Accounting is one of the core functions that every business needs to stay operational. Companies need to do it well to ensure that they comply with regulatory requirements, pay the right taxes, and hit their profit targets for a given financial period.
Due to this significance, the accounting department in any company cannot afford to make errors. Errors in accounting can cost a company a lot of money and other resources like time and brand value resulting from the error correction. In 2014, Bank of America disclosed a four billion dollar accounting error in its capital reserves calculations. Though this error did not represent a business loss, it triggered a supplementary filing request from the Federal Reserve Board, which spooked investors on Wall Street. Bank of America's stock price was down 6% by the end of the day, representing an eight billion dollar loss in value for the bank.
This example shows that accounting errors can happen to anyone; even the biggest banks in the world are not immune to them. It also shows that accounting errors can cost a lot more than just monetary loss to the business. This is why you should take every step to ensure that you minimize the losses incurred due to accounting errors. However, accounting errors alone don’t constitute the entirety of the problems faced by accountants and accounting departments.
Another major issue faced by accounting teams is the sheer amount of mundane, repetitive work that they have to do. Accounting involves a lot of repetitive processes like making ledger entries, opening and closing accounts, balancing accounts, reconciling errors, and many more. These tasks, as mundane and routine as they are, will end up costing your organization a lot of resources if you have to hire humans to do them all. They are also time-consuming and could lead to more errors and mistakes being made if done manually.
One of the tried and tested ways to reduce accounting errors and to cut down on inefficiencies that arise out of manual work is to use automation. Automation can ease certain accounting processes, especially the repetitive ones, and eliminate the need for repetitive manual entry. All of this will dramatically reduce the chances of an errant entry being made by a tired clerk in the accounting department.
In this article, we will share with you four specific accounting processes that can be automated to reduce errors in your accounting department.
4 processes that can be automated in accounting
Automation can eliminate up to 40% of the losses caused by accounting errors in your business. However, you need to know which accounting processes can be effectively automated and which ones cannot. While every business is unique, certain accounting processes are especially suitable for automation. We have identified four of them for you, although there are many more. Each of these processes contains heavily repetitive and mundane tasks that don't require much cognitive thinking to execute.
1. Month-end reporting
This refers to the process and tasks that accounting teams have to execute to close a month of business operations. This process includes closing the general ledger, reconciling cash accounts, adjusting allowance accounts and calculating income tax provisions for the month. This process occurs periodically and routinely, so it is important to get systems in place to do it error-free.
One of the common ways to ease this process is to automatically pull reports from different sources, and then automatically populate an Excel spreadsheet with the data.
2. Invoice processing
Every business at every scale has to process invoices. Many organizations have accounts payable teams that are responsible for making payments on behalf of the company. This means that there are many incoming invoices, and having a system in place to receive, verify, confirm and pay invoices within the right time frame is critical. Failing to process an invoice in time could lead to losing a major supplier or paying interest on accounts payable, depending on the terms from your suppliers.
Because there are hundreds and sometimes thousands of invoices coming in every month, mistakes can be made if it is done manually. This would involve receiving and scanning invoices, reviewing the digital copies, extracting relevant data, and manually entering it and then checking for errors. This would take many labor hours if it were done manually.
This is why many companies opt to automate this process. Some of the ways to automate invoice processing include;
- Using software to automate invoice processing flows to extract invoice data and populate your management software.
- Using invoice cognitive capture software to record electronic, digital versions of the paper and email invoices
- Using robotic process automation (RPA) to extract relevant data from emails, log in to vendor applications, retrieve invoice information, and enter data into invoice processing software.
3. Expense reporting
Expense reporting is one of the most painstaking things in accounting’s workflow. On top of that, the average cost to produce one expense report is about 27 dollars. With automation, this could cost as low as 5 dollars per report.
Expense reporting can easily be automated with expense automation software or RPA. With RPA, you can automate the process of logging expenses, attaching corresponding receipts to each expense entry, and checking the expense and receipts logs to verify that no mistake has been made.
4. Payroll management
Managing employee payroll is also tedious for an accounting team, and it can take place as frequently as every week. It includes tasks like scheduling payments with your bank, calculating the right amounts to pay out, and deduct and withhold as per contractual obligations. You also have to comply with the various state and federal regulations regarding payroll management and reporting.
All these tasks are tedious to execute manually, and mistakes are easy to make. One of the most efficient ways to automate payroll management is by using RPA. Robots can execute most of the payroll management tasks like calculating bonuses and holiday pay, complying with tax requirements and calculating the appropriate deductions for each employee.
Now that we have covered the four accounting processes that can be easily automated, let us delve into the common technologies used to automate these processes.
Common technologies used to automate accounting tasks
SAP is an enterprise resource planning software that businesses use to manage their production, purchases, sales, and accounting activities. Unlike most accounting software dedicated to business accounting, SAP is a general resource planner that integrates all the individual business modules.
Like SAP, Netsuite is also an enterprise resource planner used by businesses to manage their day-to-day operations. Netsuite is a versatile cloud-based system that can be used to automate, in part, all kinds of business activities like managing inventory, tracking financials, hosting ecommerce stores and customer relationship management (CRM).
Oracle is an integrated cloud-based platform that uses software to ease many business operations. Oracle offers database services to many of its users, which has unique data retrieval tools that retrieve the data in question and any related information.
Microsoft Excel, the universal spreadsheet software, is a strong candidate to be used to automate the accounting processes. Nearly all accountants regularly use Excel. Excel is commonly used for data recording and analytics. It comes with many built-in accounting and financial formulas that can be used to build complex accounting and financial models.
The Robocorp difference in accounting automation
By now, it should be clear that using robotic process automation can eliminate the need for mundane and manual tasks associated with accounting.
At Robocorp, we make accounting automation easier than the drag & drop RPA platforms you may be familiar with. Our open-source platform and APIs allow our users the flexibility to create a wider variety of robots, automate more tasks, and connect different platforms.
Beyond the four processes mentioned above, robots can automate business tasks like order processing, call center operations, data transfer, and many more. Our developer tools and libraries give developers a wide array of tools and historical data to build custom bots that can automate almost any work process for your business.
If you want to discuss making your accounting team more efficient by using automation, contact Robocorp today. If you are a developer, you can start building and deploying robots today by creating a free account with us.