14 Jun 2022
Blog
Accounting professionals know the nightmare of manual document processing. When docs pile up, processes get stuck on approvals, mistakes multiply, and chaos creeps in. Thankfully, the apocalyptic visions are nothing but an exaggeration in today’s world, all thanks to the variety of tools that help with accounting automation. In this article, we deep dive into the benefits of the automated accounting process, the future of accountants, and where to start with the automation of bookkeeping.
Bookkeeping has a long tradition in business conduct.
In the past, bookkeepers quickly established themselves as key business analysts capable of projecting cash flows and looking for cost optimizations.
Then, a new era dawned – the time of outsourcing.
More companies sought to delegate their financial processes – accounts receivables, accounts payables, ledger keeping, and so on – to specialized accounting partners, the so-called BPOs (business process outsourcers). BPOs could take on various responsibilities – both back office and front office – and do the heavy lifting for clients.
Moreover, outsourcing and offshoring companies improved business flexibility and provided considerable expertise. From IT services to HR, and accounting, outsourcing helped various countries become thriving centers for such services.
Despite the COVID-19 pandemic that broke out at the beginning of 2020, the trend did not note a downward-sloping trajectory. All outsourced services accounted for over $92.5 billion in global market value as of 2019.
But while it may seem that outsourcing is still the most viable workaround for reducing internal headcount, it is no longer the cheapest nor the most effective solution.
Professionals in the accounting market see that automation is the new cool kid on the block. It’s no surprise because the drawbacks of traditional accounting processes are hard to skip.
Let’s look at some of them.
The challenges of traditional accounting models
A report conducted by Tipalti provided some shocking and sadly expected insights.
The vast majority of finance leaders (80%) in the US and the UK reported that AP processes need to be significantly improved to propel business growth. From providing insightful financial projections and models to simply overhauling the entire accounting system, a properly functioning finance team is a source of valuable knowledge. And skillful leaders know it.
Furthermore, inefficient accounting processes cause financial losses, delays in deals, and increase the threat of fraud. The same survey also reveals that nearly half (43%) of AP teams spend time on manual and paper-based tasks.
Not impressed by the numbers yet?
Well, consider the final nail to the coffin.
On average, nearly 50% of the week’s work time of AP teams is dedicated to automatable tasks – monthly or quarterly account closings or even simple invoice processing. Other research by Bookkeep revealed that AP teams spend up to 38 hours doing easily-automatable tasks.
Too much time and effort are wasted.
You know the grim picture already – what are the reasons for this state of things?
And what can be done to improve it?
Well, we might need to scrutinize the last two years.
While the economic effects of the global pandemic – both the tailwinds and negative tides – are almost impossible to assess, the business world had to adapt rapidly. E-commerce growth created new opportunities for some, enabling thousands of new businesses to enter the global market.
However, this fact also entails new challenges for accounting teams that needed to process more digital documents faster. The growing digitalization of trade caused a surge in document generation, as well as made many business processes more complex, along with confusing regulations to make things more fun.
According to the CEO of Bookkeep:
The lack of data standards in how e-commerce platforms report, calculate, deposit sales and collect what’s owed is a logistical nightmare for accountants and bookkeepers. It creates thousands of hours per year of extra manual data entry that leads to staff burnout and can hurt firms’ profitability.
To sum it up, most finance teams see that the traditional model might as well mean going out of business. And while that might sound like fear-mongering, let the numbers from the above sink in.
Now that the picture is crystal clear, let’s look at how the accounting process improves with smart technology.
What is accounting automation?
In general, accounting automation can be defined as the implementation of software that automates manual work within accounting processes. The purpose of automated accounting is to help accounting and finance specialists deal with manual tasks faster, with higher precision and better efficiency.
Tasks – that can be automated – range from invoice processing to financial projections and monthly budget closings. Below are some of the most pivotal ones.
General Ledger software for accounting
The first step in creating a full-fledged implementation of accounting automation is to find software that constitutes a digitilized general ledger (GL).
General ledgers include the top-level overview of the company’s finances – a set of all records that summarize liabilities, assets, equities, as well as revenue and spending channels.
Many companies store this kind of information in large Excel spreadsheets. That, however, is neither convenient nor safe due to the threat of data breach. For that reason, digital bookkeeping is the recommended route for both small and large companies. Numerous tools can serve as general ledgers, with leading examples of Xero and Quickbooks.
Invoice Automation
Processing invoices manually is another chore of AP teams and a task that is very easy to automate.
One of the most tedious parts of invoice processing revolves around data entry and manual data extraction. When the accounts payables team goes over every invoice and transfers data from paper-based docs to computers, the process usually takes forever.
Well, actually a few days to close the single invoice cycle.
Needless to say, each hour spent on this kind of repetitive work generates costs – tools maintenance, manhours, etc. – and causes frustration.
In order to significantly speed up the process and forget about the paper-based past, consider software for automated invoices processing.
Tools such as Alphamoon provide a complete solution – from document classification and AI-supported document scanning to a single cloud for files storage. Such ordered collection of data entries can then be streamlined into other systems and used for cash flow predictions.
Even if you work with dozens of physical invoices delivered by a variety of vendors – a common case for marketplaces – information extraction is completed in a snap.
With no invoice avalanche in sight, your team can look into ways to optimize your costs, right?
Payroll
Just like delays in invoice payments deteriorate your relationship with clients, late salary transfers are corrosive to your credibility as an employer. Lack of clarity in terms of salary transfers increases the chances of employee resignation.
As you may imagine, the bigger the company, the more complex this task is.
Hence simplification of payroll can be part of your accounting automation plan. Some accounting tools – like Gusto – allow your team to plan regular salary payments, as well as easily approve any additional off-cycle payroll, such as bonuses.
Month-end reviews
While experts lean toward a belief that finance and accounting will need to adapt to the 24-hours cycle of processing, you still benefit from the traditional end-of-month budget closing.
There’s a method in that all-day-long madness, as well as a reason for it too. Since the outbreak of the pandemic, businesses have been thrown into an ever-spinning tornado of constant market fluctuations. When things move quickly, the last thing you want is to lose ground under your feet – that is see any traces of disorder in your balance sheets.
Furthermore, scrutinizing your balances enables your team to have a better grip over the financial liquidity of your assets.
That’s another area of accounting where automation comes to aid.
When all your document influx is robotized, the month-end reviews take significantly less time. Most seasoned accounting experts recommend Xero as the product they choose for dealing with automated budget closings.
Accounts Receivables & Accounts Payables automation
The bread-and-butter of every finance team refers to the A/R and A/P tasks – streamlining all documents that describe financial liabilities and funds that are secured in the budget as cash inflows.
Along with the expansion of business, comes the list of payments that just keeps on growing. Tracking all of the subscription-based software can be a challenge, so the tiny sums that pile up and amount to unexpectedly high sunk costs become an issue eventually.
Cash Flow forecasting
Automation of Accounts Payables is particularly meaningful for future financial projections.
Much of the talk about automated accounting revolves around the value that finance teams get from automation and the value they generate. Analysis of historical data is one competence, but the true merit of a finance powerhouse is when it helps set sail for business as a whole.
Highly accurate projections allow managers to plan recruitment well in advance, create new initiatives and grow budgets in their respective teams.
One of the recommended tools for financial scenario planning is Float.
Other areas (risk management, financial planning, etc.)
The list of tasks that can be automated goes on.
Enterprises introduce automated bookkeeping in areas of risk management & assessment, financial planning, reconciling, and more.
Now that we’ve gone over the quintessential tasks that the accounting process consists of, we can move to discuss the reasons behind the implementation of automated accounting technology.
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Benefits of Automation of Accounting Process
While each part of the accounting system can be automated, the role that accountants play in the ecosystem does not diminish. On a conceptual level, automation assists humans rather than taking their place.
Hence the next part of this article describes the most important benefits related to the automation of accounting systems.
Time savings
The most tangible benefit of accounting automation is perhaps the time saved on doing things manually.
Consider all the work wasted on most of the repeatable tasks within the whole process.
It’s a simple calculation.
Supposedly a single team member manages to process – that is receive the document, move to the correct folder, conduct manual data extraction and data entry – a single invoice in 15 minutes.
One hour equals four invoices.
One full working day (allowing the employee to eat, rest, and be a human being for an hour) brings us to 28 invoices.
For an AI-based tool that offers invoice automation, 28 invoices are processed within minutes. And the more documents are part of the data input, the more accurate the model will get.
It also takes less than a minute to describe your automation-related needs and start benefitting from higher productivity with Alphamoon.
Increased productivity of the team
Here’s another Captain Obvious fact: productivity increases when employees don’t have to wade through mundane, monotonous tasks.
Let’s circle back to the previous point about time savings.
Automated accounting creates a space in the calendar of your team. That space is to be filled by tackling more profound tasks and challenges, such as:
- profiling the vendors and contractors who are late with their liabilities and therefore quickening the debt collection process
- deep-diving in the pockets of each department and knocking down a few unnecessary payments
- preparing detailed reports on the future situation of the company and the market
Reduced number of human-made errors
Automated accounting software helps in preventing errors. Businesses tend to lose money due to delayed payments, or lack of transparency in their liabilities. However, we’re only humans guilty of having bad days.
When AI and automation join the pack, there are no bad days!
With all seriousness, one of the “I’m for it” arguments when you’re pushing the idea of automation, should be fewer errors that save time and money.
- Time, because reconciliation and fixing mistakes take time and disrupt the regular flow of work,
- Money, because mistakes made in invoices, breaches of contract, and other issues can create additional losses.
Quick scanning for document information
If you’re an accounting expert yourself, you might know the struggle of back-tracing a single piece of information.
When files aren’t digitized, then going over physical folders and flicking through hundreds of pages isn’t your ideal line of work.
Finding relevant information should be done in an instant, no questions asked.
Some tools help with full-text search – an AI algorithm that enables users to find information in hundreds of documents. You can get in touch with Alphamoon to chat about this feature available on our platform.
Cloud-based systems are easily accessible
Remember the Excel master spreadsheet part?
Well, good luck sharing this with other people and collecting their feedback.
Files stored in the cloud-based software can be shared and accessed within the company, and every tool offers ways to limit the roles of each member if needed.
Cloud systems are also more secure. Increasing security will also be one of the seven top trends of digital transformation in the upcoming years.
No wonder leading providers of accounting software put data security at the front of their technology. Information concerning your clients and suppliers is considered sensitive data, and apart from the basic means of protection – such as MFA, VPN, and creating back-ups – cloud-based software from established partners boosts your security.
Increased value from accounting for the whole business
The days when accounting was mostly the work of a business archivist, are long gone. Modern companies require their finance teams to be data-driven experts who analyze data in order to predict trends and support decision-making.
Frankly, that’s a utopia for many finance teams.
Without time savings achieved by automated accounting, most finance teams are knee-deep in operational work. Exhaustion and burnout effect will halt employees from focusing on the value-generating part.
Accounting set up ready for scaling
If your business grows, then you cannot let your finance team’s processes and structure hold you back.
Automated accounting systems are designed to fit the pace of scaling, without the need to hire more people. Most bricks that form an entire automated accounting system – in other words, tools that provide upgrades to particular parts of the workflow – have a few tiers to choose from.
Depending on your specific needs, you can adjust the features and capabilities of each software.
One more thing is worth emphasizing. That is the positive long-run ROI effect.
A common apprehension concerning any kind of business automation is the entry costs. Indeed, robotization isn’t cheap. It requires seniority among those responsible for its implementation; Good planning; Documentation that nails down every confusing part; and a deep understanding of the right metrics to use for measuring the actual benefits.
None of the above is rocket science, to be frank, but people are often bound to stick to solutions that they know well.
Not because we’re all just lazy or embrace archaic approaches for the sake of it. There are many reasons why people are often reluctant to change:
- Managers devising structural updates in secret and then drop them like bombs,
- Uncertainty causes people to feel anxious, hence the saying “better the devil you know than the devil you don’t know”,
- Change requires more work.
You need a bulletproof plan to overcome inertia and spark excitement among those who will benefit from automation.
Satisfaction of your employees
Aside from more tangible outcomes, you should consider the well-being of your finance team (or your own, depending on your position and role).
A recent study from Salesforce proves that automation – when introduced with proper planning before the implementation – increases productivity and reduces stress. Teams also collaborate better – over 90% of surveyed users link improved teamwork with automation. Moreover, 89% of employees feel happier about their day-to-day jobs and 76% revealed their stress levels are lower.
McKinsey backs up this view, indicating that the next decades will result in over half of workplace activities supported by automation.
That also comes in opposition to the concerns regarding job automation and robots taking work from humans. Automation isn’t going to fade away as a trend, and there are reasons to believe that robotisation will heavily impact the labor market landscape forever.
Accounting automation – key insights
Disregarding the changes happening in the market can be extremely dangerous for a company.
After all, you’re competing with not only your product, pricing, and customer service but also the ease of your processes and the general appeal, values, and mission that the brand captures.
The new reality is that things happen quickly, with little time for neat preparation. Forget about the blue ocean, because it’s all crimson red now.
Therefore, seeking optimization and process automation exhibits your wit as a business owner, project or team leader, or a specialist who wants to improve. To all the traditionalists out there – sorry folks, it’s happening now.
As explained by Paul Farrell, vice president of industry product management at Oracle NetSuite:
Gone are the days that [finance] can do things at the end of the month, the end of the day, or in batch. It needs to be real-time, and it needs to be always available.
Whether we like it or not, automated accounting is part of that post-pandemic, ever-morphing transformation of business. Since the process is complex, with varying tasks to deal with, it’s best to take steps and plan the implementation carefully.
One of the ways to kick your business automation off is to start with intelligent document processing. And Alphamoon can be the partner-in-crime that guides you from day one. Read more about the AI-based technology we have created to support document workflows below.
