challenge 6: Difficult to Track Changes
With manual accounting, it becomes challenging to monitor changes. If there’s some problem and the team needs to go back and check the previous transaction, it can be time-consuming. This is problematic, especially when the accountants need to determine the reason for that error. It is challenging to do so manually, but using automated accounting solutions, all changes are easily tracked to check out who made them.
Challenge 7: Missed Opportunities
Using outdated manual accounting processes means your team may miss some golden opportunities for available discounts, tax deductions and many other perks. As your business’s accounting system is not automated, it is easy to miss potential deductions or fail to avail of early payment discounts. As a result, you end up costing your firm a handsome amount of money in the future.
Challenge 8: Inaccurate and Lost data
One of the significant problems with conventional accounting is that it may lead to inaccurate and lost data. If the team enters data manually, there’s a high chance of errors. Also, if the staff uses paper documents, there’s a greater probability of being lost or damaged. Thus, when your financial data is inaccurate or is lost, it badly impacts your accounting system and makes it challenging to make good financial decisions.
Challenge 9: Security Risks
Conventional accounting comes with its own security risks. Keeping paper records means there’s a greater chance of being lost. This is alarming in case your staff handles sensitive data like Social Security Number (SSN) or credit card numbers. Also, if your firm’s automated accounting software isn’t password-protected, anyone accessing your computer could exploit it for illicit intentions. This will result in a data breach, costing your business a heavy penalty and damaging its reputation in the market.
Challenge 10: Limited Reporting Capabilities
Another big issue with traditional accounting is its limited reporting capabilities. Whilst manually creating reports, the accountants can only add the information they have on hand. This makes it tough to fully understand finances and decide on resource allocation. However, automated accounting systems give your team access to a huge amount of data and facilitate generating custom reports to help make better business decisions.
Automate Accounting with RecordMe
In today’s age of widespread digitisation, manual accounting is not viable. If you are still using conventional accounting methods, it’s high time to switch to an automated solution. This is where RecordMe, an AI-powered financial bot, comes in. Our automated accounting solution overcomes the challenges of manual accounting, revolutionises your financial processes and ensures your business’s success in this digital age.
Here’s why you should delegate RecordMe your accounting responsibilities :
- Ensures accurate data entry by minimising the risk of human error like miscalculations or misclassification of transactions.
- Speeds up reconciliation and data entry processes, saving your team valuable time to concentrate on growth-oriented tasks.
- Offers data insights in real-time, facilitating you to make informed decisions quickly instead of depending on static, manual reports.
- Scales seamlessly to handle piles of data, eliminating the issues associated with conventional accounting.
- Reduces expenses by eliminating the need for costly hardware and excessive labour hours. We offer a budget-friendly solution to manual accounting.
- Monitors any changes in your financial data and maintains data integrity.
- Ensures you take advantage of discounts or tax deductions by accurately recording and monitoring financial data.
- Minimises the probability of data inaccuracies and financial decision-making challenges by reducing traditional data entry.
- Mitigates the risk of data breaches associated with conventional record-keeping and enhances data security with encryption and access controls.
- Empowers you with greater reporting capabilities, providing access to a wide range of data for thorough and informed decision-making.
Whether you are seeking to scale up or expand your business, automation can be valuable for you to create efficiency, support growth, and add value to your firm. Still confused about how automation can help you thrive in this digital age? Contact us!