Our complete guide to automation in accounting for 2022. Automation is not only coming for accounting, it’s a tidal wave of change that we’re already riding.
Understanding AI, automation, the human aspect, the future of accounting and how this transformation will play out is important to anyone in the accounting profession.
What is accounting automation?
Accounting automation enables accountants to automate most essential and basic accounting tasks, instantly and with little manual input.
In a breach from old school data entry, there are now a plethora of accounting automation software suites dedicated to removing laborious manual process and multiple entry tasks.
Not so long-ago bookkeeping involved literal ledger books and journals. You may remember these if you’re seasoned enough, before accounting software became ubiquitous. Scarier still, some businesses still actually use them. A physical ledger would function in the same way as an excel ledger, recording transactions, debits, credits, and a number of broader accounting records and notes.
Nowadays we have rapidly evolving suites of tools that remove most, if not all, manual balancing, data entry, and complex calculations. With modern accounting software, accounting professionals and financial professionals need no longer bother themselves with tedious, basic accounting processes, such as inputting financial data and can use SyncDirect from APS that automatically collects your clients’ trial balance or journal transactions, maps the data from different accounting software providers and makes it available in your XPA general ledger ready for you to compile client accounts and prepare reports with ease.
Benefits of accounting automation
Automating your transactional accounting provides many advantages. While it cannot and should not replace humans— it can significantly improve efficiency.
Several advantages are attributed to financial system automation such as:
- Better data integrity. With human error limited and calculations and data transfers between systems all computer automated, you can be sure your data is correct.
- If you make a single mistake in your data, calculations, and recordings, you can destroy long-term goodwill, combusting the client’s trust.
- It frees up time to create more value and work on tightening systems and workflows as opposed to data processes.
- With richer data sets, accountants can now spent time drawing projections and predictions as well as spotting blind spots in a clients financials.
- New services come into play as business advisory becomes more valuable and accurate with the tedium of recording and transacting out of the way.
A brief history of accounting and automation
Accounting in its most basic forms, goes back millennia. Let’s have a brief trip down memory lane to see how far accounting has come. As history It may shed light on what’s coming.
Mesopotamia and Egypt
The story of accounting goes all the way back to ancient Mesopotamia and Egypt. These two distinct locations (and societies) developed bookkeeping, ledgers, receipts and taxes.
In Mesopotamia, archaeologists have found early record financial keeping dating back 7000 years on tablets (verging on bookkeeping and accounting) for recording, pricing, and trading goods such as livestock and grain.
Later in Egypt, Archaeologist Dr. Gunter Dreyer discovered meticulous records detailing inventories of goods held by King Scorpion I, dating back 5300 years. In his tomb they found bags of goods bearing inscribed bone labels alongside tablets.
Upon examination it became clear that the labels recorded inventory owners, amounts, and suppliers and would be cross checked against a master ‘spreadsheet’ to avoid errors. It is also believed these goods were actually collected as taxes. It is now widely recognised that these ‘receipts’, ‘taxes’, and ‘ledgers’ constitute the ancient origin of complex bookkeeping systems.
First double entry bookkeeping
In the 15th century Italian monk Luca Pacioli (the father of accounting) revolutionised simplistic bookkeeping when he wrote a book titled ‘Summa de Arithmetica, Geometria, Proportioni et Proportionalita’. This pivotal text laid the groundwork for modern accounting by perfecting the first known double entry bookkeeping system.
Fast forward to the first computer-based accounting automation tools
1978 saw the creation of Visicalc. This was the very first computerized accounting software commercially available, and enabled automatic calculations as well as financial modelling.
Step forward again to 1998 and we witness the advent of ‘Quickbooks’. With its ease of use and useful accounting tools (assisted by automatic processes) it dominated the business accounting and bookkeeping landscape.
Another leap forward to the year 2000 and we see what really started true automation – OCR (optical character recognition) technology. It could be said that the automating of transactional accounting tasks really took root here.
Combined with (IDC) Intelligent Data Capture technology, systems were now capable of ‘reading and recording’ invoices and receipts.
Instead of manually punching in details for accounts payable, such as PO numbers, dates, amounts, business names etc. OCR enabled accounting software could now capture, index, and record this automatically.
The birth of AI
Now, in 2022, we have automations such as e-invoicing, reconciliation, predictive analysis, bank data feeds, and a growing number of autonomous processes inbuilt into accounting software of every ilk.
Enter… Artificial Intelligence and robotic process automation.
At present, AI is commonly deployed to undergo repetitive motions, including data recording and sorting, account reconciliation, data matching, inputting data from scanned receipts and invoices, and analysing expense reports.
While AI is already being deployed in these accounting process, it won’t be long before such robotic systems are more commonly used to perform complex predictive analytics and make precise deductions from ‘big data’ sets.
Will accounting be replaced by artificial intelligence?
Yes and no. This all depends on how we want to frame ‘accounting’ and the processes and task we see as comprising the profession.
Sad to say, if you’re in the business of pure data entry, these duties may soon evaporate or become severely restricted. Data entry is the job of software, interpreting that data is the job of accountants.
AI is already at play in many of the more complex accounting systems, especially those powerful practice systems wielded by larger accounting firms.
The advisory aspect of accounting, however, is only aided by accounting software, not defined by it.
Consider human aspects of accounting
While automated accounting, AI and predictive analytics will always be in place, human accountants will never fear losing their jobs. Accounting involves a human component that has no replacement in the hands of computers.
This mostly comes down to the human elements of creativity, interpretation, business consultancy, client experience, and goal setting.
An accounting system (however replete with powerful AI and automation) will never be able to replace these human elements. While automation will continue to balloon and roles change – you will always need an experienced advisor at the helm to bridge the gap with humanity.
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APS is a division of Reckon, an ASX listed company. We develop the software used by the best accounting firms in Australia and New Zealand to run their business’ and advise their clients.