Unlike manual bookkeeping, which can be incredibly time-consuming, automated bookkeeping saves time and makes your entire accounting system more efficient.
But does that mean you and your finance team can rely on accounting technology to fully automate the bookkeeping process?
In this brief look at the benefits of automation in small business bookkeeping, we’ll discover why the short answer to that question is no.
Business before automated bookkeeping
There’s little question automation has boosted bookkeeping efficiency for accounting firms and small businesses.
Before accounting technology, companies had to:
- Record and track financial transactions and accounts in physical bookkeeping journals
- Use paper cheques to pay paper invoices
- Manually reconcile bank accounts and credit card statements
- Use spreadsheets to create financial reports
- Store paper source documents (like receipts, invoices, credit notes, purchase orders, bank statements, and cheque stubs) in a physical filing cabinet
Not only are automated bookkeeping systems easier to scale, there’s also a wide range of cloud accounting software and apps available to business owners seeking a speedier, more accurate bookkeeping solution.
Which parts of the bookkeeping process can you automate?
Many accounting technologies in the market allow users to set rules and conditions that tell the system how to behave.
Cloud accounting software like Xero or QuickBooks is one of the many accounting technologies that users can use to automate their bookkeeping process. Examples of automation using your accounting software include:
- Entering of transactions
- Invoicing and payment reminders
- Generation of financial statements and custom reports
Furthermore, cloud accounting software acts as a hub, connecting to other accounting apps and data sources such as your bank, to allow users to automate the flow of their financial data.
Here are 3 key areas where you can take advantage of accounting technology’s real-time customization to automate manual workflows.
1. Expense management
- Snap photos of invoices (or forward copies to a dedicated email address)
- Automatically extract their key information (via optical character recognition)
- Transfer and record this data as a transaction in your cloud-based bookkeeping software
Not only do these apps eliminate the need for manual data entry, but they also reduce the risk of human error. They’ll also automatically store the image of your invoice in their cloud storage, creating an audit trail through the year.
2. Bill payments
With cheque payments on the decline, you can use an app like Plooto to automate your accounts payable and make EFT (electronic funds transfer), credit card, or online transfer payments instead.
Not only does Plooto make it easy to automatically pull, approve, and pay outstanding invoices through your accounting software, you can customize payment timings to optimize early-payment discounts and cash flow.
3. Employee expense reports
By automating employee expense management (a big plus for remote work), apps like Expensify reduce the inconvenience of manual expense entries, lost receipts, and ineligible reimbursements.
- Your employees simply snap photos of their receipts, then file expense reports using their smartphones
- All pertinent document data is automatically extracted and transferred
- You can customize expense policies to flag amounts requiring higher-level approval
Cloud accounting technology even makes automating payroll a breeze.
By working with an automated payroll provider like QuickBooks Online Payroll or Payworks, you can track employee timesheets, calculate running payroll amounts, and make direct deposit payments automatically.
Why the bookkeeping process can only be partially automated
The main reason fully automated bookkeeping systems aren’t viable is because—despite their ability to speed up and improve workflow accuracy—it takes a human to ensure proper performance.
Accounts automated through accounting technology:
- Must be set up and integrated correctly. If you set a certain tax rate on your sales platform, for example, you’ll need to map it to the equivalent in your accounting system and a human must set rules around how each transaction is treated.
- Can only do what they’re told. If you use Plooto to make or schedule one-time or recurring vendor payments, for example, you’ll still need a bookkeeper to decide which suppliers need to be paid, and when.
- Aren’t very good at handling exceptions. If you run a restaurant and typically buy grocery inventory from Costco, for example, your automated bookkeeping rules may treat all Costco expenses as cost of sales—and misallocate purchases like office supplies. It takes a bookkeeping professional to prevent and follow up on exception errors, review and override irregular transactions, and ensure line items are coded correctly.
Because human oversight is essential when it comes to choosing, implementing, monitoring, and modifying accounting software and apps, bookkeepers continue to play a pivotal role in automated bookkeeping solutions.
Final thoughts: Will bookkeeping be automated entirely?
Automation may have improved bookkeeping processes significantly, there is still an ongoing need for a human to review the data and ensure the systems are working as planned.
In addition to managing your accounting technology, an experienced bookkeeper will:
- Track automated data to ensure it’s correctly recorded and accurately reflects your finances
- Use that information to help you make better business decisions around cash flow and budgeting
- Catch and correct automation-generated mistakes
The bottom line is that, regardless of the level of automation, you’ll always need professional bookkeeping services. And given the level of understanding and trust required to work with sensitive data like your business finances, the client-bookkeeper relationship isn’t likely to be replaced by automation any time soon.
Need a human to help you harness technology and make your bookkeeping process more efficient? Enkel can help. Contact us today to learn how we can help you streamline and manage your bookkeeping.
How We Select and Evaluate Our Recommended Software
We thoroughly research and test the apps we include in our regular workflow for Client bookkeeping services. After deciding on criteria for evaluating the software and then researching the app itself, we tested the app, noting its strengths and weaknesses. We then work with the app for at least a few weeks before deciding whether to recommend it to our readers. We use the software as it was designed for its intended tasks. For a detailed walk-through of how we select and evaluate software, please see the details of our process.