The combination of a labor shortage and record inflation, with rising interest rates and ongoing supply chain disruptions, have challenged businesses and caused many to reset for a slowed economy.
Business leaders have turned their focus toward cost savings and margin growth as they prepare, and though accounting automation may not seem like a priority, it should definitely be included in these preparations. Research by Bain & Company shows companies that cut costs and improved productivity during past downturns achieved better shareholder returns than those that didn’t.
4 Benefits of Accounting Automation
Automating manual accounting tasks has myriad benefits: greater productivity, better use of resources, lower overhead and more. These results are far-ranging and pay off for businesses in a number of ways, including:
Increased efficiency: Manual processes are by their nature inefficient, taking longer and requiring more resources to complete than when automated. Tasks like entering vendor bills, creating invoices and processing customer payments are also labor-intensive, especially when dealing with hundreds of transactions.
These sort of mundane, highly repetitive processes are ideal targets for automation. Rather than entering transactions manually, for instance, they can be created automatically from scanned documents or, in the case of recurring transactions, on a predefined schedule. These efficiency gains free up time, allowing team members to focus on higher-value activities like analyzing data and providing strategic insights that improve company performance and reveal ways to lower costs and work more efficiently.
Lower labor costs: With fewer students graduating with accounting degrees, filling entry-level positions has become difficult. The funnel of experienced job candidates has dwindled as a result, and an exodus of older workers has exacerbated the problem, creating a serious labor shortage and significant wage inflation. With large organizations offering higher salaries, turnover has also become a problem. For midsize and emerging businesses, attracting and retaining qualified accounting staff is a real challenge.
Accounting automation helps in a couple of ways. Because it increases efficiency, fewer people are needed in the department, so losing a single staff member has less impact on productivity than it does in companies that lack automation. Automation can also ease workloads, reducing stress and freeing up time for less mundane tasks, both of which aid employee retention. And should the business grow despite economic headwinds, accounting departments that are sufficiently automated may be able to hold off on hiring new personnel, preventing labor costs from rising.
Better data quality: It’s no secret that manual data entry is a common source of accounting errors. A simple slip up, like transposing a number or adding an extra zero, can throw off account balances and affect the accuracy of financial statements. Relying on spreadsheets to keep track of depreciation, allocate expenses or perform other common accounting tasks increases the risk of errors.
As the use of data for decision-making and strategy increases, avoiding errors has become more important. The finance department is often seen as the primary keeper of company data, responsible for ensuring the accuracy and completeness of not only financial records but operational and statistical data as well. Automation improves data quality by reducing the need for spreadsheets and manual entry.
Risk mitigation: Companies with poor financial controls are more likely to be taken advantage of than those with effective ones. Invoice fraud, including overcharging, sending duplicate invoices and billing for goods or services that weren’t provided, is one of the more common ways businesses are victimized.
Automating accounts payable minimizes the risk of fraud by automatically comparing invoice details to purchase orders and receiving documents to ensure pricing, unit quantity and totals match. This three-way matching can simplify accounts payable processes by automatically scheduling approved invoices for payment while flagging anomalies for further investigation by AP staff.
Automate Accounting with NetSuite
CFOs must help their teams accomplish more without adding headcount. Manual data entry and spreadsheet-based processes make this harder. NetSuite overcomes these limitations with a complete accounting solution that increases productivity and improves data quality by automating time-consuming manual tasks.
A few examples of NetSuite’s accounting automation include:
• Depreciation, amortization and allocation. Ensuring the expenses are recorded consistently and applied to the appropriate cost centers.
• Revenue recognition. Apply standard revenue rules for each deliverable, or develop custom rules if needed. Recognize revenue automatically according to the specific schedule of each contract commitment.
• Journal entries. Reduce reliance on manual data entry with rules-based transaction matching and auto-posting of journal entries.
• Purchase controls. Automated three-way matching and approval workflows simplify the processes of confirming delivery of goods and services prior to issuing payment.
• Bill creation. Create vendor bills automatically from existing purchase orders.
• Recurring charges. Charges like utilities or subscription fees can be automatically scheduled for payment or approved individually.
• Invoice creation. Avoid duplicate data entry by converting sales orders into customer invoices with a simple click.
• Subscription billing. NetSuite's rating engine supports multiple pricing scenarios, including tiered, volume and customer-specific pricing; variable or consumption-based charges; and promotion pricing, as well as fixed fee.
• Billing schedules. Automate the creation and delivery of invoices. Flexible rules-based schedules can be modified or put on hold as needed.
• Collections. Reduce days outstanding and minimize bad debt by automating payment reminders and dunning letters.
• Payment processing. Automatically process customer payments via credit card, direct debit, Apple Pay and other payment services providers without the need to integrate with multiple payment networks.
• Invoice consolidation. Combine multiple invoices for the same account automatically into a single consolidated invoice.
• Bank reconciliation. Nightly bank downloads and smart automation automatically match journal entries to bank account details, flagging discrepancies for further review. Missing entries, such as bank fees, are created automatically.
• Transaction matching. Match customers payments automatically to the appropriate open invoices, confirming whether payment was made in full or, in the case of partial payment, updating the remaining balance. Potential payment errors are flagged for review.
• Intercompany transactions. Sales orders are automatically linked to corresponding purchase orders as they're created to simplify processing of intercompany transactions. Automated netting simplifies reconciliation of intercompany accounts.
• Financial consolidation. Accelerate the close process with automated consolidation of subsidiary-level transactions and ensure compliance with relevant accounting standards, tax codes and reporting requirements wherever your business operations
Want to learn more about accounting automation? Join the upcoming webinar: Automate Processes to Scale Accounting(opens in new tab)