According to a recent survey, 45% of accountants intend to automate repetitive, time-consuming accounting tasks, such as data entry.
The accounting software market alone is estimated to reach $29.8 billion by 2030 — and automation could play a big role in that.
Initially, many accounting professionals met automated accounting software with distrust, believing automation could replace human employees.
But, in reality, the benefits of automated accounting translate into time and money saved for businesses of all sizes.
Accounting automation can’t replace the need for human accountants, who are still needed to interpret data, make decisions, and provide insights. But it can empower businesses to increase accuracy, reduce costs, and grow sustainably.
Can accounting be automated?
Yes, you can automate accounting. But “accounting automation” is a broad term. The more specific question would be: what is automated accounting in practice?
Accounting automation uses machine learning and other technologies to automate repetitive and time-consuming traditional accounting processes. Processes include data entry, reconciliation, reporting, and analysis.
There are dozens of applications (and 3 ways to automate, in particular) for automation across the accounting practice. You can use automated accounting tools to extract data from bank statements, invoices, and receipts and enter it directly into your accounting system.
In some cases, you can apply it to invoice processing to quickly and accurately capture, categorize, and match invoices with purchase orders and receipts.
Automated reporting tools also provide a way to generate financial statements, reports, and analytics by pulling data from internal sources.
Software can compare and reconcile large volumes of financial data, like bank transactions and general ledger entries.
Compared to traditional bookkeeping, these tools can quickly identify discrepancies and flag errors or instances of potential fraud. Accountants no longer need to go line by line, manually reconciling the books.
And finally, automated accounting tools simplify expense reporting and reimbursement processes.
Employees can use mobile apps to scan receipts and submit expense reports that the solution automatically categorizes and submits for reimbursement.
How is automated accounting different from traditional accounting?
Automated accounting systems and traditional bookkeeping are like night and day. Automated accounting software can take on the task of scrubbing and standardizing invoices and reconciling Shopify sales, for example.
It may even integrate with multiple stores and sales channels and pull all data from each into your accounting system.
Automated accounting tools eliminate the need for manual data entry across the board. For example, managers no longer need to enter receipts to process P&L statements, as software can scan invoices and automatically build reports for them.
It’s also worth noting that traditional and automated accounting have different security risks.
A traditional accounting office must guard hard files and their local server the same way digital accounting software must be secured. Automated accounting software may also be subject to compliance regimes such as GDPR and PCI-DSS.
What are the benefits of automated accounting for growing businesses?
Automated accounting is especially promising for startups, small businesses, and midmarket growth sellers that want to grow quickly.
Accounting automation can help overcome some of the challenges of traditional bookkeeping while capturing previously unrealized efficiencies.
Reduce accounting errors
Accounting mistakes are common and costly. Payment errors, in particular, can significantly affect payments, especially among merchants with multiple locations or online storefronts, who work with lots of suppliers, and in AP teams with high turnover.
Double invoicing is another accounting problem where errors occur. One study found a small business that processes 450 invoices in a busy month duplicates at least six of them (a 1.29% duplication rate).
The average amount on those invoices was over $2,000, meaning that small businesses lost about $12,000 per month if they paid each duplicate invoice.
Automated accounting tools can eliminate data entry errors, duplicate invoices, and other payment errors that occur during manual accounting processes.
Work more efficiently
Automated accounting systems can provide significant time savings by eliminating manual data entry, calculation verification, report generation, and other related tasks.
“72% of finance teams spend up to 10 people-hours per week, or 520 hours per year, on AP-related tasks that could be automated, such as invoice processing, supplier inquiries, supplier payments execution, PO matching, new supplier registration, and payment reconciliation,” according to a Censuswide study.
What could your accounting team do with an extra 10 hours per person per week? The benefits extend beyond time efficiency. Your financial experts can spend more time on high-value tasks that help your company grow.
When implemented strategically, automated accounting tools can process more records in less time and at a lower cost.
There are a few applications of automated accounting that can lead to cost optimization and improve your bottom line.
- Automating invoice routing and approval saves time that you could spend on more high-value tasks.
- Centralizing spending data in one place makes it possible to find ways to cut overall annual expenditures up to 10%.
- Paying vendors on time with automatic payments allows AP teams to negotiate better value contracts with suppliers and vendors.
Coupled with how automation reduces invoice and data entry errors so that you can set up your team for long-term financial success.
How to transition to automated accounting
Small businesses and merchants that want the efficiency that comes with automated accounting solutions should start by evaluating the processes and tasks that take the most time.
Evaluate your existing accounting procedures, workflows, and systems to find manual, time-consuming, or error-prone activities. These are the areas where automation can help.
Next, find the right tool for your business. There are different platforms designed for different industries.
For example, Webgility’s ecommerce automation software is best suited for ecommerce sellers who want to automate things like purchasing, fulfillment, returns, refunds, and other workflows to reduce overhead costs and manual data entry.
Make sure to provide your team with plenty of onboarding and training to adopt any new automation software.
Develop a comprehensive implementation plan that outlines the steps, timeline, and responsibilities for transitioning to the new automated accounting system.
Ensure your team is familiar with the features, functionalities, and processes involved in the automated system. And lastly, consider a phased rollout approach that allows for testing along the way.
Implement your automation software to gradually transition away from what you were using previously. This transition allows for a smoother transition and minimizes disruption to ongoing accounting operations. As you go, ask for user feedback and identify improvement areas.