Here is my complete guide to accounting technologies for your firm in 2021.

In this guide, you’ll learn about the LATEST accounting technology within the accounting profession along with specific strategies on how to leverage them in your accounting firm.

So if you’re looking to automate your firm and get the best out of the available technology, you’ll love this guide.

Let’s go!

Table of Contents

Cloud Technology for the Win

The most transformational of all technology to hit the accounting profession as well as accounting firms in the last decade has been cloud computing.

Briefly, the cloud allows you to store data and applications on the internet versus on your computer or server.

The implication is that this technology has allowed for:

  • Unprecedented levels of accounting automation
  • Anywhere, anytime access to data
  • Closer collaboration with your team and clients

The early days of cloud computing in accounting started in the 2000s, often said to have been started by Xero.

For kicks, here’s the oldest Xero screenshot that can be found on record (from 2007):

xero 2007 dashboard

What really made cloud accounting a gamechanger was the fact that you could connect your bank to your accounting software which started the technology trends towards accounting automation:

xero bank feed

If you’re already on the cloud and have ditched legacy applications, skip to the next section on APIs.

If you need some tips to get up and running with cloud computing:

Become a Cloud Accounting Power User

To first leverage cloud computing within accounting functions, you’ll need to understand cloud accounting.

Whether you choose Xero, QuickBooks Online, or any other cloud accounting systems out there, I recommend picking one system and mastering it to help your clients with their small business finances.

First:

Take the certification program.

Here’s Xero’s:

xero certification

Here’s QuickBooks Online’s:

Second:

Sign up to the newsletter of whatever accounting system you opt for. That way, you’ll get the latest feature release info to ensure you know the latest on the product.

Third:

Manage your own firm’s business finances and financial statements on the platform you choose. Click around everywhere so that you can really get a sense of the software to get comfortable on it.

Fourth:

Move a few lower maintenance clients and their financial information on to the platform to get your team comfortable before a larger rollout.

Pick 2-3 Other Cloud Accounting Apps to Master

Since you can take your general ledger online, you should also take other accounting functions into a cloud based solution.

There’s a lot of distractions out there with all the apps available, so no need to go crazy here.

There are so many that I actually wrote an article on the 147 different cloud accounting apps out there.

Whoa! That’s a ton of apps for accounting firms to sort through…

For now, stick to the basics.

I would recommend mastering at least a cloud-based app for:

  • Expense claims & receipt management
  • Payroll
  • Data analytics and small business performance
  • And maybe one more if there’s a process that you handle regularly for your clients (ex: bill pay)

And once you have your apps selected, you’ll need to understand APIs and integrations in order to compile automated financial information.

Opt for Cloud Tax Software

All the benefits that I listed for cloud services applies to tax software as well. For some reason, legacy applications in the world of tax have reigned supreme up until now. But we’ll see tax software start to move online and the promise is that tax software will become far more integrated into your accounting suite to help automate the completion of tax forms, making tax preparation much more seamless.

Over and above just automating completion of tax forms however, we’ll also start to see tax planning become much more automated, which is discussed later on in this article.

Sniff out a cloud based solution for tax software available in your jurisdiction and get it implemented.

APIs: Automated Accounting Technology

API stands for “Application Programming Interface”.

What you need to know about APIs is that they allow you to easily connect and integrate different pieces of software together to make accounting far less time consuming and to automate your financial information.

This is important because you’re able to automate entire workflows so that data pushes seamlessly into your cloud accounting system all without manual entry.

Example:

I can send my machine readable text and expense items via mobile devices to Dext to help automatically extract the data from the receipt/invoice using optical character recognition (OCR):

receipt bank invoice

Then, because Xero & Dext both have an API, I’m able to push all this expense data directly into my accounting system if I’ve set up the integration settings correctly.

Here you see the invoice now in Xero:

xero invoice

This is just a simple example using optical character recognition and APIs, but the possibilities are endless.

Here are a few tips when it comes to using APIs:

Always Review Integration Settings in Detail

Not all integrations are created equal!

For instance, here are the integration settings between Xero & Dext:

receipt bank xero integration settings

And here’s the integration settings between Xero & Hubdoc, an app similar to Dext:

xero hubdoc integration settings

So while the apps provide similar functionality, the kind of the data being sent over to your accounting system will differ.

It then becomes incredibly important to understand the integration settings of whatever app you select before you using any APIs and so you can get the most out of optical character recognition.

Tip: All things being equal, you’d want the app that provides the most robust integration settings, thus giving you more control over how data is pushed into your accounting system.

Test Integrations First Before Going Live

Once you’ve understood the integrations, you should test them out on a small scale before you go live.

As an example, here’s how you can integrate a Shopify store into QuickBooks Online:

But if your client has 1000’s of orders and you’re not sure how the integration works or if you incorrectly set it up, you could end up with a huge mess on your hands!

That’s why I advocate to either:

a) Test the integration on a small client which can be easily cleaned up if things go wrong

or,

b) Use a demo account to test the integration first, like the one in Xero:

xero demo company

Review App Marketplaces Regularly

Most apps that have an API will also set up an app marketplace for you to review the available integrations.

For instance, here’s the QuickBooks Online App Store:

quickbooks online app store
If you’re looking to get the most out of APIs for your firm and to eliminate manual entry, you’ll want to ensure you’re reviewing the app marketplaces for the apps you’re using regularly to see if there are any additional workflows that you may be able to automate.

Use API’s for Data Analytics

In order to monitor business performance, there is no better way than to connect your accounting system to a variety of data analytics apps out there. And the good thing is that these analytics will give you in depth insight into the numbers and can be compiled automatically.

I mean, check out how cool this data analytics dashboard from Jirav looks!

jirav cloud accounting software

Blockchain: Emerging Technologies on the Horizon

I became involved with bitcoin and, correspondingly, blockchain in 2013.

As I studied the space, I couldn’t help but notice the parallels that this technology had with accounting.

So in 2014, I wrote an article titled, “How the Technology Behind Bitcoin Could Transform Accounting as we Know It“.

To be clear, there has been a ton of hype around blockchain, and related technology like smart contracts, in the world of accounting. And the real-world application of this technology in our field so far has been marginal at best.

That said, I believe it’s important to understand and monitor changes happening in the space to see how it may apply to your firm as things develop.

Some Background

The blockchain is simply a public ledger that automatically records transactions that hit it.

So if I send someone a bitcoin, this transaction is automatically transcribed on this public ledger. It’s worth noting that this technology always records transactions 100% accurately.

If more and more transactions flow through a blockchain as governments and banks get on board, consider the implications this would have on bookkeepers and auditors (I go into detail on the implication for bookkeeping here and for audit here).

If you want to see the blockchain in action, head on over to Blockchain.info:

blockchain.com

You’ll notice there’s a search bar there where I’ve popped in a bitcoin transaction ID. I can then search for this transaction and get more information on it:

Above shows the recording of this transaction on the public ledger where I can see:

  • A timestamp
  • The bitcoin address it was sent to
  • The bitcoin address who sent it
  • The amount of the transaction (3.09960339 BTC, which equals around 36k USD at the time of writing)
  • The fees associated with the transaction
  • And more…

If I click on the “3CDENCr2EEDpeepGRg7K4oja3PtYF87VDz” address (blue link above), I then get brought to the receivers bitcoin address:

We then see:

  • The total amount of bitcoin sent from the address
  • The total amount of bitcoin received
  • The current balance in that address at the moment
  • A full history of all transactions that went through that address

Again, this ledger records transactions 100% accurately & automatically on a completely tamper-proof ledger.

As financial professionals, it’s hard to not get excited at the possibilities this may have on our field.

The thing is, there’s not enough mainstream usage for it to be valuable to us yet.

So we must learn and we must monitor to be ready for when this technology becomes a larger driver force in the profession.

I can suggest two things:

Buy & Spend a Bit of Bitcoin Yourself

The best way to learn is to use the technology yourself.

Now, I’m not suggesting you load up on thousands of dollars worth of cryptocurrency, but even just buying $20 worth can give you a sense of how it works.

You and an accounting friend can head on over to a cryptocurrency exchange (ex: Coinbase) to easily purchase a small amount of bitcoin, or whatever other cryptocurrency you want. After you purchase, experiment with sending money back and forth and then keeping track of the transaction in the Blockchain Explorer like I did in the example above.

After that, you’ll get a better understanding of the full cycle of a blockchain transaction.

Set Up Google Alerts

To get the latest on what’s going on in the world of blockchain and accounting, I recommend setting up some Google alerts to ping you whenever there’s news on the subject.

First, head over to Google Alerts.

Next, type in the keyword that you’d like to monitor.

Here are some examples:

google alerts blockchain

You can then edit the alerts to choose your alert frequency, etc.

Cryptocurrency Accounting Software

Had enough of the bitcoin, cryptocurrency, and blockchain talk?

Sorry, but there’s a bit more.

Love it or hate it, cryptocurrency is not going anywhere and it requires new skill sets to deal with it in accounting.

In fact, just check out the increases in the weekly bitcoin volume over the past few years:

bitcoin volume 2021

The trend is that more and more of your clients will be engaged in buying, selling, and/or transacting in cryptocurrency in the years to come.

The problem:

Most tax agencies (at least in Canada and the US) view crypto as property and not currency.

What this means is that we need to track and calculate the gains/losses on the disposal of any cryptocurrency transactions for financial reporting and tax purposes.

From personal experience, let me tell you that this is an absolute nightmare!

I have a few suggestions when it comes to tracking cryptocurrency transactions for financial reporting and tax preparation:

Use a Google Sheet When Low Volume

If your client only has a handful of crypto transactions (let’s say 10 per month), then I’d recommend just getting set up on a shared Google Sheet spreadsheet with your client.

To compile the financial information, you’ll want to track:

  • Each transaction that has been acquired and disposed of
  • The amount of that transaction in crypto
  • The amount of that transaction converted to their currency
  • The number of units
  • An ongoing tally of the weighted average cost basis
  • Any corresponding gain/loss on the disposal of any crypto

Then all you need to do is journal those transactions on the frequency you see fit.

Use Crypto Accounting Software When High Volume

Take it from me, those spreadsheets above can get unmanageable real fast, especially if we want to rely on cohesive financial information to drive business strategy. The blockchain can be a confusing place to navigate with all kinds of inter-wallet transfers.

This is where you’ll need to step up to specialized crypto accounting software which will help in 3 big ways.

First, it will integrate directly with the blockchain to pull in transactions directly into the software.

Here’s a screenshot of transactions being brought into Gilded direct from the blockchain:

gilded

Second, the software will automatically calculate gains/losses on disposals of any crypto to make your tax returns easier to prepare.

Here’s Verady, another crypto accounting software, calculating the gain/loss on disposals:

Last, it will connect to cloud accounting software to push journal entries over automatically by setting up the Xero/QBO integration:

And by properly mapping the general ledger accounts for the integration:

With that in place, you’ll be able to ease the process of compiling financial information and tax returns in order to help your crypto small business clients remain relevant.

A word of advice: Read my section on blockchain above and make sure you have some basic knowledge of cryptocurrency and blockchain before trying to service clients in this space.

Robotic Process Automation Accounting Technology

In high demand is Robotic Process Automation (RPA), one of the more popular of the latest technologies to help automate rule-based tasks in accounting and to eliminate manual entry.

Accounting technology like RPA is good when you have a lot of repetitive tasks that need to be treated in the exact same manner each and every time.

As an example, in Dext you can click on the “Suppliers” tab to bring up all suppliers in the system:

And then by clicking into one of the suppliers, I’d see this:

Here I’ve done a few things:

  1. I’ve completed all of the necessary fields
  2. I set “auto-publish” to on

What this means is that I’ve set the rules for how this supplier should be treated each and every time. When Dext sees an expense from Google, it will extract the data exactly how I’ve set the rules and then automatically push it to my accounting system.

So even if the category should be something different on a particular invoice, Dext will still treat it according to the rules. It’s predictable, but not always correct depending on whether factors change.

Here are a few things to consider when using RPA accounting technology:

Write a List of All Repetitive Tasks & Shop for Solutions

No tricks here, but before you can use RPA, you should document the kind of things that you do over and over again in the exact same manner. This would make RPA a prime technology candidate to help you with automation.

Once that’s done and once the requirements are clear, you’ll need to shop around for a software solution that can assist.

Use Bank Rules in Your Cloud Accounting Software

This is an easy win when it comes to using RPA.

Most cloud accounting systems have the ability to create rules for how certain transactions are reconciled in the same manner each and every time.

For example, here’s one I set up in QuickBooks Online:

quickbooks rules accounting technologies

Set a recurring task in your system to regularly update bank rules across your clients.

Artificial Intelligence & Machine Learning

Artificial intelligence (AI) is the simulation of intelligence by machines where it can mimic human judgment to help solve certain problems.

For example, Blue J Legal is a piece of software that can predict the outcome of tax cases to help automate aspects of tax planning.

In this example, we have provided the software with facts on a given tax issue. The software then scanned related tax law and court cases to provide a degree of confidence on what the outcome would be if that very issue went to court:

blue j legal tax

Machine learning (ML) is a subset of AI where the computer can “learn” from experience to help automate certain tasks.

You’ll see examples of this in systems like Xero or QBO. When you code a transaction a certain way in one instance, in future instances it will start making coding suggestions for you.

Both of these new technologies can operate outside of a strict rules-based environment, which makes it especially interesting.

Here are two things to consider when it comes to leveraging AI & ML in your firm:

Seek an AI Accounting Technology for Audit

AI has arguably had the biggest impact within the audit process and it is in very high demand among these latest technologies.

Traditionally, auditors would sample large sets of data and perform certain tests to provide a level of assurance over that data. It was not feasible to look at the entire data set in great detail, however, due to the amount of time (and therefore costs), it would take to do so.

What AI has brought to the field is a way to use technology to run through as large of a data set as you want, in great detail, to point out risks that you might not have previously seen through the samples an auditor had selected.

For example, in the image below, MindBridge‘s software for auditors ran through an entire sample of data and identified $103,460 of high-risk transactions, $306, 250 of medium-risk transactions and $10,430,000 of low-risk transactions:

mindbridge accounting automation

Basically, the software will highlight anomalies and from there, you can tailor your audit much more easily.

Don’t Look Too Far When It Comes to AI

If you’re using some of the technology mentioned in this article, you’re probably already unknowingly using AI & ML without even knowing it (ex: Xero & QuickBooks). And these products will continue to make incremental improvements with regard to this technology.

I’d be wary of searching explicitly for AI & ML tech.

Instead, identify the inefficiencies and time-sucks at your firm first, then search for software that can plug it up after. And if it happens to contain AI or ML, great.

For instance, if you spend a ton of time on tax research, then you may want to search for available tax research software options.

And from there you may find something like Checkpoint Edge from Thomson Reuters which uses AI to help predict what the user may be searching for and provide the appropriate search suggestions.

Wrap-Up

I hope you enjoyed my guide to accounting technology for your firm.

Now I’d love to hear from you 🙂

Are there any others that you’re most excited about?

Which ones do you want to leverage next?

Which strategy in this guide did you like best?

Let me know by commenting below!


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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