Accounting Automation: The Definitive 2022 Guide

This is my complete guide to accounting automation in 2022.

So if you want to:

• Learn the 8 benefits of automated accounting
• Save time by automating your accounting processes
• Automate all 15 areas of your accounting
• Find out the latest tools to help you streamline and automate your work

Then you’ll love this new guide.

Let’s get started.

Table of Contents

• What is Accounting Automation?
• Will Automated Accounting Replace You?
• 8 Benefits of Automated Accounting
• How to Automate your Accounting in 15 Key Areas

What is Accounting Automation?

I once worked for a partner at a firm that required files to be handwritten on a paper ledger like this:

Performing this work consisted of manual, time-consuming tasks which were inefficient, prone to error, and quite painful.

Today, accounting automation uses technology to, in many instances, completely remove the manual parts of an accountant’s work.

This means no more:

• Manual data entry into a computer
• Manually reconciling bank statements
• Paying suppliers one-by-one
• Producing financial reports in a spreadsheet
• Chasing after documents from your client
• And so many more repetitive tasks…

In short, there are numerous benefits associated with finance process automation, and accounting automation allows you to get most accounting tasks completed and this can free up resources that can be used for other purposes, such as accounting marketing strategies or practice management.

Will Accounting Automation be Enough to Replace You?

The answer depends on your ability to adapt to the changing world of accounting.

A report by Oxford University 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 or accounting professionals are some of the highest scores among the 702 occupations listed!

And another report from McKinsey found that most of what accountants do are either highly or fully automatable:

That said, pacesetting accounting firms, the ones growing the fastest according to a recent Xero study, are also the ones adopting the most technology:

The above proves that while there’s a shift taking place, there are still plenty of opportunities for accountants who choose to adopt. Some parts might need automation, but overall accounting jobs will still require a human being in order to properly do the task.

It’s no longer a question of “will accounting be automated”, but more a question of “how much”.

8 Benefits of Accounting Automation

Let’s now briefly outline the main benefits of automated accounting:

1) Time Savings

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

2) It Improves Margins

If automated accounting cuts down the time you spend to perform certain accounting tasks, then it’s only natural to expect that you’ll be incurring cost savings on the work of those automated accounts.

3) Greater 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.

4) 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 and financial reporting.

5) Superior Customer Experience

With quicker results and improved accuracy, it’s natural that a superior customer experience results from the benefits of automated accounts.

6) Lends Itself Well to Upskilling

This study by the World Economic Forum gives insights into the skills increasing and decreasing in-demand:

Learning how to use software to automate accounting processes helps you improve professional development and be prepared for the future of accounting.

7) Real-Time Decision Making

When there’s accounting process automation, you can get faster insights into the numbers, which can then be leveraged by financial analysts and accounting teams for improved business operations decision-making.

8) Improved Accessibility

Because accounting automation now takes place online, you can access your data and perform your work on the go rather than being tied down to a physical location.

How to Automate Your Accounting in 15 Key Areas

If you’re looking to automate accounting processes in 2022, here are some steps you can take:

1) General Ledger Accounting Software

Cloud accounting software (ie. accounting automation software) for your general ledger is far superior to desktop accounting software when it comes to automation.

This is because it acts as the hub to which other pieces of software can connect it in order to seamlessly transfer data back and forth, which significantly reduces the time you spend on your accounting tasks.

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 accounting process automation software.

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

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

2) Expense and Accounts Payable Processing

Ditch the shoebox of receipts and mountains of paper that need to be manually entered into accounting software and replace it with some nifty automated accounting apps.

Through a combination of robotic process automation and artificial intelligence, apps like Dext & Hubdoc allow you to streamline accounting processes and 100% eliminate all manual 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 and human error)
• The extracted financial data syncs with your cloud accounting software

3) Payroll

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

• Manually inputting figures into the accounting management system
• Manual processes calculating the net pay
• Relaying that info to the client and/or cutting checks themselves.

Yikes.

But with automated accounts via payroll automation, payroll can run with taxes deducted and properly submitted along with all corresponding forms in just a matter of minutes.

See how easy it is with an automated system like Gusto:

4) Month-End Reviews

Before the books are closed, it’s typical for senior accountants to review the books to spot any accounting errors or potential issues.

This task ties up valuable resources, especially if the manager has to review many files per month.

Luckily, there are other tools available that can help automate the month-end review process to spot errors before it even gets to the manager’s desk.

Dext Precision, as an example, will scan the ledger for the period in question and point out warnings for things such as duplicates, unreconciled items, problems with bank reconciliations multi-coded contacts, and a whole lot more.

It will then provide you with a health score so that low health scores can be reviewed by the preparer before sending to the manager for sign-off:

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 for accounting and finance departments.

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

Clicking on items will provide suggested actions that are useful for bookkeepers to follow before sending it over for final review.

5) Working Paper Schedules & Adjusting Journal Entries

As part of the month-end or year-end procedures, accounting professionals often create a variety of schedules for deferred revenues, fixed assets, loans, prepaid, etc. to prepare their financial statements.

With some cool computerized accounting software though, you can automate the creation of these schedules and have your adjusting journal entries posted directly to your accounting system.

You won’t need as much paper once you adopt an automated accounting system.

One app to keep your eye on for 2022 is Facta, which appears to be able to handle a variety of accruals, schedules, and adjusting journal entries with the click of a button.

Take a peek at how it works:

6) Accounts Receivable

Most firms help their small business clients with different accounting and finance operations like 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 proper accounting software.

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

Firms can also use an A/R automation app to help automate collection of their billings after they’ve put a contract in place with their client.

7) Accounts Payable

Still cutting checks or sending once-off wires to pay suppliers in your accounts payable department?

Financial professionals, it’s time to move to something far more streamlined when it comes to automated accounts payable.

There are a ton of apps that can help with automated accounts payable and bill pay, whether it be mainstays like Bill.com in the US or Plooto in Canada. Setting up automated accounts payable could be the biggest impact you have on your small business.

But I’m keeping my eye on others like Routable and CorpayOne that have enabled some pretty neat “if this, then that” automated accounts payable approval rules.

For instance, you could set a rule in the app that says whenever an invoice with the supplier name “Future Firm ®” is forwarded to the system, automatically make that payment via my Royal Bank account and then reflect this in the accounting software.

Here’s a quick demo of automated accounts payable in action:

8) Expense Reports

Compiling employee expenses reports can be exceptionally manual and error-prone if you’re handling these accounting processes the old school way with spreadsheets.

I personally like using Dext’s Expense Report module where each employee has their own login and dedicated email-in address:

And when that employee emails in their receipts for their expense report, Dext will show that user on the expenses in-processing screen:

Which makes it very easy to just sort items by an employee and create the expense report directly within Dext before sending them over to Xero or QuickBooks for reconciliation against the payment.

Easy peasy!

9) Banking & Credit Card Data

We rely on bank and credit card transaction data to help us reconcile a set of accounts.

Cloud accounting software helps to pull in that data automatically via bank feeds which smooths your accounting workflows, but there are 3 issues:

1. The feeds from bank accounts break frequently, causing re-authentication to be required
2. Duplicate or missing transactions sometimes occur
3. The transaction information provided by your bank often lacks sufficient detail to identify the transaction

Relay, a modern banking product, is a great example of how you can set up your banking in a way that avoids these security issues.

First, it has direct bank feeds with your automated accounting software, contrary to most of the other banks that connect via an intermediary, which is often the source of broken feeds or transaction issues.

Second, instead of seeing vague transaction information in your system, such as “Check Deposit” or “Online Payment”, requiring the accountant to ask their client what this transaction is, Relay allows you to choose what data gets pushed into your automated accounting system:

This provides you with far more context on the transaction itself, eliminating the back and forth with your client, making your automated accounting process faster and easier, and there is no need to go through mountains of paper records.

10) Reconciling Uncategorized Transactions

Gathering input from your clients when it comes to missing information on uncategorized transactions has long been an inefficient process for accountants.

These mundane tasks are being automated today, however.

Not only did Intuit announce their new Transaction Collaboration feature at the 2021 QuickBooks Connect conference to help solve this pain point, but two other great options also exist to help you ditch trading spreadsheets with your clients to gather this info.

First, Uncat is an app that lets you send a link to your clients with all uncategorized transactions in QuickBooks Online and lets them proceed with the info directly on their screen (ie. no spreadsheets required).

Here’s Kate from Bookkeeping Sidehustle getting a tour of the app:

Also worth evaluating is Client Hub, which is a popular practice management app, which in addition to tracking tasks and collaborating with your accounting team, can also handle pulling uncategorized transactions in from QBO and set them as client tasks for them to assist with:

11) Cash Flow Forecasting

Cash flow forecasts have typically been manually produced in an Excel spreadsheet by firms or an accounting department.

Luckily, there are quite a few excellent options to automate your cash flow forecasts and provide more financial automation.

Xero & QuickBooks Online have both entered into the short-term cash flow forecasting game which can help automatically produce cash flow plans for up to 90 days and help provide advice when there’s a foreseen cash deficiency.

When it comes to longer-term forecasting, 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.

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 the finance team loves.

12) Accounting Advisory

Providing advice to clients via advisory services was typically reserved for partners and more senior-level staff, which therefore made them hard to scale.

But over and above automating transactional accounting tasks, with smart software and some automated tools, advisory services can be performed by accountants and finance departments at almost any level at scale.

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 processes are at now:

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:

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:

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 business decisions.

13) Financial Modeling

When it comes to financial modeling, 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 and management 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 and finance processes:

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

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 reduce manual processes to automatically produce your financial model along with a whole variety of data analytics to help add value for your clients:

14) Financial Risk Management

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.

MindBridge has been helping to automate the work auditors have been doing for years by scanning 100% of the data, rather than just a sample, to spot potential issues.

But over and above its use to improve operational efficiency and reduce mundane tasks in the audit profession, the tool can also be used to help companies spot errors and risks in the books as well.

Here’s a good video of how MindBridge works in action:

15) Tax Planning

Another interesting use case for artificial intelligence when it comes to automated accounting is that you can actually use AI in accounting business processes to automate parts of tax planning which may help ease work for accountants in the busy season.

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 like Blue J Legal can help accounting practices (or eager business owners).

You would start by picking a tax issue:

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

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:

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.

Technology has a long history in the accounting profession. 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.

Over to You

So that’s my up-to-date guide on accounting automation for the accounting profession, business leaders, and the accounting community in 2022.

Now I want to turn things over to you!

What do you think? Will accounting be automated?

Which strategy are you going to try first?

Let me know by dropping a comment below right now.