With digital accounting becoming a prevalent process in the business world, we wanted to highlight one of the critical tools to use when you adopt digital accounting — accounting automation. Accounting automation is a tool used within digital accounting to streamline and automate various accounting and financial processes. This tool aims to improve efficiency, accuracy and productivity in managing financial data and transactions, which we'll explore in more depth throughout this article.
- What is accounting automation?
- How does accounting automation enhance efficiency?
- Why is document management integral to accounting automation?
- How can businesses transition to automated accounting?
What is accounting automation?
Before we head straight into why you need to implement accounting automation, let's take a step back and understand the main components of this tool. If you've previously read our blog on the topic, you'll understand that automation is just one part of this way of working — but this is where it gets a little more complicated. The core components of accounting automation include:
Data extraction and entry tools: Where the system can extract data from documents and populate itself to reduce the need for manual data entry.
Transaction processing systems: The tool handles routine financial transactions to ensure they’re accurate and updated promptly.
Invoice and expense management: The capability simplifies the creation and processing of invoices by doing it for you.
Bank reconciliation: This matches bank statements with accounting records, identifying and resolving discrepancies quickly.
Financial reports and analysis: Access real-time data and gain deeper insights into the organisation's financial standing point.
Compliance reporting: Ensure your financial data and reports comply with regulatory standards, reducing the risk of errors and non-compliance.
Audit trails and security: Track changes, enhance accountability and safeguard financial data.
Payroll processing: Simplify payroll tasks, from calculating wages and taxes to issuing employee payments.
How does accounting automation enhance efficiency?
With all these capabilities becoming readily available thanks to accounting automation software, it's no surprise it has become a critical tool for modern finance departments to enhance efficiencies.
Save time
Automation reduces the time and effort spent on routine, manual tasks and allows financial professionals to allocate more time to strategic analysis and decision-making.
Reduce errors
Automated systems minimise the risk of human error associated with manual data entry and processing, leading to more accurate financial records and reducing the time spent correcting mistakes.
Save money
Automating repetitive tasks helps organisations like yours save costs associated with edits and fixing errors. In a McKinsey report, 60% of workers estimated they could save six or more hours a week if the repetitive aspects of their jobs were automated. Staying compliant with legal regulations also reduces the risk of fines for non-compliance.
Scale your organisation
Accounting automation is designed to handle increased transaction volumes and complexity without a proportional increase in manual effort. You don't have to worry about training new employees to handle the workload.
Improve decision-making
The reporting features can help you make the best decision for your business at a much greater speed.
Automation works
Amidst rapid expansion with the opening of an eighth location, Stuart Plumbing faced the daunting task of manually processing over 2,000 invoices monthly from various suppliers, overwhelming their finance department. Seeking efficiency, they consulted their long-standing print and software supplier. After a comprehensive audit, the experts recommended DocuWare to automate invoice entry. The critical goals were eliminating manual tasks, streamlining finance processes and promptly addressing errors for enhanced accuracy. The transition seamlessly integrated with existing electronic data interchange software, reducing invoicing time by 30-40% while minimising paper usage and costs.
The key aspects of accounting automation
Digital accounting encompasses several key areas, and automation positively impacts each. Here are some of the critical areas:
Invoicing
Automated invoicing systems streamline the creation, delivery and tracking of invoices. They can automatically generate invoices based on predefined rules, send them to clients electronically, provide real-time updates on payment status, utilise intelligent indexing, integrate with scan and classifying software, and import files. This reduces the likelihood of errors and accelerates the payment cycle.
Bookkeeping
Automated bookkeeping tools can handle routine tasks such as data entry, categorisation of transactions and reconciliation. These tools ensure accurate and up-to-date financial records by integrating with bank feeds and other financial sources.
Payment processes
Automation in payment processes includes features like automatic payment scheduling, online payment gateways and reconciliation tools. This accelerates the payment cycle, reduces late payments and improves cash flow management. Additionally, automation helps track and match payments to corresponding invoices, enhancing accuracy.
Expense management
Automated expense management tools streamline capturing, categorising and approving expenses. You can use mobile apps to capture receipts and the system can automatically match expenses with predefined categories. This not only improves accuracy but also provides real-time visibility into company spending.
Financial reporting
Automation in financial reporting involves automatically generating reports based on predefined parameters. This ensures that reports are accurate, consistent and available promptly. Automated reporting tools can consolidate data from various sources, providing a comprehensive view of the organisation's financial health.
Tax compliance
Automated tax compliance tools help businesses stay up-to-date with changing tax regulations. These tools can calculate taxes, generate accurate reports and facilitate electronic filing. Automation in tax compliance reduces the risk of errors and ensures that the organisation remains compliant with tax laws.
Workflow management
Workflow automation tools help streamline and optimise accounting processes. These tools automate the flow of tasks and approvals, reducing manual intervention. This makes sure that processes are consistently followed, improving efficiency and accountability.
Bank reconciliation
Automated bank reconciliation tools match bank transactions with the company's records, automatically identifying and reconciling discrepancies. These tools accelerate the reconciliation process, reduce errors and ensure the accuracy of financial records.
Why is document management integral to accounting automation?
Document management plays a pivotal role in the realm of digital accounting and, therefore, accounting automation, forming a symbiotic relationship to enhance financial workflows.
A document management system (DMS) serves as the backbone for the systematic storage, categorisation and retrieval of digital financial documents. Accounting automation software complements a document management system to create seamless workflows.
Upon receiving an invoice, it can be effortlessly scanned or uploaded to the document management system and automatically integrated into the accounting software, mitigating the risks of errors inherent in manual data entry. Version control features within document management systems enable tracking changes made to financial documents, ensuring compliance with regulatory requirements and maintaining document accuracy over time.
Document management systems also incorporate essential security features to safeguard sensitive financial information, including access controls, encryption and secure authentication. These measures uphold the confidentiality and integrity of financial documents. The combined capabilities of accounting automation, digital accounting and document management significantly contribute to regulatory compliance, exemplified in frameworks such as GDPR, offering more effective and streamlined management processes.
How can businesses transition to automated accounting?
Implementing automation within accounting is often a subset of digital accounting systems within document management systems. Here's a step-by-step guide on how businesses can make this transition.
- Assess current processes
Conduct a comprehensive assessment of your existing accounting processes to identify the manual and repetitive tasks that your organisation can automate. - Set clear objectives
Identify the goals you want to achieve with automated accounting, such as reducing processing time, minimising errors, improving reporting capabilities and enhancing overall efficiency. - Choose the right software
Research and choose accounting software that aligns with your business needs and objectives. Consider factors such as scalability, integration capabilities, user-friendliness and the specific features that address your pain points. - Data migration
Plan and execute migrating your existing financial data to the new automated system. Ensure data accuracy and integrity during the transition to avoid discrepancies in financial records. - Employee training
Provide comprehensive training to your accounting team on using the new automated tools. This will help them adapt quickly and use the software efficiently, minimising disruptions to daily operations. - Integration with other systems
Ensure seamless integration of the accounting software with other systems used in your organisation, such as CRM, ERP or payment systems. Integration enhances data flow and reduces the need for manual data entry. - Implement document management
Integrate document management systems to organise and store financial documents electronically. This ensures that supporting documents are easily accessible and linked to corresponding transactions. - Define workflows
Map out automated workflows for various accounting processes, including invoicing, expense management and financial reporting. Define approval hierarchies and automate routine tasks to streamline the entire financial workflow. - Security measures
Implement robust security measures to protect sensitive financial data. This includes user access controls, encryption and regular security audits to identify and address vulnerabilities. - Monitor and evaluate
Continuously monitor the performance of the automated accounting system. Collect feedback from users and make ongoing improvements based on the evolving needs of your business. - Scale gradually
If applicable, scale the implementation gradually across different departments or locations. This phased approach allows you to manage the transition effectively and address challenges as they arise. - Continuous improvement
Embrace a culture of continuous improvement. Regularly assess the performance of your automated accounting system, explore updates and new features and stay informed about advancements in accounting technology.
By following these steps, businesses can methodically transition to automated accounting, realising the benefits of increased efficiency, accuracy and streamlined financial processes.
Embrace the path to automation
The transition to automated accounting is a strategic move that empowers businesses to unlock greater efficiency, accuracy and agility in their financial operations. By carefully assessing existing processes, setting clear objectives and embracing the right tools, organisations can pave the way for a seamless transition.
Learn more about invoice automation.
