Don't Get Left Behind: How to Implement Accounting Automation in 2022
Step Into the Modern Age of Accounting.
Are you still operating in outdated accounting workflows that require hours of manual data entry, bank statement reconciliation, document management, and paper payments? It’s 2022, and just like virtually every other aspect of business, accounting has changed from manual tactics to automated processes.
Not only does accounting automation reduce time spent on routine transactional tasks, it also frees up more time for accounting professionals to focus on value-added services that impact your organization much more holistically. Though it might initially feel like a financial burden, research shows that accounting automation software pays for itself within 6 to 18 months and saves an average of one hour per day (per employee!).
Here at Kaizen CPAs & Advisors, we’ve compiled this complete guide to discuss various aspects of accounting automation and help you step into the modern age of accounting. Keep reading to master your process, or skip to a specific section below!
Optical character recognition (OCR) is the basis for automation in accounting. When you understand OCR and its relation to accounting tasks, you can then begin implementing a variety of automated processes.
OCR is an automated technology that converts manual documents into computerized text data. Though OCR has been used across various fields for a number of years, the process is gaining importance for accounting professionals who simply can’t afford to waste time on manual data entry. By cutting processing time in half, OCR allows staff to input accounting data quickly and efficiently, ultimately setting the foundation for:Optimized Data Entry — Remove the possibility of manual errors and improve efficiency and accuracy when entering data.
- Invoice Processing — Improve vendor relationships with automated invoice processing to make payment cycles smoother and faster.
- Remote Audits — OCR-generated documents can be audited remotely, removing the need for in-person audit reviews and meetings.
- Internal Security — Because data is encrypted and stored on servers, you decrease the chances of security breaches and/or physical misplacement or theft of paper.
- Cloud Benefits — With OCR in place, you can unlock the full benefits of the cloud within accounting (more on this later).
Going paperless and converting paper documents to digital is essential for modern-day businesses. Adopting OCR in your accounting process is the first step to adopting automation. For an in-depth dive into OCR, read our full article here.
The World of Accounts Payable Automation
Manual payments no longer have to be such a burden for organizations. Rather than spending hours completing vendor invoices and tracking payments manually, automate the accounts payable (AP) process.
Automated AP uses accounting software to digitize account payables, remove the need for manual data entry, and increase security, efficiency, and accuracy throughout the payment process. Manual entries risk human errors from simple typos or distracted staff members, which could create drastic errors down the road.
The truth is that these tasks really don’t need much human oversight, especially when automated processes can recognize the data more accurately and complete paperwork more efficiently. In addition to creating cost savings opportunities by reducing time spent on manual work, this also acts as a value add when it comes to talent acquisition and retention. Your staff members understand they will be able to spend more time on meaningful projects, ultimately improving their desire to join your team or stay on your team.
Ultimately, AP automation allows you to:
- Save time — Reduce processing time for payables from days to minutes.
- Improve quality and efficiency — Automation syncs between invoices and orders faster and more accurately.
- Limit Costs — Accounts payable automation software can save a business $16 or more per invoice and improve productivity among team members who now work on more valuable projects.
Want to learn more about automation in the payment process? Read this article on AP automation solutions to implement in 2022.
Adopting Electronic Payment
Electronic payment solutions are another way to automate the payment process between vendors and suppliers. Making the switch from cash/check payments to electronic invoices may seem like a no-brainer, but many businesses still prefer in-person forms of payment. And while you may think this is improving security and control over your payments, it’s likely limiting you in a number of ways.
66% of accounting professionals still report check fraud activity.
Here are four main benefits of adopting electronic payment on your way to automating the accounting process:
- Payment Security — One of the biggest benefits of electronic payment is the ability to reduce check fraud. We’ll dive into this more down the page, but here’s the skinny — 66% of accounting professionals still report check fraud activity. Securing the payment process through ACH is one way to eliminate this fraudulent activity.
- Fast Payment — Electronic payments are as close to instantaneous as possible, reducing the time previously needed to write, mail, receive, and cash checks.
- Reduced Costs — From labor costs and opportunity costs to physical costs of checks, stamps, and envelopes, electronic payment helps your business save money.
- Data and Organization — Say goodbye to the messy filing cabinets or unorganized payment sheets strewn about the office. Electronic payment data is gathered and organized automatically for you to access whenever and wherever.
If you want to learn more about the adoption of electronic payment and how it aids in your ability to automate the accounting process, read this helpful article.
Phishing and Secure File Sharing
It’s time to get into the security benefits of accounting automation. While process improvements and cost savings are certainly crucial, the ability to keep your company, your data, and your customers’ data secure is of the utmost importance.
With the prevalence of phishing and other cyberattacks on the rise, it’s your job as a business leader to take the necessary steps to prevent these attacks from wreaking havoc on your organization. In business, phishing includes any activity where a criminal pretends to be someone to obtain business information and use it to their advantage. This includes stealing credit card numbers to make illegal purchases, accessing bank information to withdraw cash, and more.
There are a number of avenues that criminals can take to find this information, but one of the most common is through file sharing. While file sharing is a necessity within business today, it also presents a massive risk if done improperly. Unsecure, yet increasingly popular, file-sharing methods that only require a single sign-on for team members (i.e. G-Suite and Office 365) can open up a wealth of information to cyber attackers at the ready.
This is where secure file-sharing systems come into play. Purpose-built to protect your valuable information, and thus prevent criminals from accessing sensitive data, these systems:
- Require additional authentication before logging in
- Include end-to-end encryptions
- Automate the file syncing process to improve efficiency and transparency of data collection.
- Give users more robust control over public sharing
Without these systems in place, your security is at risk. Learn more about the correlation between secure file sharing and accounting automation in this guide.
Eliminating Check Fraud
Okay, now let’s really get into check fraud. Contrary to popular belief, check fraud remains one of the most prevalent methods of attack on a business, likely due to business owners remaining set in their ways when it comes to payment. However, if you’re still relying on checks and other cash payments as your main form of business payment, you and your organization are likely at risk.
Counterfeit checks, stolen checks, and check cloning are the most common forms of fraudulent activity that businesses suffer from, both from internal employees and outside criminals. However, there are steps you can take as a business owner to eliminate this activity and the negative impacts it has on your business in 2022:Use ACH and Digital Payment — As we touched on above, adopting electronic payment is the most important step you can take to reduce fraud. Not only is this a more secure way to accept payments and pay vendors, but it’s also a much more efficient use of your team’s time.
- Sign Up for Positive Pay — Taking your security a step further, signing up for positive pay with your bank provides even greater insight into your purchases and payments received. With real-time access to your bank statements and every purchase, you can prevent fraud by monitoring and detecting suspicious transactions as soon as possible.
- Make Employee IDs Mandatory — Employee IDs allow you to grant permissions to various places in your building and track the activity of employees. This means that you can better protect checks when they are the only form of payment accepted.
- Only Accept From Trusted Customers — If you must accept checks, only do so from customers you know and trust. Accepting check payments from a first-time customer increases the possibility of fraudulent behavior.
Check fraud is a much larger issue than many business owners realize, and we’re here to prevent it. Read this full article to learn more about prevention.
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Past, Present, Future: Cloud-Based Accounting
The “cloud” has transformed from a far-fetched, rather confusing idea into an absolute necessity for modern businesses. Though cloud computing expands across multiple industries and departments within organizations, the evolution of cloud-based accounting is of note.
While it may seem like a brand new idea for many business leaders, the truth is that cloud-based accounting practices are more established than you may realize. All the way back in 1999, NetSuite launched the first package that allowed large companies to access the same data in multiple locations using cloud technology.
This introduction of cloud computing set the foundation for the accounting industry to adopt cloud-based practices and storage, and within just five years, QuickBooks created the first cloud accounting package for small businesses, followed shortly thereafter by other players in the industry.
Savvy business owners capitalized on this evolution to become early adopters of the cloud and set their organizations up for accounting success. They saw a number of the benefits that the cloud offered from an accounting standpoint, including:
- Accessibility — access the same version of the same data from anywhere at any time
- Data Backup — prevent lost data by automatically backing it up to the cloud
- Efficiency and Collaboration — improve the sharing of information across your organization to work better together
- Security — prevent security breaches of manual data through cloud encryption
These benefits are largely the same today as businesses worldwide have turned to the cloud for their accounting needs. And to put it frankly, businesses that don’t adopt the cloud are setting themselves up for failure in the future. Here’s why:
- Using the cloud decreases labor costs by 50% when compared to using in-house, on-premise hardware.
- 78% of small businesses rely on cloud-based solutions already
- Cloud-based solutions help organizations onboard nearly 5-times as many clients
Find Your Comprehensive AUTOMATED Solution
The future of accounting is the cloud, now it’s time for you to get onboard. Our team at Kaizen CPAs & Advisors is here to help you make the transition. Whether you’re in need of a robust solution that solves all of your accounting needs or you want to customize systems that fit your needs, let us help.