How CPA Firms Can Leverage the Power of Automation
CPA firms who embrace automation can make time for the work that really matters—strategic planning and data analysis.
By Mike Whitmire | Digital Exclusive – 2023
If you think of automation in a business as something that occurs on the assembly line rather than in the accounting department, it’s time to adjust that thinking. Modern digital accounting solutions can help CPA firms automate some of their processes (especially the time-consuming ones) and transition their focus to things like strategic planning and data analysis—things that would be more valuable to any firm over the long run.
In a survey of almost 800 accounting managers, chief financial officers, and others by the Institute of Management Accountants and Deloitte, about:
- 43% of accounting departments are equally split between manual and automated.
- 33% of accounting departments are primarily manual.
- 22% of accounting departments are primarily automated.
- 1.5% of accounting departments are fully automated.
While these survey results aren’t surprising, they do bring attention to the fact that the accounting profession has room to grow with automating tasks. Here are some ways that CPA firms can leverage the power of automation to benefit their day-to-day work.
Benefits of Automating
Automation involves using technology and software to streamline certain practices and processes. For CPA firms, it benefits tasks like data entry, calculations, and automatic data sharing. Additionally, it allows CPA firms to:
- Complete tasks faster: By sharing data between processes and by automating aspects of data entry, accountants can complete tasks faster.
- Ensure data accuracy: Automating the data entry process reduces the chances of someone making an error.
- Enhance agility: Automated accounting tasks give decision-makers in the firm the information they need faster. This allows them to make decisions based on up-to-date information rather than waiting for someone to process data manually.
- Allow simultaneous tasks to be performed: With automated data entry, multiple accountants can access the same data set and work on their own tasks earlier than if they have to do their own data entry.
- Support more time for higher value services: When members of your accounting team don’t have to do time-intensive tasks because of automation, they can spend their time working on projects that bring more value to the firm.
What Accounting Tasks Can You Automate?
To make the most of your opportunities to leverage automation with your accounting team, it’s helpful to understand what types of tasks you can automate and how the process works. Here are a few examples of tasks that can be automated and how.
Compliance Forms
When you need to complete compliance forms, you can automate the entry of some information. Having software pull data into these forms ensures accuracy and reduces the time required to complete them.
Data Backup
Every firm needs to have a means of backing up its data, especially its financial data. Rather than having staff manually trigger a data backup at the end of each day, set up automated backups. Through automation, you may even run backups dozens of times during the day, constantly ensuring up-to-date copies.
Data Entry
Automation of data entry can occur by pulling data that someone entered earlier rather than re-entering it. You can set up rules for the automation process that determine exactly when the software should pull in data and when someone should manually enter the data.
Invoicing
To ensure accuracy, you may have many steps to complete when generating client invoices. You can automate some steps, such as verifying the invoiced amount against other data records. You could do this by integrating your customer resource management system (where your client contract lives) with your enterprise resource planning (ERP) system and creating a rule in the ERP that cross-checks all new client invoices against the contract. If everything matches, the invoice is automatically approved and sent, while any discrepancies get flagged.
You can also automate sales tax calculations, even if you operate in multiple states with third-party programs, like Avalara. This software automatically calculates the correct amount of sales tax to collect based on the client’s address shown on an invoice.
Preparing Reports
When members of management want financial reports, they usually want them yesterday. Fortunately, you can automate creating these reports, especially the ones most frequently requested. To do this, you can create custom recurring reports in your ERP that generate the reports automatically at the time you need. When you need the information, the automation should pull the relevant and the most recent data, which management will appreciate.
Reconciling Bank Statements
Accounting software can automatically compare your firm’s bank statement to the transactions listed in the cash ledger. This saves your team a lot of time versus manually reconciling this data. You’ll need to connect your software with your bank to automatically download bank transactions. Your software will then try to match transactions based on the amount, date, and vendor name. Any amounts it can’t pair up will be noted for review. Should the automated process detect an abnormality, you can have it automatically kick the item to a team member for a manual inspection.
Steps for Common Processes
When your accounting team has to follow certain steps to complete a process, project management software can help. List the steps and assign them in the project management software. When one team member finishes a task, the software automatically activates the next step. Everyone knows their due dates and tasks, as the software tracks them.
As CPA firms increase the automation of their tasks, they can expect to see reduced importance of performing basic functions for accountants. However, tasks related to providing insights based on data analysis will become more valuable for accountants to prepare. In fact, an ACCA report sees these technological changes as a potential advantage for accounting professionals going forward.
Simply put, accountants who embrace automation and technology can help lead their firms forward. Ultimately, CPA firms who embrace automation can embrace other beneficial tools, like big data, mobile payment systems, cloud computing, cybercrime defense, and more—all of which will allow them to better meet the wants and needs of today’s demanding clients.
Mike Whitmire is co-founder and CEO of FloQast, an accounting close management software company headquartered in Los Angeles.
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