This is my complete guide to automated accounting for the accounting profession in 2021.

In addition to the basics of accounting automation, you’ll also get:

Actionable new strategies and accounting processes that are working great right now to help you with accounting automation.

In this guide, you’ll learn how you can:

  • Implement accounting software for automated accounting tasks like bookkeeping, payroll, etc.
  • Use artificial intelligence right now to save you loads of time with automated accounting
  • Automate the verification of financial data quality
  • Become a fully outsourced automated accounting department for your clients
  • Pick banks that provide the most accounting automation capabilities
  • And more!

So if you’re looking for ways to leverage automated accounting in your firm’s accounting processes, you’ll love this 2021 guide.

Let’s go!

Accounting Automation 101

Before jumping into specific ways on how you can leverage accounting automation or computerized accounting software, let’s take a look at the basics.

Basic Terminology

Let’s look at a few accounting technologies that enable automated accounting:

Robotic process automation (RPA): This new technology mimics human actions to reduce human involvement in repetitive accounting tasks. This kind of technology works well when the expected outcome is the same every time for a particular series of inputs. Essentially RPA allows for automated accounting for rule-based accounting tasks, such as invoice processing.

Artificial intelligence (AI): Used by accounting and finance departments around the world, AI technology augments and mimics human judgment and behavior in the same way human intelligence works to solve certain problems for automated accounting.

Machine learning (ML): Machine learning is a subset of AI technology where we teach the computer to “learn” from experience. The more experience the machine has, the more accurate they’re able to handle automated accounting outside of a strict rules-based accounting management system.

It’s not abnormal for these technologies to work in tandem for the purposes of automating transactional accounting tasks.

Will Accounting be Automated?

If you’re worried about automated accounting replacing your job or what you do at your accounting firm, well, there’s some truth to that.

Slowly but surely, automated accounting is taking over more and more complex tasks. As finance professionals, the talk of technology can be intimidating, but the reality is automation removes repetitive tasks and helps you work more efficiently.

So is automated accounting going to be a reality? Well, a recent report concluded that there was a 99% chance that tax preparers’ jobs would be automated and a 98% chance that it will happen to bookkeepers and accountants. Those numbers for finance professionals are some of the highest scores among the 702 occupations listed!

accounting automation job percentages

If automated accounting takes over, it doesn’t mean you’ll be replaced. But it does mean that your role will change.

Benefits of Accounting Automation

Briefly, let me outline the main benefits of automated accounting:

Time savings

This is an obvious benefit of automated accounting. The more manual accounting data entry tasks that you can automate through the software, the more time you can save to focus your efforts elsewhere.

Improved margins

If automated accounting cuts your time in half to perform certain accounting tasks, then it’s only natural to expect that you’ll be incurring cost savings on that work.

Improved customer experience

I’m a big proponent of service offerings that aim to optimize the entire A-Z customer journey.

Take companies like Uber that have made every customer interaction as seamless as possible. Instead of you having to call in to order a cab, you can simply tap a button on an app. Experiences like this are only possible with new technology and automation running in the background.

Automated accounting could likely follow suit and typically results in superior customer experiences, which are incredibly important these days.

Faster turnaround time

Because automation runs with the click of a button compared to someone having to key in financial information entry manually, you can speed up the turnaround time of your deliverables. This is important in a world where people expect everything in real-time. Automation, therefore, provides a greater client experience.

Improved accuracy

If you set up your automation properly, you can effectively eliminate human error arriving from manual accounting data input transcription. This is incredibly important in an industry like the accounting industry that relies on accurate, real-time financial data.

Automation of Transactional Work is Table Stakes

Automation of transactional work includes automating things like:

  • Expense accounting process
  • Payroll
  • Bill pay
  • Bank reconciliations
  • And anything else highly repetitive in the accounting cycle

Here’s how to make sure you’re automating the basic transactional accounting work:

Cloud Accounting Software is a Must

Cloud-based accounting software is the hub for all of your automated accounting.

Since this is the kind that is being done online, it’s able to connect to other online software. The benefit here is automation can help you plug and play different apps in real-time to customize and automate just about any manual accounting workflow.

It’s like the App Store on your iPhone, only for automated accounting software.

As an example, just check out part of Xero’s App Marketplace:

xero app marketplace accounting automation

There’s a ton of cloud accounting systems to choose from, but my preferences tend to lean towards Xero or QuickBooks Online. They have the largest app marketplaces which are critical for automated accounting.

Automate Expense Processing

Here’s something else that is currently table stakes if you’re looking for automated accounting.

The days of manual data entry of bills and expenses into a system of accounting are over by combining software with automated accounting.

Through a combination of RPA and AI, apps like Receipt Bank & Hubdoc allow you to 100% eliminate all manual accounting data entry associated with entering expenses into an accounting system when delivering client accounting services.

It looks like this:

  • Snap pics of your receipts with your smartphone or forward electronic copies by email into the app
  • The app scans the docs and extracts the required info automatically in real-time
  • (ie. elimination of manual accounting data entry)
  • The extracted financial data syncs with your cloud accounting software

receipt bank

If you use Hubdoc, the app will actually be able to automatically fetch invoices without you having to forward them to the app yourself.

There are 100’s of suppliers that you can choose from based on the business needs of your clients:

hubdoc accounting automation

Payroll Automation

Legacy accounting automation software systems usually come with a payroll module. I still see some accounting firms using it even though it involves:

  • Manual data entry inputting figures into the accounting management system
  • Calculating the net pay
  • Relaying that info to the client and/or cutting checks themselves.

Yikes.

This is an example of transactional accounting.

Below you can see a pretty simple video by Gusto that walks through an entire payroll process from start to finish in 31 seconds.

Click play:

For those in Canada, you’ll want to check out Wagepoint which is a great product you can include in your automated accounting tech stack with excellent support:

Wagepoint payroll accounting automation

Data Quality Accounting Automation

Automation without checks and balances can be a dangerous thing.

This is why I see a trend towards not only automating the accounting inputs (ie. entering bills, etc) but also towards the automation of verifying the accuracy of the data that’s been entered.

Enter the age of automated file reviews.

Automate File Reviews

I think we’re about to see automated file reviews starting to mature and become the norm.

How do I know?

Well, Intuit clearly sees this as important as they announced a “Bookkeeper Review” feature in QuickBooks Online at a recent QuickBooks Connect conference I attended:

Typically before the books are closed, a manager reviews the work of the bookkeeper to ensure data is correct.

The issue here is that:

  • The manager typically only reviews a data sample
  • The manager’s time is too valuable to be spent searching for accurate data

As data quality is critical, here are a few automated accounting options that you can use right now for file & data quality checks:

Dext Precision

After signing up with Dext Precision, previously, Xavier Analytics, you’ll be prompted to add a Xero file:

xavier analytics xero integration

Once integrated, Dext Precision will scan the file and then display an overview of issues:

xavier analytics accounting automation

As you can see from this demo account, the app has flagged a number of things that a manager typically would have had to do manually, like:

  • Duplicate transactions
  • Unreconciled transactions
  • Dormant accounts
  • Old lock dates
  • And more…

By clicking into each item, you’ll get a list of things that you might want to action.

Over and above pointing out potential errors, it also provides suggestions for how your finance team can standardize data within your system, like keeping the same supplier coded to the same account.

It’s a pretty nifty way to automate the verification of data within your Xero file to keep things clean.

And with Dext acquiring Xavier Analytics, I think we’ll start seeing this kind of functionality be brought to the masses.

VerifyIQ

VerifyIQ is similar to Dext Precision but positions itself as a tool for accounting firms to collaborate on and streamline file reviews.

The app hooks up to Xero & QuickBooks Online files and then similarly scans them to try to identify errors or possible issues.

There’s a variety of different tabs that you can look through to check for errors, such as the reconciliation tab below:

verifyiq accounting automation

Clicking on items will provide suggested actions that are useful for bookkeepers to follow.

The idea is to automate the review aspect of the file on the bookkeeper’s end before sending it over to the manager for the final sign-off.

Automated Fully Outsourced Accounting Departments

Most firms engaged in accounting automation today tend to focus on the automation of transaction work, such as bookkeeping.

As we saw earlier in this article though, this work is now table stakes, and as such, is no longer a competitive edge.

So what’s next?

More than ever I believe your clients are looking for you to essentially act as their complete outsourced accounting department.

That means handling all of their accounting, tax & bookkeeping needs.

And there are a few automated services that you can offer right now to help fill out that outsourced accounting department offering.

Let’s take a look:

Automated Accounts Receivable Services

Most accounting firms help their clients with their books, bill pay, payroll, accounts payable, etc., but when it comes to the A/R part of the revenue cycle, they’re invisible.

My view is that apps like InvoiceSherpa, an app that automates the collection of A/R, is the next logical service offering that accountants can provide via automated accounting to simplify life for their clients.

Effective A/R collections rely on two things:

  1. Sending enough reminders for payment on overdue invoices
  2. Tailoring reminder messages depending on who you’re sending them to

The above can become automated accounting with the right accounting software.

To see how easy it is, I developed a 10-step process to automate A/R collections using InvoiceSherpa.

automate accounts receivable invoice sherpa

Automated Financing Services

With financial flow tight due for many small businesses due to COVID-19, there’s a ton of business owners searching for financing combined with their automated accounting.

With the right tools, a finance team can automate the accounting process of searching for funding options and completing their applications.

By doing so, you are one step closer to becoming an automated fully outsourced accounting department.

For instance, take a look at how Capitalise helps accounting professionals search for and secure funding:

And by being able to integrate your cloud accounting system into these platforms, you can significantly cut down on the time it takes to prep an application.

As Capitalise is only focused on the UK market, you can check out other options for North America here.

Other Automated Services?

Just about any part of the accounting and finance function can be automated if it involves any time-consuming accounting tasks (see RPA – robotic process automation). Consider how you can move one step closer to being a fully outsourced accounting department as your clients are looking for as much support as possible.

Leveraging Banking Automation in Accounting

Smaller, nimbler, digital, and more innovative neo-banks are hitting the streets. They are filling the gaps when it comes to:

  • Customers wanting an easier banking experience
  • Accounting professionals want the functions they need to make their job easier

As such, you’re seeing accountants recommend the banks that can automate the most, propelling these individuals into a new kind of role: banking advisor.

This section will look into a few ways on how you can leverage new banking features.

Set Up Direct Bank Feeds

One of the claims to fame with cloud accounting software is that it can connect with your bank and credit card to sync your transactions, eliminating the associated manual data entry required.

The problem:

There often isn’t a direct connection with the bank as it goes through an intermediary. The more links in the chain, the less reliable the connection is.

As such, in automated accounting, we often see issues with data syncing due to these indirect bank connections:

  • The feeds break frequently, causing re-authentification to be required
  • Duplicate transactions are sometimes fed into the software
  • Missing transactions can occur

All of the above rely on manual corrective actions.

Direct bank feeds mostly eliminate the above issues.

However:

Direct bank feeds are few and far between.

With over 5,000 banks in the US, here are the banks that provide direct bank feeds for Xero:

xero direct bank feeds

Yikes… only 11 banks and almost half of them are neo-banks.

In Canada, it’s not much better:

canada xero direct bank feeds

And the only major bank with a direct feed didn’t receive stellar reviews.

That being said, if a direct bank feed is available or if small business owners are looking for the most solid banking integration, look for a bank that has a direct integration with your accounting management system to maximize the automated accounting potential.

Recommend Neo-Banks When Possible

Your clients’ banking needs may sometimes be complicated and when it comes to providing a full suite of financial services, it’s hard to compete with the more traditional players.

But if small business owners and clients had simpler bank needs, you might want to consider getting them set up on some of the newer neo-banks popping up.

By doing so, small business owners can dramatically increase automated accounting with an easier and more seamless banking experience.

For example, Relay, one of the newer upstart banks on the direct bank feeds list above, provides you with better quality data to speed up the bookkeeping & accounting process.

Here’s an example of a check transaction:

relay accounting automation

On the right you have the transaction in Relay with an image of the check pulled into the accounting system and then we have the pertinent information pushed directly into Xero on the left.

More traditional banks wouldn’t push all this data into Xero and instead, you’d just see something like “Check Deposit”. You’d then need to ask business owners what this was for.

With neo-banks like Relay, small businesses get this info automatically for checks, wires, e-payments, etc, to help speed up the automated accounting process and eliminate the back and forth.

Then there’s Revolut.

In addition to integrating with your accounting system, it can also integrate with Slack, Zapier, and even their API.

revolut integration

With the Zapier integration, for example, imagine being able to send an email to small companies automatically for them to identify a transaction when the vendor field is missing.

You simply can’t get these levels of automation and time-savings with traditional banks.

Don't Forget Neo-Credit Cards Too

A lot of the above functionality also applies to credit cards.

Take Brex for instance.

The company issues credit cards that you can completely manage yourself online by controlling the types of expenses different cards can spend, the limits, and who gets them.

Once they’re in your employees’ hands, they can simply forward in their receipts to auto-match them to their transactions before pushing all the details over to Xero or QuickBooks for automated accounting.


quickbooks xero brex

Accounting Automation in Financial Advisory Heats Up

While compliance work seems to have more and more levels of automation, will accounting be automated in the world of advisory work?

Advisory services typically require analyzing data and using professional judgment to provide advice and to help various stakeholders make better decision making. Examples of these kinds of services might be:

  • Forecasting
  • Financial reporting & modeling
  • Business planning
  • Etc.

Previously offering these services has been quite labor-intensive, though I believe we are seeing more sophisticated levels of automation reduce the time it takes to perform this work.

Here’s just a few ways you can add value:

Increase Your Sophistication Within Advisory Automation

Certain advisory services require collecting information from various data points and constructing the data in a way that allows you to then provide advice and add value.

Take financial modeling for instance.

You need information about:

  • Previous financial reporting information
  • Salaries and the corresponding breakdowns per employee
  • Upcoming sales pipeline

Gathering and assembling this information to construct your model takes time.

Through the power of cloud accounting software, however, small businesses can leverage some pretty sophisticated integrations to help you assemble your models much more quickly.

One such example is with a financial planning & analytics app called Jirav which helps automate the financial modeling process.

As you can see, it can integrate with many other data points to suck information into the accounting system, providing efficiency in reporting:

jirav integrations

With the Gusto integration, you can pull in details of staff costs:

jirav gusto

And with the:

  • Salesforce integration you can pull in your sales pipeline to model out revenues
  • Xero/QBO integration you can pull in actuals

Which can help you to automatically produce your financial model along with a whole variety of data analytics to help add value for your clients:

jirav accounting automation

Democratize Your Advisory Services

Advisory services were typically reserved for partners and more senior-level staff, which therefore made them hard to scale.

But with smart software and some automation capabilities, advisory services can be performed by accountants at almost any level at scale to help your clients with decision making.

First, you can set yourself up on Clarity to pull in reports of financial data from your cloud accounting system. Here you can see the app shows you 7 simple KPI’s based on where the business is at now:

clarity accounting automation

On the next screen is where we engage with the client to adjust various parameters. By doing so, we can see the overall impact on cash & profit to get them closer to what their goal might be.

So if someone is looking for an extra 65k in profit for a given period, I can play with the parameters in many ways to achieve that number.

In this example, I increased:

  • Revenues by 15%
  • Revenue per employee by 10%
  • EBITDA by 15%

To arrive at this result:

clarity app

This then kicks off the next step of the process with a multi-step action plan that staff at any level can complete with the client:

clarity action plan

With part of the advisory work being automated and with the other part being streamlined, this is one example of how advisory work can be democratized and scaled to help your clients make better decision making.

Cash Flow Automation Pushed to Forefront

Cash is king.

And that statement is truer than ever thanks to the impact COVID-19 had on the economy.

That means that more and more businesses are looking for help with cash flow planning and cash flow decision making.

Which provides you with the perfect opportunity to leverage accounting automation in the cash flow forecasting space.

Automating Short-Term Cash Flow Planning

You’re now starting to see short-term money flow planning automation baked directly into some of the more popular cloud accounting systems like Xero & QuickBooks Online.

For example, looking at historical information, Xero has a new feature called “Short-Term Cash Flow” which automatically projects bank balances 30 days into the future. It also provides suggested actions to help improve your financial flow projection and its accuracy.

It’s pretty neat and gives everyone access to some levels of cash flow automation.

Here’s Xero’s tool:

Short Term Cash Flow xero

And here’s the tool in QuickBooks Online:

Automating Long-Term Cash Flow Planning

There are a variety of apps out there that can help automate your cash flow planning beyond 90 days.

While Excel tends to provide the most amount of power and customization, manual data entry is required.

There are a couple of great apps in the cash flow forecasting space.

I’ve always been a fan of Float, where you can connect with Xero & QBO to pull in your financial information to either:

  • Automatically extrapolate the data itself to build a cash flow forecast
  • Let you forecast out the income & expenses yourself

Additionally, the integration will pull in all A/R & A/P to let you indicate the payment dates to adjust the forecast.

Similarly, Fathom has released a forecasting module, which is super neat is as well.

But one of the coolest new cash flow automation features has to do with

Helm’s recent integration with Veem, where you can create a plan to pay your payables from your cash flow statement and then actually have Veem trigger the payments to your suppliers. Very cool feature for accounts payable that finance teams love.

Artificial Intelligence Takes on Larger Role

You’ve probably heard many times that robots will steal your job.

My view on this though is that AI won’t replace your job but instead make your job easier and augment the kind of work you can do. So will accounting be automated? Yes, since AI in accounting is no longer all hype.

There are a few things that AI can do right now when it comes to an automated accounting system.

Let’s take a look at a few:

Use AI to Scan the Ledger for Risks

The great thing about AI, machine learning, and robotic process automation is that it can process and “understand” large amounts of data to ease decision making by scanning data analytics.

Artificial intelligence in accounting is important, but the adoption of AI is especially important in areas such as audits where auditors have had to sample data instead of scanning the entire ledger.

But now with new technology, firms can let AI scan through the general ledger and identify issues itself.

For instance, Canadian-based MindBridge has been one of the original players in the accounting industry to make use of AI for accounting procedures

Below you can see that their platform has identified a number of risks (bottom right-hand corner) by scanning data analytics in a way that would not be possible without spending a ton of time manually identifying these things:

mindbridge accounting automation

Similarly, with the use of AI technology, Inflo highlights account balances which include transactions that might pose a higher risk of error or fraud:

inflo explore

While AI technology is currently primarily being used in the audit, it’s easy to see this applying to tax and other advisory-oriented financial services in the accounting industry to help identify risks and opportunities in the data.

Automate Your Tax Planning

Here’s another interesting use case for AI technology when it comes to automated accounting. You can actually use AI in accounting business processes to automate parts of tax planning.

For instance, taxpayers in Canada are taxed differently depending on whether individuals are considering employees or contractors. And while tax law and tax cases provide some guidance, it’s hard to give a concrete answer on what the outcome might be in your situation.

This is where the adoption of AI-powered predictive tax software for accounting processes like Blue J Legal can help firms (or eager business owners).

You would start by picking a tax issue:

blue j legal accounting automation

Next, you would provide the app with some facts surrounding your client’s issue:

blue j legal

And once complete, the AI-powered software will scan related tax law and court cases to predict the outcome of the issue with a degree of certainty:

blue j legal tax

The advice can then be provided around tweaking some of the parameters to make sure your client is properly protected from tax treatment that would be harmful.

What’s cool is that the use of artificial intelligence in accounting can help level the playing field between big firms and small firms, and provide more value to accounting systems.

Automate Tax Research

Researching tax rules and receiving tax guidance can be a lengthy process.

But AI can help save time in this area.

Thomson Reuters has a product called Checkpoint Edge which allows users to search for tax guidance. Using AI technology, the product is able to more accurately predict what the user is searching for and provide tax guidance suggestions based on several data points:

thomson reuters checkpoint edge

Over to You

So that’s my up-to-date guide to accounting automation for the accounting profession in 2021.

Now I want to turn things over to you!

Do you think that accounting will be automated? Or are we going to continue with manual processes?

Which strategy are you going to try first?

Are you focused on automating transactional compliance work right now?

Or are you looking to leverage more sophisticated automation when it comes to advisory?

Let me know by dropping a comment below right now.


Ryan Lazanis

Hi! I'm Ryan. I’m an entrepreneurial CPA that founded Xen Accounting, a 100% cloud-based accounting firm, in 2013. Following its acquisition in 2018, I started Future Firm to help accountants fast-track the growth of a modern, scalable accounting firm of their own.

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