Across different regions and sectors, the finance industry shares many similarities. Key responsibilities within accounting and finance include producing financial reports, managing accounting records, and tracking accounts receivable. The utilization of automated bookkeeping software has greatly facilitated these tasks, offering improved efficiency, accuracy, reliability, and compliance with established procedures over time.
It’s projected that the accounting industry in the United States will surpass $141 Billion in revenue in 2022.
What is Accounting Automation?
The automation of accounting involves the utilization of software to streamline extensive financial operations. Tasks such as accounts reconciliation, financial statement preparation, and financial data updates can be carried out without human intervention through advanced accounting software.
However, automating accounting functions does not imply a complete replacement of human involvement. Rather, it assists in automating traditional and time-consuming tasks, allowing the entire staff to concentrate on high-priority assignments.
Accounting Automation Use Cases
To maintain business continuity and strong relationships, it is crucial to promptly pay a multitude of invoices to vendors. Even seemingly minor payments, such as electricity bills, are essential to ensure an uninterrupted power supply to the office. In the manufacturing sector, timely payment of invoices for raw materials is vital to enable vendors to efficiently ship them to the recipient.
Any delay in invoice payment can have a negative impact on the brand’s reputation and place it at a disadvantage compared to competitors. Bookkeepers can effectively utilize automated accounts payable software to create predefined commands.
For instance, when an invoice is received from utility companies, it is labeled as “utility,” and the invoice amount is recorded in the “expense” section of the accounts chart. The transaction is then forwarded to the accounts payable department for processing and approval. This automation simplifies the process and ensures timely payment of invoices.
The record-to-report (R2R) process commences with identifying and inputting transactions from the books into the journal. Ensuring the accuracy of journal entries is essential, which necessitates verifying the precision of the underlying data. Manual data entry presents various challenges, including:
- Inaccurate Entries: Financial professionals may mistakenly record an amount in the books that does not correspond to the invoice number, resulting in errors.
- Tedious and Time-Consuming Nature: Manual data entry involves individually recognizing and approving each transaction. This process hampers productivity and can lead to frustration.
- Omissions in Recording Entries: In organizations dealing with numerous high-volume but low-value transactions, certain entries may be overlooked and not recorded in the financial books. Over time, these minor omissions accumulate and can result in missed reconciliations.
To address these challenges, it is recommended to implement automated bookkeeping solutions that leverage Robotic Process Automation (RPA). RPA replicates user interactions with the graphical user interface (GUI) and automates tasks without requiring further human intervention. Furthermore, in highly interconnected and automated ecosystems, automated bookkeeping solutions can integrate with a business’s other Enterprise Resource Planning (ERP) systems through Electronic Data Interchange (EDI), facilitating seamless data exchange and automated entries.
Through RPA and seamless exchange of invoice data, the bookkeeping solution can automatically generate rule-based entries in real-time, leaving a visible audit trail.
Handling Accounts Receivable:
Ensuring timely receipt of payments is equally important as paying vendors on time. The processing and handling of payments are interconnected, as there are numerous payments that require processing. When payments are received in installments, it is crucial for maintaining liquidity and accurately estimating cash flow so that payments are received promptly.
In cases where there are time gaps between the closing of financial records and receivables, adjustments should be made to entries for that specific fiscal period. This ensures that reconciliations are not overlooked and facilitates the accounts receivable aging process.
To simplify and streamline this process, it is recommended to leverage accounts receivable automation software. This software automates and streamlines the procedures by automatically recording the date of invoice issuance. It also captures essential customer data such as name, phone number, physical address, and email address, generating corresponding entries in the sales section of the accounts chart.
On the due date, the software integrates with payment processing software and utilizes workload automation tools to send customers a polite email, serving as a gentle reminder of their payment obligations. By utilizing accounts receivable automation software, businesses can enhance efficiency and ensure a smoother payment collection process.
Handling account receivable becomes more effective with automation software. This software streamlines and automates the process, recording invoice issuance dates and capturing crucial customer data. Incorporated with payment processing software and additional workload automation tools, ensuring timely payment collection by sending gentle reminders to clients on the due date. Hence, embracing automated bookkeeping solutions in 2023 is crucial for companies to thrive in the competitive landscape and achieve sustainable growth.