A CFO guide to accounting automation: impacts, benefits, and tips
Fast-growing companies and startups must stay up on the latest technologies in order to scale. However, when building their stack, they often forget about accounting technologies. This is a strategic mistake.
Finance and accounting are crucial to push companies forward and make the right business decisions. It means implementing the right stack for finance teams as well.
One of the main accounting technologies your business needs to thrive is accounting automation. Automating the most manual and intensive accounting tasks will save you time, reduce costly errors and make your business a more attractive place to work.
We hope that this guide on accounting automation will help to further understand: what it is, why it's crucial, and how to implement it.
What is accounting automation?
What is accounting automation? Accounting automation entails partially automating accounting functions and accounting processes; however, it does not mean that you are getting rid of Bob or Steve from your accounting team. It does mean that you are automating part of Bob’s job so that he can focus on the more important parts of his work.
Accounting automation entails taking the most manual elements of an accounting service functionality and improving them so that they are done automatically, often instantly. These improvements are intended to allow business leaders to have access to more accurate information and help finance teams to focus on more pressing challenges.
What are the challenges of manual accounting?
The technological advancements in robotic process automation (RPA), accounting software, artificial intelligence, and machine learning make clear the challenges and inefficiencies in manual accounting. These challenges include but are not limited to, human errors, the waste of time, and lack of security. Inefficient accounting methods can make employees spend countless hours on repetitive tasks, instead of working on business matters that would greatly benefit the organization. In addition, these challenges may cause data error and imprudent decision-making due to miscommunication as well as misinformation.
The benefits of accounting automation
Here is a list of the many benefits and advantages associated with accounting automation:
Huge time saver
Save time by streamlining time-consuming work functions. Imagine a situation in which Carol from accounts receivable no longer must spend hours writing the same past due invoice reminders to various customers. Imagine now that Carol has completed that task with the click of a button and can now focus on more pressing matters such as resolving seriously past due accounts.
Reduce needless errors
Errors negatively affect decision-making, financial data, and financial systems. Accounting automation reduces error by using sophisticated software to input data and ensure that the financial functions within a company operate smoothly. This reduces the fear that Bob from accounting will make a human error that annoyingly delays the year-end close.
Save a ton of money
You know the old saying ‘Time is money’. With automation, you’ll not only remove time-consuming tasks, but you’ll also avoid costly errors, improve internal processes and focus on improving cash flow. Eventually, this will help the overall financial health of the company.
Higher productivity & improved profit margins
Profit margins are improved with the simplification of a routine task. For example, if you automate part of your A/R processes, like automating first email reminders to smaller accounts, you’ll have time to send highly personalized reminders to accounts that are in the 30s to 60s days late bucket. You’ll be able not only to be more efficient at cash collection but also understand why these accounts aren’t paying. In the long term, this will help solve underlying disputes, avoid bad debt and help to build stronger customer relationships.
Improved data accuracy
One aspect of the human condition is making mistakes. On the other hand, the beauty of accounting automation software is that it makes very few mistakes, especially when coupled with artificial intelligence.
Automated systems use advanced security features such as encryption technologies to enable firms to securely store financial information. In addition, it helps to minimize risks by allowing business leaders have more control over which individuals in their organizations have access to specific information.
Acquire valuable insights from comprehensive analytics
Besides providing better organization and security, accounting automation also allows for quick presentation and distribution of precise financial data. All reports are available for anyone in the company that needs them, helping simplify the reconciliation of audits and records. This helps provide CFOs and business leaders with a more accurate means to analyze trends, variances, and predictability.
Improve professional development & the well-being of your employees
Accounting automation provides an opportunity for career growth. Not everything can be automated, and businesses will always need human judgment and knowledge. Automated systems will remove frustrating tasks from the accountant job, leaving room for more accounting management and strategy. Your finance team will be more satisfied and happier with their job.
Improved user experience and attract talents
Employees’ experience is crucial, especially for fast-growing companies that need to attract top talents. Building the right finance stack with automated solutions means making your company more attractive to these talents. You’ll provide them with the best working conditions and win over the competition to hire them.
Improve cash flow management & avoid potential cash flow crises
Triggering payment and invoicing automatically will enable finance teams to handle AP and A/R processes much faster and thus improve cash flow management. Real-time analytics and dashboard provided through automated solutions will let finance leaders spot where they’re spending the most, and where cash will be expected. It will help them get a full picture of their cash flow and let them make smart decisions quickly.
Promptly prepare records for tax deductions & readily simplify tax filing
Accounting automation allows organizations to compute and prepopulate data while securely maintaining important financial documents. Thus, when tax season comes around, companies are readily able to produce and generate financial documents at the click of a button.
What accounting tasks can be automated?
When implementing accounting automation don’t go crazy. Start by automating basic transactional accounting tasks. You do not have to automate every accounting function at once. Communicate and be transparent with your accounting team and finance professionals. Explain to them the benefit of accounting automation. Elaborate that the software is intended to reduce the time they spend on repetitive tasks so that they can spend more time on work that adds value to the company. Below are four examples, basically, all redundant tasks that should be automated.
- Procurement - Procurement involves a lot of documentation and paperwork. Many processes such as purchase order, invoice management, vendor management or contract approval can be automated, leaving room to build stronger relationships with suppliers.
- Payroll – There are many basic payroll tasks you can automate now, such as: calculating hours and wages, handle payroll taxes, or transferring money to employees’ bank accounts. Payroll automation also has the advantage to enable team member Self Service by giving them autonomy on updating their personal information or view their paychecks easily. This helps streamline your payroll process, limit error and free some time for your payroll specialist.
- Expense Processing - Expense processing and reports are time-consuming and painful processes that nobody likes. The good news is that you can easily automate processes of recording, tracking, approving, and paying employees’ expenses using the right automated solutions. This will help maintain compliance, and provide better tracking of expenses.
- Cash Collection – A/R automation doesn’t only mean automating tedious payment reminders. At Upflow, we believe cash collection is a team effort. Automated solutions for A/R also mean optimizing internal processes and improving collaboration across teams.
How to implement accounting automation?
1. Choose the right accounting software
Switching to automated accounting starts with choosing the right accounting software. Many accounting software will enable you to implement basic accounting automation and that's where you should start. Choosing your finance stack must be a business decision as accounting and finance are meant to help business thrive. So when you choose accounting software, make sure you involve leadership and the business team.
Here are six concepts to contemplate when deciding on accounting software (for more, check out our article on how to select the right accounting software for your company.)
- Choose a transparent and open service – When deciding on a financial stack, it is important to consider the future needs of the company in terms of accounting services and finance functions. Search for an accounting automation system that is open and compatible. Remember to be forward-thinking, and live in the future, build your stack for now and consider challenges that lay ahead.
- Compliance with local law – You must choose a solution that complies with your local tax needs and accounting standards. Look at the most commonly used software in your region and make sure they comply with local regulations. For example, if you’re starting a business, and you’re considering QuickBooks or Xero, choose QuickBooks if you’re in the US as it is most likely to comply with all US local laws. If you start a business in the U.K. or APAC region, then Xero would be a better solution.
- Functionalities - Before choosing software, examine the features and needs that are important to your organization. For example, Netsuite and QuickBooks are both great solutions, however, they provide completely different levels of functionalities. If you're a small business needing basic accounting functions, Quickbooks will a good option. However, if you’re running a larger or fast-growing company and need to handle several subsidiaries or multiple currencies, Quickbooks won’t be a good fit for you. In that case, you’d instead choose an ERP like NetSuite.
- Use cloud accounting - Cloud accounting enables you to log in to an always-up-to-date online solution, with all data safely stored on a cloud server. It is a must because the cloud is readily accessible so that important information is easily available and difficult to lose. Here is an article that will provide more detail on this topic.
- Customization – Decide on accounting automation software that you can customize. For example, NetSuite ERP (Enterprise Resource Planning) comes in one simple to use platform so that you can tailor it and adapt it to your organization.
- Pricing – Examine your budget too and consider the monthly subscription fee for accounting automation software. QuickBooks is a relatively cheap and reliable software that many companies begin with. NetSuite is a more complicated and expensive piece of software that may become more financially feasible down the line as the company grows. The best approach is to select the software that meets your company’s needs and that you can grow with.
Remember to do your due diligence when searching for an accounting automation system. Consult your business partners and corporate associates to gain some information. Ask them about the challenges they come across when using specific accounting software and ask about the benefits and what they like most about the automated accounting system.
2. Use native automation features in your accounting software
Once you've chosen the right software, you can take advantage of its automation features. If you need more than just basic automation, software like QuickBooks or Xero will integrate with hundreds of applications to help you implement more advanced automated processes. That’s why it's crucial to choose an open system. Both software integrates with Upflow which enables you to automate the collection functions of your finance processes.
3. Use dedicated accounting automation solutions
As you grow, you might need to implement more and more automation. Especially to specific areas of your accounting processes that are time-consuming. For example, fast-growing companies are often, at some point issuing hundreds of invoices per month. At this stage, implementing A/R software into your finance stack is a must-have.
Will accounting be automated?
Many people think of accounting automation and imagine science fictions movies in which machine learning becomes so advanced that robots can overtake human beings and control the world. Do not dread the advance of artificial intelligence, as it exists to facilitate accounting systems within an organization so that employees can do more.
The benefits of account automation software mean companies can readily scale their business. Business leaders appreciate the improvements in data accuracy and the expedience accounting automation software provides, as it enables them to make clear and concise business decisions.