What Is Accounting Automation: A Quick Guide

Accounting automation is steadily becoming more popular across the finance sector, and for good reasons. Automated processes help finance teams eliminate repetitive, time-consuming tasks, leaving time for big-picture planning.

Still, working with emerging technology like RPA means that you need to make changes in your existing processes for a smoother transition. This is where a lot of enterprises struggle as they try to balance automation with human expertise.

In this blog, we dive deeper into automated accounting, explore its major challenges and offer strategies to overcome them.

What Is Accounting Automation?

Accounting automation is all about using technology to handle routine accounting tasks. It is often confused with finance automation, which refers more to the strategic side of financial activities such as budgeting and investment analysis. However, in accounting, automation instead focuses on day-to-day bookkeeping, tax work and generally getting your numbers right.

Traditional Methods vs. Automation

Traditional accounting methods are slow and full of errors. These processes have been traditionally done by humans and are only recently being replaced by automation, which allows for rapidness and a high degree of accuracy. 

For example, while manual account reconciliations might take days to complete, an automated system can perform these in real time, giving you constant visibility into any discrepancies. This clear contrast clearly displays how much time enterprises can earn back with automation, but also underscores its potential to free up valuable human resources for more strategic, analytical work.

Which Accounting Tasks Can You Automate?

Here are some common accounting tasks that you can automate:

• Bookkeeping: Automatically record transactions, update ledgers and create journal entries.
• Bank reconciliations: Match bank transactions with internal records to catch and correct any discrepancies.
• Invoice processing: Scan, read and log invoices into your system without having to enter details one by one.
• Payroll processing: Automatically calculate employee wages and deductions and manage payroll submissions.
• Tax compliance: Compute taxes and ensure that your records are ready for tax season.

Benefits of Accounting Automation

There are plenty of benefits to accounting automation, but accountants note speed and efficiency, error reduction, and task automation as the key ones. Overall, accountants are excited about automating manual tasks and free up their time for higher-level responsibilities.

Other benefits of automation include:

• Improved compliance: By reducing errors that come with manual work, you also improve compliance.
• Scalability: As your operations grow, you can scale your automation systems to fit your needs.
• Real-time reporting: Being able to look at data in real time helps you make better financial decisions.

The Relationship Between Accountants and Automation

When it comes to automation, there is a lot of discourse around how reliable it is and whether it can function independently from humans. There is no concrete answer for this – every fintech solution offers unique value, and some require more human input than others.

As of right now, there are automated solutions that can do repetitive, high-volume tasks in minutes, which frees up accountants’ time for more strategic work. Besides data entry, accountants are tasked with analysing financial trends, forecasting the economic state and more, which means taking manual work out of the equation helps them prioritise decision-making. For this, a different type of automation is used, more specifically, intelligent finance automation.

Challenges and Best Practices

As more and more accounting teams embrace automation, there is the question of how many tasks should be automated. We recognise that there is still a need for someone to verify that the information you are feeding an automated system is accurate. So, the number one challenge of accounting automation is accuracy.

The other challenges are related to cybersecurity, data privacy and regulatory compliance. Financial data is sensitive, making it a prime target for cyber threats. 

To maintain data integrity, businesses should implement best practices such as:

• Doing regular audits: Do periodic checks of the completed work, especially in the initial phases of the transition.
• Creating audit trails: Maintain detailed logs of all data transactions and changes. Audit trails help trace errors back to their source and are vital for compliance.
• Implementing security measures: This includes encryption, multi-factor authentication and compliance with rules and regulations that exist to protect sensitive data. 
• Doing regular backups and recovery tests: Schedule frequent backups and periodically test your recovery processes. That way, you’ll always have vital data stored for safekeeping in the case of a disaster.
• Setting user permissions: Limit employees’ access to sensitive financial data by setting authorised users. This helps eliminate accidental or malicious changes.

This combination of automation and periodic human oversight ensures that the data remains reliable and trustworthy, even as processes become more efficient.

How to Implement Accounting Automation

Getting started with automation is simpler than you think. Here’s a step-by-step guide to help you transition more easily:

1. Identify manual tasks: Look at your current accounting process and think about which repetitive tasks you could automate and the benefits that could bring in terms of saved time and resources.
2. Prioritise: Next, list the tasks by priority. Automate first those tasks that use up the most of your resources.
3. Research software options: Find a tool, such as Aico, that can automate these tasks. Look at the different financial close solutions and try a demo to see them in action.
4. Plan the transition: Once you’ve decided on the software, map out the whole transition, more specifically, how it will fit into your existing process.
5. Train your team: Make sure everyone knows how to use the new system. Allocate enough time and resources to train each team member and help them transition with ease.
6. Monitor and adjust: Once your system is in place, monitor its performance regularly. Tweak settings or workflows as you go so that you see constant improvements.

These steps will help you shift from manual to automated accounting without feeling overwhelmed.

Final Words

Automating accounting processes can help enterprises avoid human errors that can lead to compliance issues and security risks. It also provides real-time insight into all accounting processes, which allows you to confidently make time-sensitive decisions.

The transition carries its own workload, but you can make it easier with our step-by-step guide. The most important thing is to focus on what you need to automate and how you can do that as simply as possible.

Finally, you can overcome any of the challenges that come with automation by following our best practices.