A Guide to Automated Accounting: Benefits and Tips

Introduction

In today’s fast-paced business environment, accounting departments face increasing pressure to deliver accurate financial information quickly and efficiently. Manual processes are not only time-consuming but also prone to errors, which can hinder decision-making and delay financial closes. Automated accounting offers a transformative solution by leveraging advanced technologies to streamline financial operations, enhance accuracy, and boost overall productivity.

In this guide, we will explore the key benefits of automated accounting and provide practical tips to help you implement these technologies effectively. Whether you’re looking to improve reconciliation processes, optimize financial close management, or ensure compliance, this comprehensive overview will equip you with the knowledge to optimize your accounting practices and drive your business forward.

What is Accounting Automation?

Accounting automation refers to utilizing software to streamline and automate various accounting tasks, such as data entry, reconciliation, and financial reporting. It helps save time, reduce errors, and increase efficiency in managing financial processes.

Automation in accounting and finance has grown with AI and ML, enabling software to track, record, and customize data. By automating time-consuming repetitive tasks like data entry and calculations, it frees up time for the accounting teams to focus on other important responsibilities. While it doesn’t eliminate the need for human involvement, it allows the accounting team to focus on more valuable and strategic activities, such as budgeting or investment planning.

6 Key Benefits of Automated Accounting Systems

Automated accounting systems have revolutionized the way businesses manage their financial processes, offering a streamlined and efficient approach to handling everything from transaction tracking to financial reporting. By leveraging advanced technology, these systems reduce manual work, enhance accuracy, and improve overall productivity. Let us explore six key benefits of automated accounting systems, highlighting how they can help businesses optimize their financial operations, save time, and make more informed decisions.

• Faster turnaround: Automated accounting systems help save your accountant’s time and effort. Your accounting team can now give results quicker and with more accuracy. This scalability enables you to take on more clients and expand your market presence.

• Enhanced data accuracy: Data accuracy is critical to financing operations and maintaining a good reputation with clients. Even the most cautious and thorough professionals may make mistakes, such as misplacing a number or forgetting a decimal. Automated accounting helps reduce the possibility of errors and ensures better accuracy. For example, HighRadius Journal Entry Management automates the entire process of journal entry right from journal entry preparation to posting, resulting in a 40% increase in close productivity due to data accuracy. 

• Cost reduction: Accounting automation software helps automate mundane tasks, helping you save on costs. Automation can process more records in less time and at a lower cost. When using accounting software, you do not need to invest in a large accounting team to complete transactions.

• Comprehensive analysis: Accountants and AR analysts need relevant and accurate data to track trends, identify fraud, and calculate various metrics that indicate a business’s financial strength. Data collection and compilation can be made easier with automation. Self-service analytics features in automated accounting solutions allow even non-IT staff to create reports and visualize data easily. For instance, by leveraging Transaction Matching organizations can automate data extraction, match line-level transactions from two or multiple data sources using AI-based rule discovery, resulting in a 90% transaction auto match rate. 

• Better security: Traditional accounting systems involve a lot of paperwork, like large ledger books, journal entry records, and more. There’s a high chance of these papers getting lost, leading to inefficiencies due to the loss of backup. Automated accounting systems help ensure that data is organized and stored securely on the cloud or in on-premises data centers.

• Swift data retrieval: In pre-digital days, hundreds of paper-based files and books were stored in rows of cabinets. To extract a document, you had to scout through bundles of records. This is a tedious way to search for information. With automation solutions, locating and retrieving data is easy. You can search with the file name, owner name, or other meta tags to locate the document. Archiving data is also easier and less expensive with automated accounting systems

What are the Challenges of Manual Accounting?

Manual accounting presents several challenges that can significantly hinder the efficiency and accuracy of financial management within an organization. Below are some of the key challenges associated with manual accounting:

• Time-consuming processes: Recording and verifying transactions manually takes significant time, especially during peak financial periods such as month-end close.

• Prone to errors: Human errors, such as incorrect entries or missed transactions, can lead to inaccurate financial statements, resulting in regulatory and legal issues. They also impact stakeholder and investor confidence about the organization.

• Lack of real-time data: Delays in updating financial records prevent access to real-time financial information, crucial for decision-making.

• Limited scalability: As businesses grow, the volume of transactions increases, which makes the manual processes increasingly inefficient and error-prone. Manual processes are unable to handle this transaction volume, resulting in high error probability.

• Security risks: In manual accounting, the physical records are vulnerable to theft, loss, or damage, with no encryption to protect sensitive data. However, when organizations leverage solutions such as HighRadius, such security risks are minimized as it uses advanced encryption and access controls to keep your financial data secure. Additionally, compliance with industry standards such as GDPR, ISO, PCI DSS, HIPAA, and SOC ensures that your data is both private and compliant.

• Difficulty in maintaining compliance: Keeping up with changing regulations is harder with manual systems, increasing the risk of non-compliance.

• Inefficient audit trails: Manual systems often lack clear audit trails, complicating the auditing process and tracking financial history. By leveraging automated solutions such as HighRadius Financial Close Software, organizations can leverage features such as Close Checklists, that have ‘task logs’ to help track all changes made to every close task in a chronological order. Additionally, accountants can add all collaterals – supporting documents, comments, and web links – to their task for auditors to have all information handy.

• High costs: Hidden costs from errors and inefficiencies make manual accounting more expensive over time.

6 Accounting Tasks you Need to Automate Right Now 

In today’s fast-paced business environment, accounting departments are under increasing pressure to improve efficiency and accuracy while managing growing volumes of financial data. Manual accounting processes are not only time-consuming but also prone to errors, which can delay critical financial reporting and decision-making. To keep pace with modern business demands, automation has become essential. By automating key accounting tasks, businesses can streamline operations, reduce errors, and free up valuable time for more strategic activities. Let us explore six accounting tasks that you need to automate right now to enhance your team’s productivity:

• Payroll processing: One of the key functions of finance teams is to manage payrolls and payouts, which requires great attention to detail. Payroll analysts spend hours going through employee tax records and rates to create accurate reports. Automating the payroll function starting with automated payroll journal entries can save your team much time and effort. It also ensures the accuracy of payroll reports, leading to reduced disputes and higher employee satisfaction. Whether dealing with fixed-pay employees or hourly freelancers, automation solutions help directly deposit funds into employees’ bank accounts, calculate pay, sync with time-tracking software, handle payroll taxes, and generate filings automatically.

• Purchase management: When companies purchase goods or services, they usually have to deal with a lot of paperwork, from purchase orders to contracts. Purchase order automation ensures that nothing is misplaced and that all needed paperwork is filled out correctly. Accounting system automation software offers purchase management features that help successfully automate repetitive, low-value processes such as purchase order creation, payment processing, etc. You can shorten the procure-to-pay cycle, save personnel expenses, and eliminate errors by automating your purchasing process.

• Tax compliance: Tax season, like monthly financial close, is a particularly stressful and labor-intensive period for businesses. Tasks pile up quickly as everyone races to collect the open accounts. The following are some of the common challenges encountered during this period:
  – Error detection, verification, and correction
  – Maintaining compliance with tax deductions
  – Retrieving missing invoices and receipts lost during the transfer of data from one system to another
  – Identifying anonymous payments

• Expense management: Collecting expense receipts from co-workers is often as difficult as tracking delinquent customers for payments. Some of them may have lost their receipts while others might have incomplete ones. Automation software makes it easier to collect, transfer, and monitor expenses. Corporate credit cards can also be added to the expense tracking software to capture expenses and receipts automatically. Employees can scan their receipts and upload them on the portal. The program then extracts the information and sends it to your accounting software, making it easier for your finance team to close the accounts easily.

• Accounts payable (AP) and accounts receivable (AR) processes: Accounts payable and accounts receivable significantly affect your company’s cash flow. They are both integral components of your cash flow statement. Mismanaged AP results in high costs for the business and a bad reputation with vendors. On the other hand, companies that fail to manage their AR, are exposed to the danger of not getting paid on time, leading to working capital challenges. To optimize accounts receivable, you should track pending payments, remind customers to pay on time, and identify high-risk customers as a top collections priority. 

• Cash visibility and forecasting: Accounting professionals hold the keys to crucial company information and help shape the business’s strategic decisions. As a result, their ability to collect and present data to the leadership teams is vital. Cash visibility is another important factor that businesses need to consider when making strategic investment decisions. F&A teams should use modern accounting software solutions to forecast cash flows, generate trend reports quickly, and track key metrics such as aging accounts, sales forecasts, and expenses. Software solutions can compile data from multiple sources quickly, thus helping you prepare well-rounded reports.

What are the Challenges of Automated Accounting?

While automating finance and accounting tasks offers many benefits, there are certain short-term risks and challenges associated with it. To ensure effective implementation, organizations should focus on some of these challenges to solve them early on:

• Complex software interface: Automation of certain accounting processes can sometimes be too sophisticated or expensive for some firms. These bulky apps might be tricky to understand and navigate. However, automated accounting solutions allow you to choose from various tiered plans based on your demands.
• Time-intensive training period: When you transition to automated accounting, you probably need to train your employees on how to use the software. Unfortunately, training time may differ from person to person, impacting the implementation timelines. causing the solution to be implemented slowly.

• IT implementation: Technical problems can occur due to operating systems, internet connectivity, or software glitches. While the software can address some issues, IT support may be necessary. System downtime, caused by server issues, disrupts operations and adds complexity to tasks.

• Data migration and integration complexities: The accounting software sometimes may not be able to read your database correctly or may skip out on some parts, causing discrepancies in the newly migrated database. It is also possible that it doesn’t integrate with your ERP or CRM to share data. However, solutions such as HighRadius Record to Report seamlessly integrate with leading ERPs like SAP, Oracle, Microsoft Dynamics 365 and many more. These integrations help extract data from your ERP and post journal entries back to it automatically.

• Regulatory compliance issues: If there is an error in your accounting software, it may produce inaccurate financial reports, which may lead to legal violations, risking fines, and sanctions.

6 Steps to Automating your Accounting Process

Switching to accounting system automation is inevitable as businesses go digital. Here are a few tips to help you successfully implement automated accounting software solutions.

• Assess your current accounting process and identify areas for improvement.

• Look for the best accounting automation software that fits your business needs and is within your budget.

• Choose accounting software that provides you with customized invoice templates and integrates well with your ERPs, banks, and so on.

• Assign a project owner who can create and manage your workflows so that data migration can be more accessible.

• Provide your team with proper training and the necessary time to get familiar with the software.

• Schedule a transition period and notify all staff members affected by the change, notably the CFO, your accountant, and the finance department.

How Can HighRadius Help Organizations Unlock the Power of Automated Accounting Software?

HighRadius offers organizations a comprehensive Record-to-Report (R2R) solution, leveraging cutting-edge technology to transform accounting processes. With end-to-end capabilities, it streamlines and automates various workflows, resulting in a remarkable 40% close productivity improvement.

1. Financial Close Management Software: Reduce peak load and gain control of your month-end close and reduce days to close by 30%.
2. Account Reconciliation Software: Leverage out of the box AI transaction matching rules to automate and streamline the reconciliation process. Achieve up to 90% transaction auto-match rate and 95% journal posting automation.
3. Anomaly Management: AI/ML-powered Anomaly management to proactively identify errors and omissions in the source ERP data and transition to a continuous close by resolving 80% anomalies.

The HighRadius Record-to-Report suite empowers organizations to achieve optimal efficiency through advanced accounting technology, enabling a seamless transition to modern accounting practices. With a powerful AI-driven platform, it revolutionizes accounting processes, enhancing efficiency, accuracy, and overall approach to accounting.

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