How does accounting automation solve the challenges of manual accounting?

Wonder how ecommerce giants like Amazon, Walmart, eBay, and many more have instant access to financial reports? Relying on outdated methods like manual accounting could have hindered their growth and innovation. 

Time-consuming data entries, high error rates, scaling challenges, real-time reports, and compliance complexities are some of the significant challenges that come with manual accounting. Plus, the hidden costs of a manual accounting system often go unnoticed, which can adversely affect your business's efficiency and profitability.

Here’s some good news! 

Automated accounting tools are here to rescue ecommerce businesses from these burdens. These solutions can effortlessly scale with you, adapting to your evolving business needs and allowing you to focus on growth and customer satisfaction. 

In this blog, we will discuss the problems with manual accounting, the hidden costs of manual processes in accounting, and accounting automation benefits. We’ll also conduct a comparative analysis of manual accounting and automated accounting. 

Without further ado, let’s get started!

What is manual accounting?

Manual accounting is the process of inputting information manually into a system rather than using an ecommerce accounting automation solution. This often involves recording business transactions by hand, using ledgers and journals.

It involves a lot of human effort and is majorly reliant on the accuracy and speed of the data entry personnel. The likelihood of human error increases with fatigue, lack of attention, or misunderstanding of instructions, which can hamper the data quality.

Manual accounting systems demand a rigorous quality control process to analyze and correct errors, which can be time-consuming and costly.

However, by opting for an ecommerce accounting automation software, you can streamline your business operations, reduce errors, and ultimately save time and money.

Manual accounting challenges

Imagine a dedicated employee painstakingly recording transactions on paper, and discovering hours later that a single misplaced digit has thrown off an entire report. This is just one of the many challenges that can arise from manual accounting.

Let’s know about some major challenges associated with manual accounting system-

1. Time consuming

Manual accounting can be extremely time-consuming. An average data entry operator takes several minutes to understand data and then put it into the system.

If the volume of data to be entered is in thousands or tens of thousands, manual accounting then becomes a tedious and time-consuming task. By just depending on manual accounting, you are trading hours of valuable time for accuracy that may not even be guaranteed.

Thus, opting for a great alternative, i.e. accounting automation platform, will ensure your work is completed in minutes, what normally would have taken days (or weeks).

2. Errors and inaccuracies

Small accounting mistakes may hurt your business. Even a simple typo error can lead to cascading failures, from internal team conflicts to financial discrepancies, which may put you into legal trouble and may cause a loss of client trust.

The worst part is that identifying and correcting these errors can be even more time-consuming. Moreover, it can be difficult to trace its source, particularly in growing companies where multiple hands touch the books.

3. Lack of real-time insights

One of the major hurdles in manual accounting is the absence of real-time insights. When you enter data manually every day, you will not have access to real-time insights that can help you make informed business decisions. 

For example, an online store started with just a few products and quickly grew to hundreds. As orders surged, the team found themselves overwhelmed by the tedious task of manually entering data into their inventory system.

The result? 

Delays in updating stock levels, missed sales opportunities, and frustrated customers. The lack of real-time insights not only affected their operational efficiency but also their bottom line.

4. Difficulty in scaling

As the business expands, the volume of financial data also increases exponentially, making it difficult to maintain accuracy and speed in manual accounting processes. Plus, more data means more workforce is needed, leading to slow and costly expansion. 

You can relate better with this example. Imagine a customer excitedly placing an order for a limited-time item, only to be informed later that it's out of stock due to a manual data entry error. The disappointment is tangible, and the trust in the brand diminishes.

Benefits of accounting automation.

Hidden costs of manual accounting system

Pouring your heart and soul to grow your business and later finding that the manual accounting system you rely on is draining your resources. Terrible, right? This isn’t just a minor inconvenience; instead, it can quietly drag your business down. 

That's why, before opting for a manual accounting system, you must know the roadblocks associated with it. Read on to know about them all:

1. Lost business growth opportunities

Manual accounting can result in inaccurate predictions that can be disastrous for your business. Remember, this accounting process can not only cause financial strain for your business but also lead to weakened relationships with vendors and customers.

Without real-time data at your fingertips, you might struggle to monitor and optimize your business's performance. Additionally, identifying which menu items are bestsellers or which marketing campaigns are driving traffic becomes quite challenging without the right data.

This lack of insight suppresses the ability of your business to innovate and grow. Instead, you will find yourself reacting to problems rather than proactively seeking opportunities.

2. Missing deadlines

Undeniably, manual accounting is a time-consuming and slow process. This can lead to delays in your business process, which will eventually affect the outcome. It not only consumes your valuable time but can also have a devastating effect on various other business deliverables such as order fulfillment, financial auditing and reporting, and customer service. 

Thus, when employees are bogged down by manual accounting, crucial deadlines can slip through the cracks. This can result in late payments, lost clients, and damaged reputations.

3. Customer dissatisfaction

Providing customers with inaccurate data or incorrect billing can drive your clients away. 

Whether it is order fulfillment or inventory updates, manual accounting processes make mistakes that strain your relationships with customers who rely on your precision and professionalism.

4. Regulatory issues

Hiring a workforce for handling e-commerce accounting means you will need to follow a set of labour rules, such as handling tax forms, giving benefits, etc., which adds to the cost. You also have to be vigilant that you do not miss anything.

Furthermore, manual data handling also increases the chances of data breaches, which may attract hefty fines and penalties. 

5. Employee Burnout

The pressure and demanding nature of manual accounting systems, including heavy workloads, tight deadlines, and lack of control, can lead to employee burnout.  

Spending hours on dull and repetitive tasks and struggling to meet deadlines can hamper productivity and morale, persuading your team to look for more fulfilling job positions. 

Finally, when you tally up all these hidden costs of manual accounting, the financial impact becomes apparent. The cumulative effect of lost opportunities, employee turnover, compliance issues, and error rectifications can cripple a business.

Manual accounting vs accounting automation (Comparison table)

Here is a detailed comparison table that will help you explore the key differences between both systems:

Automating your accounting process with Webgility 

This financial year doesn’t need to be a source of stress. Using Webgility, an accounting automation tool, you can eliminate manual accounting costs and make things easier. 

                                                          Automate your ecommerce accounting with Webgility

By automatically pulling and categorizing transactions from sales platforms and ecommerce marketplaces and syncing sales, inventory, fees, and taxes in real-time, this platform centralizes all your financial data.  

The best part? Tracking profit margins, sales performance, and other key financial metrics has become easier than ever.

Pairing your accounting solution with Webgility has helped more than 70% of its customers save up to 10 hours per week on manual accounting processes. 

Ready to eliminate the hidden cost of manual accounting? Start a free trial with Webgility today and ensure that it's the right fit for your business. 

FAQs

What is the error rate for manual accounting?

On average, manual accounting tasks are prone to an error rate of about 4%.

Which technique is used with manual accounting to increase efficiency and reduce errors?

Some of the widely used techniques to increase accuracy and reduce errors in manual accounting are-

• Optical Character Recognition
• Robotic Process Automation 
• AI and Machine Learning (ML) for Data Capture
• Automated Form Filling and Field Validation
• Data Deduplication Tools

What are some of the manual accounting errors you can eliminate with automation? 

Some of the errors that accounting automation can eliminate are-

• Typographical mistakes
• Inconsistent formatting
• Duplicate data entries
• Missing data fields
• Data transcription errors