This is my complete guide to accounting automation for accountants in 2020.

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

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

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

  • Automate transactional accounting work like bookkeeping, payroll, etc.
  • Use artificial intelligence right now to save you loads of time
  • Automate the verification of data quality
  • Become an automated fully outsourced 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 accounting automation in your firm, you’ll love this 2020 guide.

Let’s go!

Accounting Automation 101

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

Basic Terminology

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

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

Artificial intelligence (AI): This technology augments and mimics human judgment and behavior in the same way human intelligence works to solve certain problems.

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

It’s not abnormal for these technologies to work in tandem.

Will Accounting be Automated?

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

Slowly but surely, automation in accounting is taking over more and more complex tasks.

In fact, 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 are some of the highest scores among the 702 occupations listed!

accounting automation job percentages

This 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 accounting automation:

Time savings

This is an obvious one. The more manual tasks that you can automate, the more time you can save to focus your efforts elsewhere.

Improved margins

If it takes you half the time 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 technology and automation running in the background.

Increased automation typically results in superior customer experiences, which are incredibly important these days.

Faster turnaround time

Because automations run with the click of a button compared to someone having to key in information manually, you can speed up the turnaround time of your deliverables. This is important in a world where people expect everything instantly.

Improved accuracy

If you set up your automations properly, you can effectively eliminate human error arriving from manual transcription. This is incredibly important in a field such as accounting that relies on accurate data.

Automation of Transactional Work is Table Stakes

Automation of transactional work includes automating things like:

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

When I first started my cloud accounting firm in 2013, I leveraged cloud accounting systems like Xero and Receipt Bank to automate a big chunk of the bookkeeping process.

Not only did it blow me away, but it blew my clients away as well.

In 2020, these kinds of automations are table stakes, ie. the minimum requirement to be competitive.

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

Cloud Accounting Software is a Must

Cloud accounting software is the hub for all of your accounting automation.

Since this kind of software is online, it’s able to connect to other online software. The benefit here is that you can plug-and-play different apps into your cloud accounting software to customize and automate just about any manual accounting workflow.

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

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 accounting automation.

Automate Expense Processing

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

The days of manually entering bills and expenses into a system is Over (with a capital “O”).

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

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 (ie. elimination of manual data entry)
  • The extracted 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:

hubdoc accounting automation

Pro-tip for Receipt Bank users:

Make sure you’re heading into the supplier tab for each of your clients and activating “auto-publish” on suppliers that have the most items. By doing so, all forwarded items will skip the inbox and flow automatically to your cloud accounting software so long as the suppliers have been set up properly.

You can see in the image below that auto-publish is enabled on 4 out of the 7 suppliers. The more that are enabled, the more that will be automated:

receipt bank suppliers

Payroll Automation

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

  • Manually inputting figures into the system
  • Calculating the net pay
  • Relaying that info to the client and/or cutting checks themselves.

Yikes.

This is an example of transactional accounting that is very easily automated.

Below you can see a pretty simple video by Gusto which 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 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 errors

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

Xavier Analytics

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

xavier analytics xero integration

Once integrated, Xavier Analytics 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 through 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 you 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 Receipt Bank acquiring them, I think we’ll start seeing this kind of functionality be brought to the masses.

VerifyIQ

VerifyIQ is similar to Xavier Analytics 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 firms help their clients with their books, bill pay, payroll, etc., but when it comes to the A/R part of the revenue cycle, they’re invisible.

That’s why I joined InvoiceSherpa, an app that automates the collection of A/R, as an advisor in early 2020 as I believed that A/R was the next logical service offering that accountants can help their clients automate.

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 be automated with software if configured properly.

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 cash flow tight due for many businesses due to COVID-19, there’s a ton of businesses searching for financing.

With the right tools, you can automate the 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 repetitive tasks. Consider how you can move yourself 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 wanting 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 to improve accounting automation.

Set Up Direct Bank Feeds

One of the claims to fame with cloud accounting software is that they 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 and the accounting software as it goes through an intermediary. The more links in the chain, the less reliable the connection is.

As such, 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 a client is looking for the most solid banking integration, look for a bank that has a direct integration with your accounting system to maximize the accounting automation potential.

Recommend Neo-Banks When Possible

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

But if your client has simpler bank needs, you might want to consider getting them set up on some of the newer neo-banks popping up.

By doing so, you and your client can benefit from 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 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 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 your client what this was for.

With neo-banks like Relay, you get this info automatically for checks, wires, e-payments, etc, to help speed up the 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 your client 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.

quickbooks xero brex

Accounting Automation in Financial Advisory Heats Up

We’ve all heard the argument:

Compliance work will be automated and that you have to pivot towards offering advisory services to stay relevant.

While I debated this notion with a thought-leader in the space recently, there’s no denying that firms are trending towards offering more and more advisory services.

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

  • Forecasting
  • Financial 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:

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.

Take financial modeling for instance.

You need information about:

  • Previous financial 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, you 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 system:

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:

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.

First, you can set yourself up on Clarity to pull in 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.

COVID-19 Pushes Cash Flow Automation to Forefront

Cash is king.

And that statement is truer than ever before due to COVID-19 hitting the economy hard.

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

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 cash 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 cash flow projection and its accuracy.

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

Here’s Xero’s automated cash flow 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, it’s incredibly manual.

One of my favorite apps in the space to help automate cash flow planning is Float.

By connecting to Xero & QuickBooks Online, it will pull in your financial data 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.

The video below describes how to plan for cash flow during COVID-19 in just 5 minutes:

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.

And artificial intelligence in accounting is no longer all hype.

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

Let’s take a look at a few:

Use AI to Scan the Ledger for Risks

The great thing about AI and machine learning is that it can process and “understand” large amounts of data.

This is especially important in areas such as audit where auditors have had to sample data instead of scanning the entire ledger.

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

For instance, Canadian-based MindBridge has been one of the original players innovating in the space.

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

mindbridge accounting automation

Similarly, Inflo uses AI to highlight account balances which include transactions which might pose a higher risk of error or fraud:

inflo explore

While this technology is currently primarily being used in audit it’s easy to see this applying to tax and other advisory-oriented services to help identify risks and opportunities in the data. In fact, some firms are already leveraging this very technology to do so.

Automate Your Tax Planning

Here’s another interesting use-case for AI when it comes to accounting automation. You can actually use it 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 AI-driven predictive tax software like Blue J Legal can help.

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 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

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 this kind of accounting automation can help level the playing field between big firms and small firms.

Automate Tax Research

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

But artificial intelligence 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, 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 guide to accounting automation in 2020.

Now I want to turn things over to you!

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 automations when it comes to advisory?

Let me know by dropping a comment below right now.


Ryan Lazanis

I’m Ryan Lazanis. I’m a CPA by trade but definitely don’t consider myself a normal accountant. I identify more with being an entrepreneur and I love disruptive technologies and business models. My aim is to help modernize the old, traditional accounting profession by giving firms the tools they need to modernize. Each week I send off a curated newsletter recapping the top 5 things on the internet affecting your modern firm. Click here to subscribe to my Future Firm Top 5 Weekly newsletter today!