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6 Ways Accounting Automation can Improve Small Businesses
Accounting automation is a finance function that could help you save money, store important documents, and avoid errors.
Whether you’re a startup founder new to accounting work or a seasoned head of an accounting department, there’s no running away from the tediousness of accounting. Ever wish all your company’s invoices just automatically approved themselves without your input? That’s part of what accounting automation software makes a reality.
Accounting automation involves configuring workflows to automate manual, formulaic, and rules-based accounting tasks so that your accounting team does not have to spend time executing these manual processes on Microsoft excel. With these accounting processes automated, there’s no longer a need to manually key in rows and rows of data, or to manually manage accounts payable and accounts receivable.
What are the implications for the accounting profession? Far from stealing jobs, accounting automation lightens the load of accounting professionals. Automation streamlines routine tasks where human judgment isn’t truly necessary so that accountants have more time for focusing on other business needs, and work on making business decisions in strategic planning and analysis.
Accounting automation vs robotic process automation (RPA)
Robotic process automation (RPA) is one of the emerging workforce automation practices used for business process automation. Within accounting automation, RPA helps to automate low-value repetitive tasks such as manual data entry that are fixed in the steps required to execute them.
According to The CPA Journal, using RPA configures software bots to mimic human activity, repeating tasks more quickly and accurately than humans can. It also automates tasks such as copying and pasting data, capturing and interpreting applications for processing transactions, manipulating data, and more.
However, there are other types of accounting automation technology used such as cognitive technologies like artificial intelligence, machine learning, and natural language processing (NLP), which are used to automate higher-order tasks where rules are not always fixed, tasks can differ, and decision-making is required.
There are also other aspects of accounting automation involving application programming interfaces (APIs) which enable software to “talk” to each other, integrating different applications.
What accounting tasks can you automate?
Sometimes interchangeably labeled as procurement, purchasing refers to the process of acquiring goods and services for your business. The process involves the following:
- Searching for suppliers and vendors to purchase goods and services
- Creating and receiving purchase requisitions, which are forms that request the purchasing department to buy certain goods and/or services
- Creating and issuing legally binding purchase order (PO) forms to suppliers committing to buy specific products
- Reviewing existing POs and approving contracts
These tasks are all highly time-consuming and are also tasks where manual human errors hold serious repercussions for the company. Automation of these tasks with accounting software not only increases efficiency by removing bottlenecks such as long waits for multiple approvals but also helps ensure accuracy.
An expense report is a form recording how much your business spends on business expenditures, detailing variables such as:
- Date when the item was bought
- Vendor from which the item was purchased
- Client for whom the item was bought
- Project for which the item will be used
- Account number
- The author who made the new expense
- Notes may include other details like the condition of the items or services purchased
- The total amount of the entire transaction including tax
Expense reports are used to manage employee expense reimbursements, track your company’s spending to identify areas of potential cost reduction, and also identify opportunities for tax deductions.
Because of the sheer amount of detail required in an expense report, small businesses may choose to opt for software-as-a-service expense automation software which integrates with enterprise software like ERP solutions to streamline the process, and automatically generate these expense reports.
Just in case you need a reminder, accounts payable (AP) refers to money your company owes to suppliers, creditors, or vendors. When tracking accounts payable, accountants work through large amounts of invoices in an often slow and tedious approach.
Accounts payable automation would involve using tools that eliminate these manual aspects of accounts payable, helping to streamline the process of invoicing and making payments.
AP automation software can use a mix of Optical Character Recognition (OCR) technology, Machine learning, and Natural Language Processing to process both structured and unstructured invoice data, and improve accuracy over time. This increases the operational efficiency of your business, and also has key benefits such as preventing the possibility of late fees when vendors are paid late.
Additionally, AP automation software often comes with tracking and analytics tools, allowing your finance team to see AP activity on a dashboard, tracking invoice processing progress, and more.
As a small business just starting out, a manual payroll process may not feel too bad. However, as your small business grows, you might find that after onboarding employee number fifty, manually doing payroll at the end of the month saps a significant amount of time you could devote to growing the business instead.
Payroll automation enables business owners to process payslips and tax calculations much quicker. It also saves time in accurately calculating how much to pay employees each month, taking into consideration factors like overtime, bonuses, and commissions.
Expense claims or employee reimbursements
It’s easy to see why people procrastinate on making expense claims. Filing your monthly expenses is an unavoidable hassle, involving laboriously going through receipts both digital and paper to record your work expenditures, whether that’s traveling for work, paying for fees, or office supplies.
Expense automation helps your company speed up this filing process. Spenmo’s spend management platform enables you to issue your employees pre-loaded corporate cards for their business expenses.
This gives you real-time expense reporting and tracking as they spend, avoids making employees spend from their own pocket (a win for employee experience, we’d say!), and makes it easier to monitor your company’s online subscription and marketing spend.
How to automate your accounting process
There’s no denying that automating your accounting processes can save you and your team valuable time. The bigger question is, how to implement it with your finance and accounting team? We break down the steps below:
- Choose a template: Identify the accounting processes you want to automate and pick the relevant templates
- Choose the right software: Choose a core accounting software, evaluating based on price, security, potential integrations available, and how well it meets your business needs
- Find a reliable payment platform: Choose a payment platform you can trust and one that integrates seamlessly with software to ensure fuss-free accounting. Spenmo can easily integrate records with accounting tools, and when used alongside dependable accounting software, it helps your company stay on top of your financial records.
- Determine the workflow: Determine the steps to be automated. This involves first identifying a trigger which is a predefined event kickstarting the automation. Following this, an action (response), and result (goal) should be set up.
One example of a process you can automate is the creation of an expense report, wherein the process of submitting the report would start from the employee to the manager, and eventually to the approving officer.
How accounting automation can improve your business
There are many ways automation can be helpful to finance and accounting teams. Some of these include:
- Handle repetitive tasks efficiently: with automated accounting, work that typically takes days or weeks can take mere minutes
- Avoid errors: As the saying goes, to err is human. Especially with data entry work, human slip-ups like double-entry can occur, which can cause issues in financial reporting. Accounting automation machine tools do not make accidental mistakes like humans.
- Increased employee productivity: The time you save may mean fewer billable hours for an external accounting firm you are engaged in, but it also means being able to optimize your time better.
- Secured data storage: There’s no need to rifle through files and files of hardcopy documents and worry about lost ones with accounting automation software. These tools enable you to receive document files online, instantly have them logged in your general ledger, and then automatically stored in the right digital folders too.
- Real-time access and integrations: Tools like Spenmo provide a current overview of employees’ spending habits, which helps your business deter fraudulent spending and also helps in forecasting. Accounting automation tools also integrate with the accounting platform your company uses, which helps you to use these solutions in tandem.
- Save money: Eliminate late fees, open up chances of negotiating price discounts with your vendors when you pay early, and also cut costs with a leaner accounting team
5 Best accounting software in Singapore
If you’re in Singapore, choosing the right accounting software for your business also means choosing one that is IRAS approved and GST compliant. It should also be software that’s flexible enough to seamlessly allow integration with other enterprise resource planning (ERP) system software.
Here are some top accounting software choices:
- Xero: built for accountants and bookkeepers, pay bills, claim expenses and connect to your bank with Xero, a cloud-based software program that’s even available on mobile, making it a good choice for working on the go. Spenmo fully integrates with Xero for smooth flow of your expense data for accounting reconciliation.
- Intuit QuickBooks: a cloud-based platform to track expenses, create invoices, and manage cash flow, with a mobile application function.
- Wave: a platform that’s a good pick to keep your business expenses low, as it's free at the basic level, with accounting, invoicing, and receipt scanning at no cost.
- FreshBooks: favoured by both businesses and freelancers, features include time tracking, proposal software, and invoicing.
- Microsoft Excel: While not solely used for accounting, Excel is cheap, customisable, and still does the job for small business accounting.
Takeaway: The pandemic has accelerated digital transformations within business organizations. The time is now for businesses to find the right automation software and payment platforms to prepare for the impact of digitization on finance functions.