A Small Business Guide to Accounting Automation Software
May 18, 2023
By Ben Grossberg
Definition: The use of technology, primarily automated software, to streamline financial processes and minimise the need for human intervention. This can significantly reduce the risk of human errors, speed up processes, and create more time for employees to focus on other tasks.
Purpose: To help finance teams increase speed, improve efficiencies and complete tasks consistently by reducing human intervention.
The benefits of accounting automation
Automating accounting tasks can bring significant benefits to your organisation, but it's essential to understand why it's beneficial and how it can work for you. We’ll explore the key advantages of automation below.
There’s a reason automation is so popular. We surveyed over 500 CFOs worldwide on the topic of automation and over 41% of the 500+ CFOs surveyed indicated that automation increased their team’s happiness and satisfaction, closely followed by 40% being able to focus on more strategic work.
Some of the key benefits are:
By cutting down the time spent completing accounting tasks and manual data entry by using automation, you can naturally reduce costs and improve your margins.
Just as automation helps to reduce costs, it can also speed up the time it takes to complete certain tasks, enabling finance managers and teams to focus on more important tasks.
Human error is a common occurrence in business, especially in manual data entry tasks, but automation can help to streamline accounting processes and eliminate these errors when set up accurately.
Employees can concentrate on tasks that add more value, leading to an increase in job satisfaction. This also results in fewer errors and faster completion times, which ultimately benefits the entire business.
With remote working now the norm, accounting automation can give teams the flexibility to use automation software that can be accessed online from any location.
Automated software typically allows you to see a full audit trail of automated tasks in real-time, giving you greater visibility of your numbers to help with decision-making and future planning.
Like human error, fraud and embezzlement can be a very real risk to any business managing their finances. Automation can make your business more secure when verifiable digital ‘paper trails’ and robust automation rules are put in place.
The challenges of accounting automation
Although automation and new technology offer many benefits, there are also several challenges and obstacles to overcome when adopting them. Here are some of the main challenges organisations face as voted by our 500 strong CFOs survey when considering accounting automation:
- Stakeholder buy-in
- Lack of budget
- Lack of time
- Employee training and upskilling
- Finding the right technology
Overcoming these challenges is critical for success, and accounting automation can help to solve several other challenges on the agenda for businesses today including:
- Need for digital transformation
- Changing customer expectations
- Maintain compliance and regulations
- Make more data-driven decisions
- Improve agility
- Keep up with competitors
What accounting tasks can be automated?
While this guide delves into various software options for an accounting tech stack, but at the heart of your stack, a 'core' accounting system that automates your general ledger is essential. In Australia, the most popular accounting software is Xero, MYOB AccountRight, QuickBooks, and Reckon One
There are core accounting systems available in the market that can do all of the above but their capabilities will be limited.
The below accounting tasks can be automated with automation software to free up time and create a more efficient business.
Accounts Payable (AP)
Receiving, processing and paying invoices are key aspects of the accounts payable remit, and automation can help to streamline and improve these processes. Automation software enables businesses to completely automate the processing and payment of invoices, giving time back for employees to focus on higher-value add tasks.
The main benefit of using automation for accounts payable processes is accuracy. By removing the need for manual checking and understanding of the invoice, anomalies are usually picked up quickly and any issues solved accordingly.
For invoices without purchase order numbers and different formatting, automation and deep learning can help to clearly assess the information, identify duplicate invoices and accurately create accounting entries.
Accounts Receivable (AR)
When customers owe money for goods or services that have been delivered by your company, it’s possible to automate the processes involved in accounts receivable to further improve efficiencies. Processing order forms can sometimes be tricky, with several different formats used and no single standard format. However, this is where machine learning can help to intelligently capture and record data.
Automation can be used to monitor receivables, distribute notifications to customers for long outstanding bills or money owed, and record data for use in accounting and reporting.
While several different tasks often fall under the remit of ‘payroll administration’, it’s a great function for automation, with many activities already suitable for automating including time-sheet management, payroll processing, calculation of deductions, leave management plus much more.
When accounting teams are required to manually review timesheets and arrange appropriate compensation, it’s easy for mistakes to be made, especially when there are large numbers of employees to account for. However, with automation, human error can be eliminated and a more accurate and timely process completed.
All types of businesses have expenses that need to be carefully managed, and this can include everything from employee travel to client entertainment. Regardless of how many employees you manage expenses for, it’s a time-consuming task that can really drain your resources.
By automating your expense management processes, your finance teams can save a huge amount of time, create an easy approval process, quickly match data from company cards and receipts to build comprehensive reports, and gain real-time visibility into the company’s finances and where employees are spending.
Using automation to manage expenses can also help to speed up the entire process of collecting receipts, processing approvals and reimbursing employees, since everything will be set up in automatic workflows. This frees up time for those who manage the business’ finances allowing them to focus on the more important aspects of their role.
How to choose the right accounting automation software
Choosing the right accounting automation software for your business is imperative for success. After all, the role of finance and accounting doesn’t just cover tax, it’s designed to understand how the business is performing, where you can improve and where better decisions can be made.
With this in mind, it’s important to think about the specific features you want from your automation software before you make a decision. This ensures the software and package you choose will deliver value for money and meet the requirements you have in mind.
Before you look at the specifics in terms of the finance functions you want to automate, there are a couple of features that are applicable to all types of automation software which you should be aware of: integrations and the cloud.
Any automation software you choose should offer a level of integration with your core accounting software and other platforms. Accounting integrations can help to save time by eliminating manual data entry by ensuring all data is automatically shared between systems. You can then see all company transactions in one place, with each of your systems effectively talking to the others and making for a more seamless reporting process - without the need for expensive and time-consuming technical intervention!
While it might seem like a no-brainer in this day and age that technology is making a huge shift towards the cloud and away from on-premise solutions, it’s still a feature you should be paying attention to.
Many automation software tools have been built in a cloud environment, meaning they can be easily accessed at any time from anywhere, are often more affordable, are typically more secure and are easier to scale without needing huge infrastructure projects to take place.
Now let’s get more specific about the features you should look out for when comparing different types of accounting automation software.
Accounts Payable (AP) Software features to look out for
- Optical character recognition (OCR). This enables data to be automatically extracted from printed or written text from a scanned document or file. Important data from invoices can be automatically recorded into your accounting system before being checked against purchase order numbers and stored in the appropriate category. The main benefit of OCR is efficiency in terms of time savings, with repetitive tasks like data entry able to be automated.
- Approval Workflows. In line with invoice capture and processing, you can also use automation to speed up and automate the approval process to ensure payments are signed off quickly and seamlessly. Finance managers can remove the manual process of finding out who needs to approve an invoice by setting up workflows that ensure every invoice is automatically sent to the right person/people.
- Automated Payment Process. Once invoices have been received, processed and approved, you can rely on automation to ensure payments are made. This helps to speed up the time it takes for someone to get paid, as well as freeing up the time of those who are responsible for this traditionally manual action.
- Real-time data and reporting. By having a view of data in real-time, your teams can can keep an eye on transactions as they happen and flag any issues as they arise.
For small businesses, Weel’s bill payments feature is a good tool to get invoices paid via bank transfer.
Accounts Receivable (AR) Software Features to look out for
- Automated Communications. This is now commonplace in businesses today. No one has time to send a bill to every customer and keep track of follow ups. Save time by automating this task by simply setting up the email templates and triggers.
- Electronic Payment Options. Giving your customers the ability to quickly pay for goods and services electronically is a great automation feature you should be looking for. Not only does it speed up the time it takes for a customer to make a payment, but it also removes an admin-heavy task from your team.
- Dispute management. Sometimes customers will have a problem or issue regarding their invoice. The longer the invoice sits in dispute, the less likely the full amount will be paid. This process can be automated to save you time, while still giving customers the answers they are looking for. Many dispute management tools not only improve the customer experience as a first touch point, but also provide the information your teams need to handle the dispute further down the line.
- Credit management. Software with credit management capabilities, allowing you to extend credit to your customers, can be a great feature. The software can help to determine credit eligibility, extending credit to those customers who are reliable and credit–worthy. You’ll be able to define credit limits, send automated alerts and get insight into your customer credit groups.
- Reporting & Analytics. Having the ability to accurately report on finance information is essential for all departments, but especially in accounts receivable where data is king. Ensure your automation software includes reporting and analytics features that provide you with full visibility over all customer accounts, invoice statuses, actions and trends.
Payroll Software features to look out for
- Process and manage payroll. By using automation in payroll processing, you can help to eliminate errors, speed up the payroll process, enable employees to have quick and easy access to their payroll records and enhance the security of your payroll systems with cloud-based solutions.
- Leave management. As finance works closely with HR when it comes to payroll, it makes sense to look for an automation solution that includes leave management technology. With leave management, finance can be automatically notified when employees take time-off via integrated workflows so payroll can be completed accurately and seamlessly.
- Direct deposit. When handling transactions electronically, automation can help speed up the time it takes to process direct deposits by removing the need for physical or paper checks. It’s highly likely you’ll already have employee banking information to hand, and this can be simply input into your accounting automation software to ensure employees are automatically paid the right amount at the right time, and into the right place!
- Income tax and deductions. To further enhance and streamline the payroll process, income tax and other deductions can be automated. Automating this aspect of payroll can be hugely beneficial, eliminating needless human error and freeing up the time it takes to manually check everything for accuracy.
- Commission, benefits and bonuses. As with the automation of income tax and deductions, it’s definitely worth looking for automation software solutions that enable you to automate company benefits, commission and bonuses. When workflows are set up accurately, your payroll can become a seamless process that automatically adds all the benefits that should be included for each employee.
- Employee self-service. Automation software that includes self-service functionality can be really helpful when it comes to saving time in your payroll department. Simply giving employees the ability to update their personal details and view their payroll documents securely online can remove a large chunk of work from the role of payroll.
Expense Management Software Features to look out for
- Virtual cards with controls. Virtual cards can offer a huge amount of benefits to expense management. Virtual cards can be set-up instantly and enable you to track all business transactions in real-time. They provide greater security with customisable controls, spending limits and the removal of physical cards which can be lost or stolen.
- Custom approval workflows. No matter what type of expenses need to be approved, streamlining the process with custom approval workflows can help to reduce the processing time and ensure only those who need to be involved are notified. Find a solution that allows you to set up custom approval workflows that meet the needs of your business, whether your expenses policy is managed by budget, employee or spend amount.
- Automated expense processing. By using automation to process expenses, your finance teams can save a lot of time on admin. Employees can submit receipts online and the platform can automatically process the approval based on set parameters. This doesn’t just help save time in the finance team, it also ensures employees aren’t wasting time on manual data entry.
- Subscription management Many employees will require subscriptions for various different things, from sales teams needing premium LinkedIn accounts to domain hosting subscriptions. A subscription management feature allows subscriptions to be automatically paid and provides you with visibility over which employee or team this cost is attributed to.
- Real-time analytics and reporting With this feature, you should be able to find and filter specific transactions, quickly review expenses and create custom reports that can be used to inform future business decisions - without waiting 2-3 business days from the time of each transaction.
We’re a little biased but we think Weel’s expense management system is the best out there for Australian businesses.
Getting started with accounting automation
The journey of accounting automation is different for every business. One thing that is clear, however, is that automation software can significantly improve financial processes and lead to greater visibility, more control and better decision-making.
The accounting tasks you choose to automate and the order in which they are implemented is completely dependent on the type of business. You could start by automating the tasks that require the most time but need little intervention from an accounting expert. Or you could consider those tasks that are seen as most vital for business success. Think about the types of financial control, or reporting, that would help to optimise and grow the business.
Whether you begin by launching a generic cloud-based accounting system, or you advance to specialised tools offering more features and greater control, now is the time to invest in accounting automation to ensure you stay ahead of the game.