Accounting Automation: A Guide for 2022
Accounting Automation: In accounting, there used to be a notion that if your firm was an early adopter of technology, it was considered progressive. Veterans of accounting saw progressive firms like this as intrepid explorers who burnt through their budget as quickly as possible on the latest tools, only to produce lackluster results. Traditional accountants saw this effort as a waste of time. The old ways worked, so why fix something that wasn’t broken?
But this is no longer the case. The firms that have stuck by traditional accounting are falling behind those firms they once called progressive. Companies worldwide deal with daily changes affecting their business, including tax law changes and new safety and health requirements. And those firms that were once early adopters of technology like accounting automation can now adjust to these and future changes dynamically. In contrast, old-school firms must retrain staff to perform new manual processes to keep up.
The technological change started with small accounting firms that were agile enough to make quick changes. But larger firms soon took notice and started creating their own technology to remain relevant and compete with these upstarts. So for your accounting firm, it is no longer a question of whether you should implement technology but which technology fits your business and which processes you should target with automation.
This guide is here to help you make those decisions. In it, you will:
- Learn what accounting automation is.
- Find out what automation means to your accounting staff. (Will it replace them?)
- Discover the benefits of accounting automation.
- Learn key areas of accounting that are ready for automation.
What Is Accounting Automation?
Technology has changed every industry, and those it hasn’t changed, it has been made obsolete. The accounting profession is no different. Many of the day-to-day, repetitive processes in accounting could quickly be done by anyone as long as they were well-trained in that specific process. Yes, they would make some mistakes along the way, but even accounting professionals with years of experience make the occasional error.
Automated accounting turns these repeatable human processes into streamlined digital processes that remove human error. Deadlines are no longer an issue because the automated processes run on a schedule and get tasks done faster than any human could. What this means to your firm is no more:
- Manual data entry.
- Manual bank statement reconciliation.
- Manual supplier payments.
- Generating reports one-by-one in a spreadsheet application.
- Waiting on your clients to send you the necessary documents.
Accounting automation also frees up time so you can focus on other things, like advisory meetings with your clients.
Will Accounting Automation Replace Accountants?
It depends. Is your firm ready to adapt to the future of accounting?
Oxford University did a study in 2013, nine years ago, that found that 98% of a bookkeeper’s job would be automated and a 99% chance that a tax preparer’s work would be in the near future. Of the 702 occupations surveyed, the accounting profession was near the top of the list. McKinsey similarly reported that most of the work that accountants do could be automated.
But accounting firms are growing. In fact, according to Xero, the fastest-growing firms are those that adopted accounting automation. Those firms also spent more time on their advisory services. Not everything can be automated. Some of your services still need the human touch. The question is not if you should implement automation. Instead, it is which processes you should automate so your accounting team can focus on those services that clients consider irreplaceable.
Benefits of Accounting Automation
Before we get to how you can implement accounting automation in your firm, let’s look at some benefits automation can bring.
This benefit is the most obvious one. When you no longer have to enter data manually, you will save a lot of time. What can you and your team do with all the extra time that automation saves you?
Automated accounting works faster than a human accountant and costs a lot less. It only makes sense that automation will save your firm money.
The accounting industry relies on accurate data. Automation eliminates the human error that is always a part of manual data entry.
Manual data entry and report creation are slow. Automated processes are not only fast, but they can also happen in real time, so turnaround is near-instantaneous.
Better Customer Experience
What do your clients want from your firm? They want quick and accurate results, and if you provide advisory services, more time with your team one-on-one. Automation can help with all of that.
When your clients’ data is aggregated automatically, in real time, the reports and forecasting that result from that data also update in real time. That, in turn, enables your clients to make on-the-fly decisions based on insights they can trust.
Reporting and Data Accessibility
With cloud accounting software, you and your clients can access real-time data from anywhere in the world, at any time, using various devices, including mobile phones.
Key Areas to Target with Automation
If your firm currently doesn’t automate accounting processes, you have a lot of options. Here are some areas that are ripe for automation.
Every business is moving to the cloud, and so is accounting. Taking advantage of modern cloud accounting software instead of using older desktop software means that your clients’ data is accessible to you, your clients, and reporting software from anywhere in the world because it is available on the internet. Encryption and high-security standards make sure that data remains secure. Moving your clients’ general ledger to the cloud is the first step towards automation.
Expenses and Accounts Payable
Paper should no longer be part of your accounting process. Imagine if you never had to manually enter data from a mountain of receipts into accounting software. It is possible. Modern algorithms using OCR, natural language processing, and machine learning can automatically extract data from pictures of paper receipts and sync that data with your cloud accounting software.
If your accounting firm does payroll, you may already have a payroll module in the accounting software that makes the process easier. But is it really easy? You may still have to manually enter information into the software, transfer that information to your clients, and even manually cut checks for employees. With payroll automation, this can happen without all the human steps, with all the taxes deducted correctly and checks or direct deposits sent out automatically.
Before you close the books for the month, it’s usually time for the senior accountants of your firm to review your clients’ books to find errors. This can take a lot of time, and the process is prone to the same human errors that initially caused the issues. Month-end reviews can also be automated. Software can check the ledger and mark potential issues like duplicates, unreconciled items, and more.
At month-end or year-end, it is time to create schedules for deferred revenues, fixed assets, loans, and more to prepare financial statements. However, this does not have to be a manual process with the right software. It can automate schedule creation and post the adjusting journal entries directly to your cloud accounting software.
A/R collection depends on sending reminders for payment on overdue invoices and customizing those messages based on which clients those reminders are going out to. Both of these processes can be automated by the right accounting software and take them out of your team’s hands.
Is paying suppliers still a manual process for you or your clients? It doesn’t have to be. With AP automation, you can simplify accounts payable. From one location on the cloud, you can create purchase orders and make payments from one place. You can also automate those processes, ensuring that your clients always get the supplies they need when they need them and that their suppliers are satisfied with on-time payments.
If you still use spreadsheets to compile employee expense reports, you know how tedious and error-prone this process can be. This, too, can be automated. Employees can scan and email receipts that will then be processed by OCR software and collected in a centralized cloud dashboard where they can be compiled into expense reports.
Banking and Credit Card Data
Reconciling bank and credit card data is a necessary but tedious task. Cloud accounting software can take it off your team’s plate by connecting to bank feeds, automatically importing the essential data, and reconciling it to streamline your accounting workflows.
Reconciling Uncategorized Transactions
It is easy to see how connecting your accounting software to bank feeds can automate a lot of the reconciliation process, but what about uncategorized transactions? Reconciling these transactions has never been efficient. But this, too, can be automated. The right accounting automation software can collect all of these uncategorized transactions in a dashboard and send the link to your client so that you don’t have to go through the back and forth.
Forecasting Cash Flow
Yes, you can do this with spreadsheets. But do you really want to? Cloud accounting software can automatically provide your clients with short- or long-term cash flow forecasts that update in real-time.
I know what you are thinking. If you automate advisory services, what else do you have left to do? Isn’t automation supposed to give you time to provide advisory services? Advisory still requires the human touch. That is a given. But you can automate the reporting and data visualizations required to provide insights that will help your clients’ businesses grow and make you a trusted partner in their venture. You will also be sure that all your reports are up-to-date and accurate for your next advisory meeting.
To construct a financial model, you need to have previous financial information, a breakdown of employee salaries, and data on upcoming sales pipelines. Collecting this data manually can be a tedious and time-consuming process. By using the integrations available in cloud accounting software, you can make building models much more efficient. Cloud accounting software can connect to ADP, gusto, Stripe, Salesforce, NetSuite, and more, making manual data collection a thing of the past.
To many people, machine learning seems close to magic. Others think it will eventually take over the world and enslave humanity. But at its core, all machine learning does well is process large volumes of data and recognize patterns and anomalies. But it does it fast and accurately, and it can make an auditor’s job much more efficient by finding errors and potential risks in the books that even years of experience may not help them spot.
Automation can also help accountants lighten their workload during the busiest season of the year. Predictive tax software can scan court cases and tax laws to automate the tax planning process and give you and your clients a head-start on tax season.
Automating the accounting processes of your firm is no longer progressive but necessary to remain competitive in an industry that is quickly becoming digitized. The aim is not to replace accountants but to give them a tool that will remove the manual drudgery from the job and free up their time to focus on services that provide more value to their clients, like advisory.
PathQuest SCALE, our automated accounting solution, will help you take this next step. It connects to all your clients’ financial data and updates in real time in one centralized location. SCALE integrates with Xero, Intact, QuickBooks, and other platforms, so the data is there when you need it.
Leverage the automation processes and the dedicated accounting with SCALE to save time and use that time to provide services that provide more value to your clients, like advisory services. SCALE comes with PathQuest BI and PathQuest Reporting, our accounting business intelligence software suite, which will give you the tools you need to provide financial performance analytics and custom accounting dashboards to your clients that are always up-to-date and accurate.
Ready to see everything PathQuest SCALE can do for your firm? Book a demo today!