Accounting automation can be a powerful tool for business owners to use when eliminating manual accounting issues.
However, while many accounting professionals welcome the prospect of a more streamlined approach to accounting principles, there are those who fear that they may lose their jobs to this software technology. That should not be.
Similar to a dependable automated assistant, the accounting automation software can definitely help financial professionals do their tasks more accurately and efficiently. Still, the crucial task of analyzing and interpreting data generated by the software will always belong to the accountants.
Challenges of Manual Accounting
People operating a business that follows conventional and manual accounting techniques know how difficult this situation is for everyone involved. The cost and possibility of mistakes can lead to numerous problems for businesses.
Undoubtedly, manual accounting has its own disadvantages that new business owners may not be even aware of.
Traditional Accounting Takes Up So Much Time
Despite running a small business, owners should not make the mistake of performing their accounting duties on their own. Activities such as setting a budget and purchasing the necessities may trick people into thinking that bookkeeping is easy to do early on.
However, there are many more aspects to consider when handling the finances of a business. Calculating tax reductions and keeping receipts for future reference are just a few of the things an accountant does to help keep a business afloat. That is why traditional accounting takes up so much time.
Attempting to manage the accounts of a business, while also running its day-to-day operations, can be overwhelming once the sales start coming in. Owners will be even more swamped once the time to allocate for taxes comes around.
Traditional Accounting Is Subject to Errors
In manual accounting processes, errors can happen frequently. Some of the most common mistakes include accidentally entering the wrong information into specific accounts, transposing figures, or recording data backward.
Although these issues can also happen in modern accounting systems, they occur more often in manual accounting, and there are no automated systems in place to perform internal checks and balances.
Accountants that are tasked to identify errors can spend several hours locating and fixing these entries. Having multiple CPAs working manually on several general ledgers can even be worse.
There Is a Lack of Security in Traditional Accounting
Saving financial records in basic computer applications is not the safest approach to securing vital company data. Each year, many small businesses become a target for cyberattacks, placing customers, employees, and sensitive business information at risk.
Likewise, filing paper documents manually can even be less secure since it can be easy to misplace documents. A cabinet filled with crucial customer details is also easier to access than a computer that requires a password and credentials to open.
Every client expects that the information they give is safe in the hands of their partner companies. Those that fail to fulfill data security are at risk of ruining their reputation and losing their business to others.
How Accounting Automation Can Help Businesses
Automation in accounting resolves many of the common concerns mentioned above through a software solution that can readily take on the role. Here are some of the ways accounting automation can benefit companies today.
It Helps Avoid a Cash Flow Crisis
Mismanaging funds is the main problem that can make any business go bankrupt. It is a result of unhealthy accounting protocols that ultimately stops a company from scaling and expanding.
When specific accounting tasks are automated, business owners can immediately get a full picture of their cash flow. They no longer need to sort through all of their transactions manually to know their financial status.
Automating activities also allow owners to quickly see how much they are generating, which areas they are spending on the most, and when they can expect their money. This kind of visibility contributes to helping business owners make smart decisions when necessary.
It Saves Time
Automation in accounting allows CPAs to conveniently enter credit, debit, client information, and other important financial details.
Conventionally, accountants need to access various books and then interpret the data on each one to find the connection.
Accounting software processes the information it receives automatically and relates this to all existing records in its system. These programs generate relevant structure reports and post the correct timestamps of all related data.
Accounting automation can even automate most transactions and eliminate manual data entry entirely.
The need to do data configuration manually may also be automated in the future.
It Provides Cloud Access
People who have used cloud-based programs know how easy it is to work when they can immediately access and share documents. CPAs can quickly process transactions or analyze required documents without having to be at the right work station.
Systems, like Tipalti, offer a secure cloud platform for accounts payable (AP) that are purpose-built for finance professionals and are accessible around the clock. These systems use enterprise-grade security to ensure that the highest standards in business continuity and safety are met.
Its Systems Are Flexible
High-quality accounting automation software is often adaptable enough to match the requirements needed by businesses. Apart from the standard formatting used for easy references, these programs also offer various templates for different business ledgers.
These qualities make accounting automation systems particularly flexible for a wide range of industries.
It Provides Storage and Organization
Automated accounting software enables finance departments to go beyond their present capabilities. Providing accuracy in data entry, processing, and storage makes it significantly more convenient to know where to locate specific information.
Apart from that, automation guarantees the storage of details indefinitely after being entered into the database. Systems, such as Tipalti’s secure cloud accounting platform, can also perform regular, automatic backups to prevent loss of vital business information.
It Offers Enhanced Security
Accounting automation makes use of encryption technology as well as other advanced security features. These systems ensure maximum protection of company records and data, helping protect from cyberattacks.
Besides that, business owners will have more control over which individuals in their business or back office can access specific financial information. This capability helps minimize the risk of certain ledgers being exposed to unauthorized employees.
It Allows for Fast Retrieval of Data
Many accountants know the agony of storing files in physical storage areas containing countless records. To retrieve or review a document, one has to search for them in another room, or worse, in the next building.
Today, it is incredibly easy to find any needed files virtually. Specific entries or records within an accounting automation software can be located almost instantly.
Automated accounting programs are designed to make ledgers and documents easier to name, categorize, and store safely. These traits make finding vital business records a breeze.
It Provides Comprehensive Analytics
Besides providing better organization and security, accounting automation also allows for quick presentation and distribution of precise financial data. All reports are available for anyone in the company that needs them, helping simplify the reconciliation of audits and records.
Furthermore, such software provides a more accurate means to analyze trends, variances, and predictability. Since they have access to readily available financial reports, accountants can do their jobs better by allowing them to make educated business decisions faster.
It Prepares Records for Tax Deductions
Business owners struggling to keep up with sales tax deductions know how stressful tax season can be. Scrambling to track expenses and receipts can lead to mistakes that can have serious consequences.
With automated bookkeeping, this kind of frenzy can be eliminated. These systems automatically update records whenever transactions are made.
Accountants do not have to worry about entering information all the time as real-time accounting systems do these for them. CPAs will simply have to check on these details later to confirm that they are accurate.
An automated bookkeeping system can also help in figuring out the deductibles, letting business owners know how much to expect during tax preparation time as soon as transactions come in.
It Allows for Professional Development
Any job that requires high levels of manual, repetitive work can potentially be automated using the right tools. The tasks that a traditional accountant accomplishes on a regular basis can benefit significantly from automation.
This kind of change is necessary for an accountant to be more productive and efficient, while also presenting an opportunity for personal development.
Since an accounting application cannot do everything on its own, smart accountants are needed to drive these systems and make sure that everything works accordingly.
Automation is actually a decisive turning point for CPAs. These programs help accountants to enrich their employment experience, share their knowledge, and improve their perceived value within an organization.
When applied correctly, accounting automation should be able to eliminate most of the frustrating and tedious parts of accounting jobs. This scenario would allow them more time to manage bank accounts, develop strategies, and communicate better with colleagues.
Will Automated Accounting Replace CPAs?
In the future, businesses are still going to need accountants to scale cost-effectively and cost-efficiently.
Automation in the world of finance does not mean roles in the accounts department will be taken away. Instead, it modernizes the traditional part of CPAs and other related professions to make them more proficient in what they do.
One way automation contributes to that is by reducing the tedious but important tasks that accountants do when manually entering and reconciling numerical data. It minimizes the required time to work on such activities, while also limiting common mistakes due to human error.
Professional accountants will have more time to work on other vital roles required of a financial officer. These include creating strategies and budgets for the company, providing financial advice to the CEO, and increasing business profits overall.
The presence of new accounting programs does not mean that a business can do away with bookkeepers in explaining, understanding, and analyzing how their finances work.
Another transformation that accounting automation brings to the table is that CPAs become more than just individuals that interpret financial data.
Such software transforms CPAs into custodians of this kind of information, especially since the industry needs professionals who understand the details processed by these applications.
Most people expect artificial intelligence and machine learning to take over roles and replace employees. However, this belief is far from the truth, especially in accounting.
Using accounting automation software enhances the efficiency of CPAs by allowing them to collect and analyze numbers faster and in a more accurate way. This scenario results in improved company data analytics and reporting, increasing the speed with which strategic financial decisions are made.
How to Get Started With Accounting Automation
Automation in the accounting industry is an excellent opportunity for companies to embrace the long-term benefits it offers. However, the switch can be overwhelming, mainly since most accountants are used to traditional accounting methods.
For business owners who wish to integrate accounting automation into their current business process, the following are the easiest starting points.
Automating the Accounts Payable Process
At this time, there is a huge gap between small businesses and large enterprises concerning invoice management. Efficiency in this task contributes to the company’s overall productivity.
Each time an invoice comes up in the accounts payable department, it needs to be approved immediately. Businesses that work fast can take advantage of early payment discounts, saving as much as 3% in total cost.
However, this manual approach is not easy. Paper invoices could sit for weeks on desks, awaiting approval, or get misplaced.
With an AP automation system like that offered by Tipalti, invoices can move quickly through the accounts payable department in an efficient way. Any problems that arise are noticed immediately, allowing accountants to address them as soon as possible.
Several problems exist concerning the conventional way of doing audit documentation. For instance, if an auditor requests to see the invoices from the previous year, most business owners would show them a year’s worth of records.
Many of these accounting documents also contain sensitive details, so companies would want to avoid handing these over if they are not needed. In case any of these records are accessed, any business owner would like to know who opened them and when it happened.
Using intuitive software for audit documentation should be a priority of organizations. In business, poor record-keeping should not be an option.
Procurement is the process that involves translating business needs and placing orders on the necessary supplies and services required for a business to operate. Additionally, it also requires owners to manage their relationships with suppliers.
There is much documentation involved in this process, so putting it all on computers can help companies become more organized and efficient.
With accounting automation, many tasks are made much simpler, such as when:
- Requesting for quotation files, inspection sheets, and approval documents
- Preparing shipment receipts, freight bills, manufacturing records, invoices, supplier data, and some other information required by a business
- Forecasting regulatory sheets, product research documents, and supplier details
- Documenting inspection reports, defect resolution workflows, and testing reports
- Working on purchase orders, contracts, and estimates
The processes listed above require much paperwork and many systems in place to ensure that everything is accurate. By automating these business processes, companies can eliminate much of these documentation tasks, while allowing their CPAs to focus on other core company activities.
What to Look for in an Accounting Software
Selecting the right accounting software can be confusing and time-consuming, especially when a company does not know what to consider. To make an informed decision, business owners have to assess required features versus those that can help them improve their work process.
From there, business owners can find an accounting solution that covers everything they need along with enhancements to make their company operate smoothly.
Here are some of the key things to consider when choosing an accounting software:
As mentioned earlier, automation enables accountants to do more for a company compared to the manual processes of traditional accounting. At this time, accounting automation could mean many things, such as generating weekly transaction reports or processing numerous invoices automatically.
No matter the case, businesses should find a way to make their CPAs more efficient and effective by automating easy, repetitive tasks through an automated accounting system.
Core Accounting Modules
An accounting software should cover the essentials of running a business. Many accounting programs today provide similar features, but some offer unique financial services that may not be available in others.
Below are some of the most practical features that business owners should look for in an accounting system:
- Invoicing capabilities
- Time tracking
- Expense tracking
- Automated financial reports
- Daily dashboard
- Customer support service
- Mobile application
A great accounting software also provides a free trial of their program. Platforms, like Tipalti, allow users to schedule a demo to show how their system can help automate payables processes.
Cloud Access and Capabilities
Businesses want software solutions that can be accessed remotely whenever they are needed. An accountant that has to access the application away from their desk or while at home will find a cloud-based solution handy.
Another benefit of cloud technology is that companies do not need to hire experts since most service providers take responsibility for upgrading and protecting their platform.
Tipalti offers a cloud-based accounting solution which they update multiple times in a year to stay ahead. They also manage any necessary upgrades, so companies do not need to maintain hardware or track various codebases.
Companies looking to expand in the near future should begin preparations for growth and more people involved. They should also have a system that can accommodate multiple users, along with the capability to assign various permission levels.
Not everyone in the company should have access to specific financial records, especially concerning sensitive client data. The ability to authorize certain users is key to preventing data security breaches.
The financial data of a company provide much insight into its overall business operations when analyzed correctly. Small business accounting software that offers predefined reports can be helpful. The ability to customize past the standard profit and loss financial statements can also be useful.
These capabilities allow business owners to identify which payments arrive on time and which are late, which departments contribute the most in revenue, or which teams are spending more than expected.
The ideal accounting system should provide valuable information, such as an overview of the bottom line profit, including more detailed records concerning specific accounts.
A Proven Track Record
Just like any service provider, assessing reputable accounting software is essential in selecting the right solution. Business owners can conduct their own research to know which accounting services provider is knowledgeable and experienced in the industry.
Reading up on reviews and user testimonials is one way of knowing if accounting firms can be trusted. Awards and achievements within the industry indicate an accounting platform’s capabilities.
A financial management system that has a good track record means that it has been around for some time and will more than likely deliver what it says it does.
Ability to Scale
Finally, business owners should look for accounting software that supports their business operations even as it expands and changes. This aspect may include having an increased capacity to accommodate clients, send more invoices, or handle projects that may need to be broken down into individual, billable parts.
Human error is one of the biggest challenges that a certified public accountant (CPA) regularly faces in traditional bookkeeping.
The routine tasks that CPAs manually perform can be slow, repetitive. This area in accounting is where many mistakes are made and the main reason why automation is necessary.
Using automation programs for tedious bookkeeping duties helps keep accounting records updated, minimizes errors in data entry for accounts receivables and payables, and expedites the overall accounting process. Furthermore, the configuration in accounting software keeps financial records aligned with established principles.
In essence, accounting automation takes most of the manual elements an accountant does each day and automates these activities. This robotic process automation (RPA) is possible, thanks to computerized accounting software, which does many of the analyzing and processing tasks for CPAs.
The practical solutions offered by accounting automation have led to the growing demand for companies to incorporate it into their processes. Integrating this kind of technology not only helps businesses stay abreast of the latest trends, but it also allows them to scale up and serve their clients better.
There is always a demand for operational efficiency, cost-effectiveness, and an increase in profit margins in any business. This environment increases the need for a sustainable solution in bookkeeping departments.
Accounting automation is seen by many as a potential answer.