A Guide to Automated Accounting: Benefits and Tips

Introduction

Financial automated accounting systems have commonalities across industries and geographies. Key tasks such as maintaining books, creating financial reports, and collecting A/R are critical for the finance and accounting teams. However, since the processes are complex, the accounting team may face challenges like invoice mismatch, transactional error, or slow transactional updates. 

The use of automated accounting tools is to accomplish traditional accounting tasks with better efficiency, accuracy, and compliance with these processes over the years. In the current economic situation, most organizations are amping up their accounting processes by bringing in automation which results in increased productivity and efficiency. 

Since accounting has been an important business attribute, it is best to realize and apply it’s true potential to gain a competitive advantage. If the accounting results are accurate, then the fiscal history of the organization will be available for auditing on time.

This article will look at the benefits of automation of accounting process and discuss which processes within F&A can be easily transformed.

What is Accounting Automation?

Accounting automation refers to using software to streamline and automate various accounting tasks, such as data entry, invoicing, and financial reporting. It helps save time, reduce errors, and increase efficiency in managing financial processes.

Automated accounting software utilizes technology to streamline accounting tasks, such as reconciliation and financial statement preparation. While it doesn’t eliminate the need for human involvement, it automates manual and time-consuming processes, allowing the accounting team to focus on more valuable activities.

Automation in accounting and finance has grown with AI and ML, enabling software to track, record, and customize data. It eliminates repetitive tasks like data entry and calculations, freeing up time for other important responsibilities. Staying updated with these trends is crucial in today’s rapidly evolving industrial landscape.

Automation solutions help reimagine the entire accounting operations. Modern solutions require minimal human assistance and complete tasks without errors. It lets your team members spend time on more strategic tasks such as budgeting or investment planning.

Quick read: Everything You Need to Know About Automated Bookkeeping

6 Key Benefits of Automated Accounting Systems

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. Enhanced 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 automation of accounting process 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. Time intensive 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. IT implementation

Technical problems can occur due to operating systems, internet connectivity, or software glitches. While the software can address some issues, IT support may be necessary. System downtime, caused by server issues, disrupts operations and adds complexity to tasks.

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.

Recommended Reading: The Future of Accounting: How Autonomous Accounting Can Help CFOs Navigate the Changing Landscape?

6 Accounting Tasks you Need to Automate Right Now 

1. Payroll processing

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 system 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) processes

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.

Explore some steps within your AP and AR processes that software helps automate.

Here are the benefits of automating accounts payable (AP) and accounts receivable (AR) processes:

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.

Quick read: Recommended Reading: Boosting Real-Time Cash Visibility with an Optimized Cash Flow Dashboard

6 Steps to Automating your Accounting Process

Switching to accounting system automation is inevitable as businesses go digital. Here are a few tips to help you successfully implement automated accounting software solutions.

1. Assess your current accounting process and identify areas for improvement.
2. Look for the best accounting automation software that fits your business needs and is within your budget.
3. Choose accounting software that provides you with customized invoice templates and integrates well with your ERPs, banks, and so on.
4. Assign a project owner who can create and manage your workflows so that data migration can be more accessible.
5. Provide your team with proper training and the necessary time to get familiar with the software.
6. Schedule a transition period and notify all staff members affected by the change—notably the CFO, your accountant, and the finance department.

Use our software evaluation template to decide which accounts receivable software you must invest in.

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 HighRadius can Help Organizations Unlock the Power of Automated Accounting Software 

HighRadius offers organizations a comprehensive record-to-report (R2R) solution, leveraging cutting-edge technology to transform accounting processes. With end-to-end capabilities, it streamlines and automates various workflows, resulting in a remarkable 30% reduction in days to close. 

Financial Close Management Software: Reduce peak load and gain control of your month-end close and reduce days to close by 30%.

Account Reconciliation Software: Leverage out of the box AI transaction matching rules to automate and streamline the reconciliation process. Achieve up to 90% transaction auto-match rate and 95% journal posting automation.

Anomaly Management: AI/ML-powered Anomaly management to proactively identify errors and omissions in the source ERP data and transition to a continuous close by resolving 80% anomalies.

The HighRadius Record-to-Report suite empowers organizations to achieve optimal efficiency through advanced accounting technology, enabling a seamless transition to modern accounting practices. With a powerful AI-driven platform, it revolutionizes accounting processes, enhancing efficiency, accuracy, and overall approach to accounting.

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. Will automated accounting replace CPAs?

Automated Accounting Process with AI enhances efficiency and precision, but requires a blend of human intelligence. This synergy enables accountants to reach new heights in client value generation, fostering an exciting transition for the profession.

3. How is AI used in accounting?

AI automates processing of payslips, invoices, and bank statements, speeding up retrieval of financial information like trial balances and income statements. Mid-market finance adopts AI for document automation, data extraction, and predictive analytics, enhancing efficiency and decision-making. 

4. What to look for in an accounting software?

As a business owner, it’s crucial to track financial activities. Accounting software helps record payments, manage costs, invoice clients, reconcile transactions, detect errors, and close books, streamlining everyday accounting tasks.

5. What are some examples of accounting process workflows?

There are several Accounting Process workflows. Some of them are-Sales Order, Purchase Order, Expense Claims, Incident Reports, New Employee Onboarding and others.

6. Will accounting be automated?

Technology has automated many accounting tasks, but it won’t fully replace humans. Combining AI with human intelligence makes accounting more efficient and accurate.