Key Takeaways
- Automated accounting can help save time and effort by automating repetitive tasks, allowing the accounting team to focus on high-value tasks such as budgeting or investment planning.
- Automated accounting offers benefits such as faster turnaround, data accuracy, cost reduction, comprehensive analysis, better security, and faster data retrieval.
- The challenges of automated accounting include complex software interfaces, slow training periods, technical issues, data migration, integration complexities, and regulatory compliance issues.
- Automated accounting cannot replace humans, it just saves time on manual tasks so they can work on the high-value ones.
Introduction
Finance operations have much in common across industries and geographies. Maintaining accounting books, creating financial reports, and collecting accounts receivables are often critical tasks of finance and accounting (F&A) teams.
The use of software to accomplish traditional accounting tasks has brought better efficiency, accuracy, and compliance to these processes over the years. The current economic situation suggests those organizations that lag in adopting accounting process automation for their F&A processes will see reduced productivity and lower efficiencies.
This article will look at the benefits of automated accounting systems and discuss which processes within F&A can be easily transformed.
What is accounting automation?
Accounting automation involves the use of software to automate important finance operations. Accounting operations like accounts reconciliation, updating financial data, and preparing financial statements can be completed without human interaction using accounting software.
This doesn’t mean that by automating accounting functions, you can completely replace the need for human intervention in these tasks, it just automates the manual and time-taking tasks so your accounting team can focus on high-value ones.
Will accounting become automated?
Emerging technologies such as artificial intelligence (AI) and robotic process automation (RPA) have vastly expanded the capability of accounting systems in recent years. Accounting software may soon accomplish everything from tracking and recording data by using AI. It helps you eliminate repetitive tasks like data entry and calculations so that analysts can focus on more important things.
Automation solutions help reimagine the entire accounting operations. Modern solutions require minimal human intervention and complete tasks without errors. It lets your team members spend time on more strategic tasks such as budgeting or investment planning.
What is autonomous finance and why do you need to get ready for it?
What are the benefits of automated accounting?
1. Faster turnaround
Automated accounting solutions help save your accountant’s time and effort. Your accounting team can now give results quicker and with more accuracy. This opens up the possibility of taking on more clients and expanding your market presence.
2. Data accuracy
Data accuracy is critical to financing operations and maintaining a good reputation with clients. Even the most cautious and thorough professionals may make unobvious mistakes like misplacing a number or forgetting a decimal. Automated accounting helps reduce the possibility of errors and ensures better accuracy.
3. Cost reduction
Accounting automation software helps automate mundane clerical tasks, thus helping you save on costs. Automation can process more records in less time and at a lower cost. When using accounting software, you do not require to invest in a large accounting team to complete transactions.
4. Comprehensive analysis
Accountants and AR analysts need relevant and accurate data to track trends, identify fraud, and calculate various metrics that indicate a business’s financial strength.
Data collection and compilation can be made easier with automation. Self-service analytics features in automated accounting solutions allow even non-IT staff to create reports and visualize data easily.
5. Better security
Traditional accounting systems involve a lot of paperwork like large ledger books, journal entry records, and more. There’s a high chance of these papers getting lost, leading to inefficiencies due to the loss of backup. Automated accounting systems can help keep your accountants ensure that data is organized and stored securely on the cloud or on on-premises data centers.
6. Faster data retrieval
In pre-digital days, hundreds of paper-based files and books were stored in rows of cabinets. To extract a document, you had to scout through bundles of records. This is a tedious way to search for information.
With automation solutions, locating and retrieving data is easy. You can search with the file name, owner name, or other meta tags to locate the document. Archiving data is also easier and less expensive with automated accounting systems.
What are the challenges of automated accounting?
As we talk about automating finance & accounting tasks, there are certain short-term risks and challenges associated with it, below-mentioned are some of which you can focus on:
1. Complex software interface
Certain accounting software can be too sophisticated or expensive for some firms. These bulky apps might be tricky to understand and navigate. However, automated accounting solutions allow you to choose from various tiered plans based on your demands.
2. Slow training period
When you transition to automated accounting, you’ll probably need to train everyone on how to use the software. Unfortunately, training time may differ from person to person, causing the solution to be implemented slowly.
3. Technical issues
IT Support: Your operating systems, internet connection, or glitch in software can result in technical troubles. Although the software is made in such ways that the system itself can address any such technical issues—there is still some need for IT support required to resolve the issues.
System Downtime: Sometimes software servers may go down due to some technical issues, hindering database accessibility. System downtime causes hindrances in operations and makes work more hectic in such situations.
4. Data migration and integration complexities
The accounting software sometimes may not be able to read your database correctly or may skip out on some parts causing discrepancies in the newly migrated database. It also is possible that it doesn’t integrate with your ERP or CRM to share data.
5. Regulatory compliance issues
If in case of an error in your accounting software, it may produce a less accurate regulatory report which may lead to legal violations, risking fines, and sanctions.
6 accounting tasks to automate immediately
1. Payroll
One of the key functions of finance teams is to manage payrolls and payouts. It requires great attention to detail. Payroll analysts spend hours going through employee tax records and rates to create accurate reports. Automating the payroll function can save your team much time and effort. It also ensures the accuracy of payroll reports, leading to reduced disputes and higher employee satisfaction.
Whether dealing with fixed-pay employees or hourly freelancers, automation solutions help directly deposit funds into employees’ bank accounts, calculate pay, sync with time-tracking software, handle payroll taxes, and generate filings automatically.
2. Purchase management
When companies purchase goods or services, they usually have to deal with a lot of paperwork, from purchase orders to contracts. Purchase order automation ensures that nothing is misplaced and that all needed paperwork is filled out correctly.
Accounting automation software offers purchase management features that help successfully automate repetitive, low-value processes such as purchase order creation, payment processing, etc. You can shorten the procure-to-pay cycle, save personnel expenses, and eliminate errors by automating your purchasing process.
3. Finance management
Tax season, like monthly financial close, is a particularly stressful and labor-intensive period for businesses.
Tasks pile up quickly as everyone races to collect the open accounts. The following are some of the common challenges encountered during this period:
- Error detection, verification, and correction
- Maintaining compliance with tax deductions
- Retrieving missing invoices and receipts lost during the transfer of data from one system to another
- Identifying anonymous payments
You can automate these processes using native functionality in your program or automation platforms.
4. Expense management
Collecting expense receipts from co-workers is often as difficult as tracking delinquent customers for payments. Some of them may have lost their receipts while others might have incomplete ones.
Automation software makes it easier to collect, transfer, and monitor expenses. Corporate credit cards can also be added to the expense tracking software to capture expenses and receipts automatically. Employees can scan their receipts and upload them on the portal. The program then extracts the information and sends it to your accounting software, making it easier for your finance team to close the accounts easily.
5. Accounts payable (AP) and accounts receivable (AR)
Accounts payable and accounts receivable significantly affect your company’s cash flow. They are both integral components of your cash flow statement.
Mismanaged AP results in high costs for the business and a bad reputation with vendors. On the other hand, companies that fail to manage their AR, are exposed to the danger of not getting paid on time, leading to working capital challenges.
To optimize accounts receivables, you should track pending payments, remind customers to pay on time, and identify high-risk customers as a top collections priority. An accounts receivable software can automate these and other steps involved in your AR operations and significantly decrease the load on your finance team.
Here’re the benefits of automating accounts payable (AP) and accounts receivable (AR) processes:
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Quick read
Learn more about benefits of automating your accounts receivables.
6. Cash visibility and forecasting
Accounting professionals hold the keys to crucial company information and help shape the business’ strategic decisions. As a result, their ability to collect and present data to the leadership teams is vital. Cash visibility is another important factor that businesses need to consider when making strategic investment decisions.
F&A teams should use modern accounting software solutions to forecast cash flows, generate trend reports quickly, and track key metrics such as aging accounts, sales forecasts, and expenses. Software solutions can compile data from multiple sources quickly, thus helping you prepare well-rounded reports.
How to transition from traditional to automated accounting software?
Switching from manual to automated accounting is inevitable as businesses go digital. Here’re a few tips to help you successfully implement automated accounting software solutions.
- Look for the best Accounting automation software that fits your business needs and is within your budget.
- Choose accounting software that provides you with customized invoice templates, and integrates well with your ERPs, banks, and so on.
- Provide your team with proper training and the necessary time to get familiar with the software.
- Schedule a transition period and notify all staff members affected by the change—most notably the CFO, your accountant, and the finance department.
Lay the proper IT architecture and cultural foundation within your organization to enable all employees to transition to automated accounting practices and workflows. Rectify any glitches in the new system with the help of your IT partner or service provider.
You’ll be able to see a marked improvement in your accounting process efficiency and a high ROI once you implement modern accounting systems.
How can HighRadius help?
At HighRadius, our team of fintech experts collaborate with companies to comprehend their unique requirements and provide tailored solutions to simplify accounting functions. Our comprehensive suite of autonomous solutions cover every aspect of order-to-cash, treasury, and record-to-report.
If you are looking to automate your accounts receivable operations, HighRadius’ autonomous finance solutions can prove to be a good fit or your business as we serve CFOs across industries and sizes. Our RadiusOne AR Suite is built specially for mid-market CFOs which offers collections, cash reconciliation, credit, and e-invoicing app.
FAQs
1. What is the approach of an automated accounting system?
Automation software is responsible for automatically completing tasks such as bookkeeping and accounting. The software automatically identifies discrepancies in data and decreases the amount of data that has to be entered manually by identifying entries from invoices, forms, and bank statements using AI.
2. Can accounting be fully automated?
No, there is always a need for the human touch to drive actions based on insights generated. Automation only helps teams focus on more important tasks by eliminating mundane processes such as data entry bookkeeping, writing dunning emails, etc.
3. How is AI used in accounting?
Modern automation software solutions are AI-enabled. It essentially processes documents such as payslips, invoices, and bank statements automatically. AI also helps provide quicker and easier information on financials such as trial balances, income statements, profit & loss statements, and so on. Here are 3 use cases of AI in finance for mid-market companies.
4. What is the impact of automation in accounting?
Automation software helps you save time, avoid costly errors, and keep all important documents at your fingertips. It also enables better cash flow management and cash visibility, better month-end closure efficiency, and helps increase data accuracy.
