What is automated accounting & why do you need one?

Are you part of th​​e 65% of small business owners who want to make more use of AI in everyday life? Familiarizing yourself with accounting automation tools is a great place to start. 

From automating data entry and invoice generation to financial reporting, automation can significantly boost efficiency and accuracy. Our guide will introduce you to the world of automated accounting, exploring its benefits, potential drawbacks, and essential tips to help you make informed decisions for your business.

How automated accounting systems work

Benefits of automated accounting

Potential challenges of automated accounting

6 Steps to automate accounting

Navigate midsize business challenges and opportunities

What is automated accounting FAQ

How automated accounting systems work

Automated bookkeeping and accounting facilitates everyday accounting practices, dramatically increasing the functionality of these programs. By leveraging artificial intelligence and other sophisticated functions, accounting software can do everything from tracking and recording transactions to generating financial statements. 

This means that repetitive tasks like data entry and checking calculations are taken care of, so accounting professionals can focus on big-picture duties. While Microsoft Excel is an undoubtedly useful tool, it’s time to upgrade your accounting. Advanced accounting software options like QuickBooks can revolutionize how your business handles accounting processes.

Automated accounting vs. manual accounting

The main difference between automated accounting and manual accounting is that software is responsible for completing virtually all aspects of your bookkeeping and accounting. Instead of having a fully staffed accounting department or contracted CPAs to help you with these tasks, the software does most of the work for you.

Automated accounting doesn’t completely eradicate the need to hire an accountant, but it may minimize your reliance on one. Although accounting software can streamline all the minor tasks necessary for accounting, an accountant’s perspective can still be valuable to your business. For example, an accountant can interpret insights from your automated accounting software and help you make informed decisions about your business moving forward. Client advisory services (CAS) practices go beyond bookkeeping, offering clients future-proofing business insights.

Benefits of automated accounting

From being more efficient and organized to simplifying tax season, it’s time to learn why accounting and automation go hand in hand.

Boosts efficiency 

Switching your accounting system over to automated accounting can save you the time it would take to enter information, check your calculations, run reports, etc. And that’s not to mention the domino effect it will have on other workflows. Using external financial services means fewer billable hours and, for in-house accounting staff, increased productivity.

Offers valuable insights

Instead of having interpretations of your financial data left up to you or an accountant, you can now access detailed, easy-to-read reports. Having a good understanding of your company’s financial situation is critical to better decision-making and long-term stability.

Simplifies tax time

Filing taxes, whether on a personal level or business level, is something most of us dread. However, with automated accounting, filing business taxes becomes much less of a burden. Track mileage, store receipts, track sales taxes, and maximize deductions, all with QuickBooks accounting software.

Keeps your finances organized 

Automated accounting systems provide a centralized location for all your financial documents and data. No more piles of receipts or searching through folders for invoices. With everything stored digitally, you can easily find what you need when you need it, improving efficiency and reducing the risk of lost or misplaced documents.

Prevents cash shortages

Many business owners struggle with cash flow management, which can be detrimental to their livelihood. Understandably, cash flow management can be difficult, especially if accounting is done incorrectly. By automating your accounting with sophisticated software, you can access tools that will make forecasting your cash flow much easier. With real-time data analytics and reporting, you can get accurate cash flow insights at a glance.

Reduces errors

Manual data entry can be rife with errors, especially when recording a large number of transactions all at once. By integrating your accounting software with other tools, data can be automatically updated, ensuring that it is recorded correctly.

Provides quick access to information

Automated​​ accounting revolutionizes information accessibility by automating the traditionally time-consuming tasks of data entry and reconciliation. This automation drastically reduces the potential for human error, ensuring data accuracy and reliability. 

Real-time data updates are a cornerstone of auto accounting, providing stakeholders with up-to-the-minute financial insights. 

These insights are readily accessible through intuitive dashboards and reports, empowering informed decision-making. By swiftly identifying trends, opportunities, and potential risks, businesses can optimize their operations and strategic planning. 

Protects your financial data

Security is a paramount concern for businesses of all sizes, and automated accounting systems offer robust protection for your sensitive financial data. These systems typically employ advanced security measures such as encryption, access controls, and regular updates to safeguard your information from data security threats. 

Pairing automated accounting with a cloud-based software solution is much more secure than paper and pen methods. As you know, keeping financial data safe is essential because of the increase in cyberattacks over the last decade. Not only is cloud storage safer, but it’s also accessible from anywhere, allowing you to keep tabs on and share financial information at any time from anywhere.

Cloud-based accounting solutions often have multiple layers of security, including:

• Multi-factor authentication
• Data encryption
• Security notifications
• Partnerships to build better security
• A single destination to manage data
• PCI compliance

This comprehensive approach helps to protect your financial data from unauthorized access and data breaches.

Adapts to your growing business 

As your business expands, your financial needs will evolve. Automated accounting systems offer flexibility and scalability to accommodate your changing requirements. Whether you're adding new employees, opening new locations, or launching new products, your accounting software can adapt to support your growth. 

Many automated accounting systems integrate with other business applications, such as CRM and e-commerce platforms, providing a comprehensive and efficient financial management solution.

Potential challenges of automated accounting

It’s true that accounting automation can improve your workflow, however, there are always challenges present when introducing new software into your business processes. Onboarding might be a pain, but automating accounting will save time and reduce errors once set up properly. 

Potentially over-complicates accounting 

Some accounting automation software can introduce unnecessary complexities into financial processes. Packed with features that may not be relevant to every person starting a small business, these systems can create confusion and inefficiency. QuickBooks, however, offers expert guidance whenever you need, in-app tutorials, support resources, and the option to connect with certified accountants who can offer tailored advice and assistance.

Potentially requires a lengthy onboarding

Implementing an automated accounting system often involves a significant time investment for both employees and management. The learning curve can be steep, requiring extensive training in system functionalities, data entry procedures, and report generation.

This process can disrupt daily operations and reduce productivity during the transition period. Furthermore, ongoing training may be necessary as the system evolves or as employees change roles.

Data migration can be complicated

Transferring financial data from existing systems to an automated accounting platform can be a complex and time-consuming process. Data inconsistencies, errors, and formatting issues can arise during migration, leading to inaccuracies in financial reports. 

Moreover, integrating the new system with other business applications, such as payroll or a CRM, can present additional challenges like API compatibility, data synchronization issues, and potential disruptions to workflows. 

May cause compliance issues 

While automation can improve accuracy, it's essential to ensure that the system complies with relevant accounting standards, tax regulations, and industry-specific requirements. Errors in data entry or system configuration can lead to compliance violations, resulting in penalties, audits, and reputational damage. Businesses must invest time and resources in system validation, testing, and ongoing monitoring to mitigate these risks.

Potentially requires IT support 

Implementing and maintaining an automated accounting system often requires IT expertise. Issues such as system integration, software updates, data security, and troubleshooting may necessitate IT support. This reliance on IT can increase costs and create dependencies, potentially disrupting financial operations if IT resources are limited or unavailable.

6 Steps to automate accounting 

Switching from manual to automated accounting is a process, so you will need to plan for a transition phase. To make the change as smooth as possible, here are a few key steps you can follow.

1. Analyze current accounting processes

Before diving into automation, it's crucial to understand your current accounting processes in detail. Identify all tasks involved, from data entry to report generation. Analyze the time spent on each task, potential bottlenecks, and areas prone to errors. This comprehensive assessment will help you determine which processes are suitable for automation and prioritize them accordingly. 

2. Evaluate existing technologies

Assess the technology tools currently in use within your organization. Evaluate their capabilities, limitations, and compatibility with automation. Consider whether your existing accounting software can be integrated with small business automation tools or if a new system is required. Identify any data gaps or inconsistencies that need to be addressed before automation. If you’re exploring automated accounting alternatives, see how QuickBooks stacks up against competitors:

- FreshBooks vs. QuickBooks

- Wave vs. QuickBooks

- Xero vs. QuickBooks

- Netsuite vs. QuickBooks

- Sage vs. QuickBooks

3. Assign a project owner

Designate a project owner responsible for overseeing the automation implementation process. This individual should have a strong understanding of accounting processes, project management skills, and the ability to collaborate with different departments. They will coordinate tasks, manage timelines, and ensure the project stays on track. 

4. Create and document current workflows

Document your current accounting workflows in detail, including the steps involved, responsible parties, and any supporting documentation. This documentation will serve as a baseline for identifying automation opportunities and measuring the impact of changes. It will also help to communicate the process to team members and stakeholders.

5. Automate based on the updated workflow

Once you have a clear understanding of your current processes and identify areas for improvement, start automating tasks gradually. Begin with high-volume, repetitive tasks that are prone to errors. Prioritize processes that will deliver the greatest return on investment (ROI). Consider using automation tools to streamline data entry, invoice processing, and reconciliation.

6. Test and iterate 

Thoroughly test the automated system to identify any issues or errors. Monitor performance metrics to evaluate the system's efficiency and accuracy. Continuously refine and improve the automation process based on feedback and results. Be prepared to make adjustments as needed to optimize the system and achieve the desired outcomes.

Navigate midsize business challenges and opportunities

Juggling increasing complexity while maintaining profitability can be overwhelming for any business owner. Automating accounting is the key to unlocking efficiency and driving growth. By automating repetitive tasks like data entry, invoice processing, and reconciliations, you free up valuable time for strategic financial planning and analysis. 

Ready to streamline your accounting processes and boost efficiency? Our accounting software can help. With accurate, real-time data at your fingertips, you can make informed decisions, identify growth opportunities, and mitigate risks within a couple of clicks.