Benefits of Accounting Process Automation
Automation is a relatively new talk of the town. After massive automation in the manufacturing sector all over the world, automation enabled by AI is set to hit all the industries that we know. It is said that about 50% of the present workforce will be jobless unless they upskill in the next few years. And the remaining 50% will be working in a job that doesn’t even exist in the present. This might be challenging for the workforce out there. From a different perspective, this should actually be a motivation for people to stay updated in the fast-changing world. For companies and businesses, automation is a boon. Once they invest in automating the tasks and processes that were once done manually by the workforce, they can save a lot on time, resources, money, and exponentially increase the profits. Companies have started to understand the true potential of this and are slowly transitioning into performance, enabling process automation throughout their services. Automation first started with the manufacturing sector; machines were built to build stuff that that was originally built by humans. These are examples of fixed programmable automation. It requires a huge initial investment, and it works best for products that have a huge demand, like FMCG, cars, or mobile phones. The investment can be split across a huge number of units that are sold in the market.
Then with the advent of new technologies, automation hit the other markets as well. In several areas like; analytics, customer support, ticketing, marketing, hiring, etc., you can see automation across the processes. In this article, we are discussing the accounting software solutions that can be taken advantage of to automate the financial processes and accounting.
Some of the top accounting software solutions available today are capable of performing all the accounting tasks more efficiently.
Process Automation and Accounting
Accounting and finance have a lot of processes that are well defined, structured, and repeatable. As compared to other industries like information technology, accounting practices, and processes have not changed much in the last fifty to a hundred years. This makes it easier to implement process automation in accounting as compared to the other industries. When all the companies in the world are running a rat race for survival to be the best in the world, the ones that remain on the top would be the one that innovates. By automating accounting processes and financial functions, more than just bookkeeping and managing taxes, the companies will get a deeper understanding and insights into huge market data that can be utilized for business performance use cases. These are some of the things that these top companies are trying to leverage using accounting process automation.
Automating an accounting process is no different from the robotic process automation applied to any other industry by software solutions. The early adopters of the robotic process automation have performed better than most of their competitors. Use cases of RPA are immense. Banking, retail, health care, marketing, property, etc. are just a few of the use cases.
The traditional accounting practices have a lot of manual tasks that require plenty of efficient labor, and there are chances for a lot of inaccuracies and human error, which may incur even more effort to verify and rectify. Manual processes are mostly related to journal entries, collections, account receivables, billings, transactional data, etc. All these tasks are continuously repetitive or recurring and mundane for employees. On top of that, many big corporations have millions of such transactional data, all of which add to the chances of errors piling up and loss of money. By implementing robotic process automation in finance and accounting, bots take charge of such operations, and the chances of human errors are nullified. It makes the whole process more productive, which would enable corporations to move the workforce previously engaged in manual activities to more high performing job roles, thereby reducing overheads and increasing profits.
If you look at an example process given below, it will be easier to understand:
- John has an invoice from the vendor that he needs to make payment to.
- Invoice is received in John’s email. (Gmail or Outlook)
- He will need to first create a vendor in his accounting system.
- Enter name, account details, billing address, etc. (These details will be pulled out from the invoice in his email client). The data is saved in the accounting software like Tally or Quickbooks.
- For internal record keeping, John also saves this data in a spreadsheet.
- After completing all these, payment is released to the vendor.
- Once payment is released, the same details are copy-pasted into the email client, and an email is sent to the vendor.
Several accounting processes can be automated, like opening the email and viewing the invoice. The data from the invoice can be automatically entered into the accounting software. Even the mouse clicks and navigations can be taken over by the automated bot. Finally, when the predefined process is done, the bot will also send a confirmation email to the vendor. Here, only a minimal intervention is required from John, maybe only to initiate the process and release the payment. The rest will be done by the bot.
Let’s have a look at some of the benefits of the accounting process automation
- Increase in productivity.
When the known processes are automated, software bots are taking in charge, and unlike humans, bots do not need to rest. They can go on 24 hours, 7 days a week, and all throughout the year. This is a significant productivity boost that businesses would love.
- The efficiency boost
When processes are automated using robots, the automated software can click through multiple pages, enter data, verify transactions and do a lot more in a matter of just seconds, which would usually take 4-5 employees to complete in a single day otherwise.
- Reduced errors
The work done by the bots is more accurate than human labor. Even though setting up and making a bot that functions properly requires a lot of effort and testing with data, once set up, it is always more accurate than its human peers.
In order to scale operations done by a human workforce, the company will need to hire new employees, train them, and set up operational processes in place to reduce errors and overheads. For scaling an automated accounting system, it is hassle-free, and only dependencies would be on the task to be performed, which can be easily changed by adjusting the rules by an engineer.
- More secure
Many companies deal with a vast amount of confidential accounting data. Accounting firms end up going through a lot of legal hassles in loss of data and ensuring that their employees stay compliant with the company’s confidentiality rules and regulations. With a bot in place, all these can be eliminated.
- More adherences to compliance
Finance is an industry which needs to be compliant on a lot of government and tax-related rules and regulation. Any non-compliance will be highly penalized and might even lead to millions in fines and penalties. As a company, you never want to get into that trouble. With machine intervention, it is easier now to adhere to compliance, and it is a big-time relief to companies.
- Increased cost saving
As you all know, the above benefits come with an added advantage of cost-saving. Most of the labor-intensive tasks were previously outsourced to other companies and have had a lot of human dependence. With the elimination of such tasks, a lot of money is now saved.
- Improved customer success
Since most of the labor-intensive accounting process are automated, the human resources used for such tasks can now be put to better use, for instance, to give better customer support to the existing customers and increase the chances of their success. The clients feel valued, and hence your value goes up as a service provider.
We have seen the many benefits of automation, and when this form of digitization used by the companies, it will help them gain a significant advantage versus their competitors. Now the question is what the main functions are to automate so that there is minimal disruption in the processes but will ensure the maximum benefits for businesses.
- Expenses automation
Previously, the accountants had to go through hundreds and thousands of bills to track expenses, and this was indeed a never-ending daunting task. Using any service that can track the employee expenses digitally can make a huge difference. Most of the available services sync easily with all top accounting software, reducing the accountant’s hurdles in data entry.
- Payroll Automation
Payroll has to be processed every month-end, and payroll management is a fixed process that needs to happen at the end of every month. Most of the time, a single human resource manager will be handling all this, and scaling it up manually comes with its own challenges. Automating this would take the stress out of this process.
- Managing credit cards
Many tasks starting from the application of a credit card to background verification of the applicant, creditworthiness check, KYC checking, issue or cards, cancellation of cards, managing the interests and fees and processing payments, all used to take two hours at the least by any employee for completion. With the automation of such tasks, companies can speed up all these operations and reduce the operational costs associated with these. It also leads to better customer satisfaction as they don’t have to wait for hours or sometimes even days to get any of the processing or tasks done.
- Account Receivables and Payables
With proper implementation of RPA, there will be better transparency in account receivables and payables. The addition of vendors, their KYC and approval processes, and payment management can be automated as far as the account payables are concerned. Creation of management of customer accounts, credit reports, and approvals and receiving payments can be automated with regard to account receivables.
- Employee Benefits
When you hire your employees, and there are a lot of them, you need to manage their benefits properly. All the benefits have a cost associated with it, and it is important to link it to your accounting software. Automating the benefits will do the trick. After automating, you can also track these by generating reports out of the system suited to your needs.
A usual reconciliation process involves reviewing multiple data from the account statements, spreadsheets, and your accounting systems to cross-check. With proper implementation of RPA, all these will be done by the bots, which will compare any discrepancies in the invoices automatically in just a matter of seconds or minutes.
Traditional bookkeeping involved manually entering each value in the account statement into a spreadsheet or accounting software. With modern software, it is much easier with a lot of bank API integrations available. The data from your bank statements are fetched automatically and entered as transactions in your accounting software. With this automation readily available, all the accountants need to do organizing and categorizing it correctly.
It is true that it’s not mandatory to implement robotic process automation in your organization. If you are a startup and if you have only basic accounting processes in place while you are still figuring out your business, then yes, you can procrastinate the RPA implementation for later. But for the larger organizations and corporations, it is a question of survivability, whether they want to be in existence as a company after 5-10 years. The world has reached a point where, as a business, if you are not innovating to stay on top, you will start losing business, and all your clients will slowly drift towards your competitors who have adopted the best practices. Accounting process automation is no different. All the big corporations have started to see their value and are soaring high on productivity and profits. As a business manager or strategist, now, it is your decision whether to take this bold move.
Invoice Meister, Banana Accounting, LedgerLite, Advanced Accounting, Wave are some of the top Accounting Software listed by GoodFirms. Accounting process automation has numerous benefits. Accounting Software solutions are packed with features that can automatically handle several accounting tasks, right from accounts payable, bank work reconciliation, billing, invoicing, budgeting, expense tracking, forecasting, funding, payroll, financial reporting, taxing, and so on.
Check out the entire list of top accounting software solutions, and choose the one that fits your business size. If you wish to try before investing in one, you can choose the free and open source accounting software solutions.
This News Story blog discusses the importance of technology and software in accounting. It highlights the top technologies that can revolutionize the accounting industry. ... continue reading