Accounting automation 2024: key benefits, technologies, and how to get started

In an industry where efficiency and accuracy are central to success, automation is a genuine game-changer for accounting firms. By handing over all those repetitive tasks to software, accountants can get more done, faster. 

Success with automation isn’t a given, however. To reap the benefits, you must first understand how it works, where it can be applied, and where it can’t. In this article, we’ll explain everything you need to know about accounting automation, so that you can drive new levels of efficiency and productivity across your firm.

What is accounting automation?

Accounting automation is the process of using software and other technologies to perform tasks with minimal human intervention. In other words, the software takes certain tasks or processes off your hands, freeing you up to do something else.

Accounting typically involves all manner of repetitive processes that are ripe for automation — everything from data entry to account reconciliation, financial reporting, and invoicing. When performed manually, these processes can be time-consuming and prone to error, but when automated, they can happen in an instant and with an unbeatable level of accuracy. This makes automation one of the most important technology trends in the accounting world today.

The benefits of accounting automation

Automation brings huge benefits to accounting firms, completely transforming the way they operate and serve clients. By leveraging accounting automation tools you can:

Boost efficiency and streamline processes

Unlike humans, automation tools can perform repetitive rules-based tasks in an instant and never need to take a break. By handing over those “low-hanging fruit” tasks such as data entry or account reconciliation, accountants can turn their attention to more complex accounting work. In other words, your firm will get more done with fewer resources. 

Improve accuracy by eliminating the risk of human error

Not only does automation enable accounting firms to perform tasks faster than ever before, but it also brings an unbeatable level of precision. In an industry where accuracy is paramount, automation tools remove the risk of human error, ensuring a better quality service for your clients. 

Build highly scalable processes

Automation can handle multiple tasks simultaneously. So if you have five different accounts that need reconciling, these can be done at the same time, in a matter of seconds. This means that as your client base grows, your processes can seamlessly scale to meet increased demand — all without having to hire new staff.

Enjoy considerable time and cost savings

By improving efficiency at scale, automaton tools save your accounting practice countless hours while freeing up internal resources. Ultimately, this has a positive impact on your bottom line, enabling you to take on more clients and grow your business rapidly.

Ensure compliance and audit-readiness

Accounting automation tools often come with compliance features built in, so you can ensure adherence to the latest regulations and laws throughout your automated processes. They also improve auditability by continuously recording transactions and logging events and changes. 

Key technologies in accounting automation

The rise of automation is powered by several advanced technologies. Understanding how these technologies work and the scope of their applications can help when it comes to choosing the right accounting automation software. 

Robotic process automation (RPA)

Robotic process automation involves the use of software robots to automate repetitive, predictable, rules-based tasks. These bots act like humans in digital systems, performing all manner of predefined actions — but faster and more accurately. RPA can be used to:

• Enter, capture, or transfer data
• Process invoices
• Categorize transactions
• Perform bank reconciliations

Artificial intelligence (AI) 

Artificial intelligence is a groundbreaking technology that enables machines to simulate human intelligence. Unlike RPA models, which can only follow predefined rules, AI algorithms can synthesize and interpret different types of data, solve problems, and self-improve through experience and exposure to new data. 

For accounting firms, there are two important subsets of AI to understand: machine learning (ML) and natural language processing (NLP).

Machine learning uses advanced algorithms and statistical models that can analyze and learn from data. This makes ML-powered tools adaptable, enabling them to perform certain tasks without explicit instructions. For example, ML can be used to:

• Predict future trends and risks
• Generate accurate financial forecasts
• Spot anomalies or suspicious transactions that may point to fraud
• Streamline audits and ensure compliance with regulatory requirements

Natural language processing gives software the ability to understand, interpret, and produce human language, either in written or spoken form. For example, accountants can leverage NLP to: 

• Generate financial reports 
• Summarize documents, articles, or reports
• Streamline audits by analyzing contracts, agreements, and other documents
• Answer questions about best practices, regulatory changes, or accounting standards 

Data analytics

Accounting firms handle a lot of data. With the right technology, accountants can turn that data into actionable insights that drive smarter decision-making. Data analytics tools can process huge data sets in the blink of an eye, identifying patterns, outliers, and trends. For example, accountants can use data analytics to: 

• Gain insights into financial performance
• Understand employee activity and productivity
• Forecast cash flow, revenue, and expenses
• Predict market trends and risks
• Receive real-time alerts when certain data thresholds are reached

Optical character recognition (OCR)

Optical character recognition is a technology that converts text found in images or scanned documents into a machine-readable form. If you take a picture of some text, for example, it’s just a flat image. With OCR, the text becomes readable data that you can analyze, search, or edit. 

Accountants can use OCR to extract important information from invoices, receipts, and other financial documents, reducing the need for manual data entry.

Cloud accounting software

Cloud accounting software combines the technologies described above to automate core accounting tasks, such as bookkeeping, payroll, invoicing, and financial reporting. 

Unlike traditional on-premise software — i.e. software that’s installed and run on local computers and servers — cloud accounting software enables users to access data and tools on any device, anywhere with an internet connection. Other benefits of cloud software include:

• Automatic software updates 
• Seamless integration with other cloud-based tools
• Robust security features such as data encryption and auto-backups
• Real-time collaboration for remote and multi-location businesses

Practice management software 

While accounting software automates your accounting tasks, practice management software automates the tasks involved in running a successful accounting business — from client communication to document management, invoicing, and payment collection. 

While some practice management platforms automate single tasks, others offer more advanced automation options. With TaxDome, for example, you can automate entire accounting workflows from start to finish. 

Let’s look at the example of client onboarding. TaxDome automates every step of the process, from sending a proposal and welcome email to gathering client information and securing payment. With all those repetitive processes running on autopilot, clients are kept in the loop at all times, while accountants can focus on providing real value.

10 common accounting tasks that can be automated

The beauty of automation is that it can be applied to a broad range of accounting tasks in different ways. In this section, we’ll highlight ten real-world examples of how automation can be implemented in your accounting practice. 

1. Bank reconciliation

Bank reconciliation can be a tedious, time-consuming task when performed manually. With bank reconciliation software, you can automate the process entirely, ensuring that your accounts are always accurate and consistent. Here’s how it works: 

• Bank statements are imported into your accounting platform
• The system automatically matches transitions with your accounting records
• Any discrepancies are flagged for manual review by an accountant

2. Expense management

The process of tracking and approving employee expenses and reimbursements can also be automated. Using a comprehensive accounting platform or standalone expense management software, you can: 

• Scan and upload receipts via a mobile app 
• Automatically extract and categorize data based on predefined rules
• Auto-route approvals to the right accountant
• Generate automatic expense reports 

This speeds up the expense process significantly while improving accuracy. You can reimburse your employees faster, avoid errors, and eliminate most of the manual tasks involved.

3. Financial reporting

With modern accounting software, financial reports can all be prepared automatically in a matter of seconds, using financial data consolidated from various sources. These can include:

• Financial statements (balance sheet, income statement, cash flow statement)
• Budget reports
• Accounts payable and receivable reports
• Payroll reports
• Inventory reports

Beyond financial data, automation software can generate accurate and timely reports covering areas such as team productivity, the popularity and value of different services, and client attrition rates, providing you with detailed insights into your firm’s performance.

4. Payroll processing

When it comes to paying your staff, accuracy and speed are essential, but manual processes are inherently error-prone and time-consuming. With payroll automation software, you can do the following without lifting a finger:

• Calculate employee salaries, taxes, and deductions
• Manage payments
• Generate payroll reports

You can automate your payroll using dedicated payroll software, such as Gusto or Paychex. Alternatively, many accounting platforms come with payroll capabilities built-in, including QuickBooks Online and Xero. 

5. Accounts payable and receivable

Accounting software can now automate accounts payable (AP) and accounts receivable (AR) processes. Here’s a breakdown of some of the key tasks you can hand over to accounting automation software: 

Automating your AP and AR processes is a no-brainer, ensuring accurate and timely payments, reliable cash flow, and happier vendors. 

6. Tax compliance and filing

Gone are the days of manually calculating tax liabilities. With tax preparation software, you can automate much of the tax filing process, ensuring accuracy and compliance with the latest tax regulations. Here’s how it works: 

• Automatically calculate tax liabilities based on financial data
• Prepare and submit tax returns electronically
• Software is automatically updated in line with the latest regulations 

With practice management software, you can even automate the process of gathering the relevant information and documents you need to prepare your clients’ tax returns. TaxDome, for example, comes with customizable tax organizers (digital forms) that guide clients through the process of submitting information. These can be sent out as part of a wider tax preparation automated workflow.

7. Budgeting and forecasting

Accountants can now create accurate budgets and forecasts automatically using ML-powered tools that analyze historical financial data to spot patterns and trends. This takes much of the guesswork out of planning for the future, enabling finance teams to allocate funds, identify risks, and make key decisions with a higher level of confidence.

What’s more, they can view real-time data insights via interactive, customizable dashboards that provide snapshots of financial performance at any given time. 

8. Audit and compliance checks

Manual audits can be a time-consuming and error-prone process. With audit management software, however, you can automate the process almost entirely. Here’s how it works: 

• Continuously monitor financial transactions
• Ensure compliance with regulations and internal controls
• Analyze huge data sets and flag anomalies in real time
• Generate detailed audit reports 

The result is a faster, more streamlined, and more accurate audit process. Instead of spending hours on manual, data-intensive tasks, audit professionals will have more time to verify results and investigate anomalies and issues. 

9. Inventory management

Manually tracking inventory levels and maintaining accurate records is a highly complex process, often leading to inaccurate data. Automation makes this a breeze. Some accounting platforms come with inventory management capabilities built-in, enabling accountants to:

• Automatically update inventory levels based on sales and purchases in real time
• Use that data to ensure more efficient inventory management and reporting

10. Categorizing transactions

Categorizing financial transactions makes for more accurate and detailed financial reporting. Accounting software can handle this for you by:

• Using machine-learning algorithms to automatically categorize transactions based on historical data and predefined rules
• Continuously learning from new data to improve the accuracy of future categorizations
• Re-categorize transactions if errors are discovered

Accountants will still be required to set the rules for categorization, provide manual approvals, and suggest new categories when the software is unsure, but the vast majority of the manual work can now be handed over to software.

How to implement accounting automation

With accounting automation involving so many different tasks, processes, and tools, it can be hard to know where to start. In this section, we’ll guide you through the steps you can take to ensure successful implementation. 

Identify your needs and goals

The first step to successful implementation is to understand where you are now and where you want to be. To do this, you’ll need to look closely at your current processes and identify repetitive manual tasks that could be automated. 

You’ll also need to define what you want to achieve through automation, so you know how to measure success. For example, do you want to save time and money, scale your business, or enjoy a better work-life balance?

Choose the right tools

Now you know the processes you want to automate and the goals you want to achieve, you can start researching potential tools, apps, and platforms that can help. Besides having the features you need and being within your budget, we recommend choosing software that:

• Is intuitive and easy to use
• Integrates seamlessly with your other systems
• Will scale as your business grows
• Offers clear and transparent pricing
• Has excellent user reviews and ratings

Implement your new software

Once you’ve chosen the right software, you’ll need to go through the careful process of implementation. This typically involves steps such as:

• Migrating data from legacy systems
• Integrating your software with your existing tech stack
• Setting up accounts, users, and permissions
• Configuring and personalizing the system to meet your needs

Train and prepare your team

To maximize the potential of accounting automation, you’ll need to get your team up to speed on the new tools you plan to use. 

This isn’t just about the ins and outs of how the software works — it’s also about communicating why automation is beneficial. To achieve seamless adoption, you need your staff to be onside, and that means explaining to them how the new software will make their lives easier, and their work more enjoyable. 

Review and fine-tune processes

Post-implementation, it’s important to periodically review how your accounting automation software is performing against the goals you established back in step one. If you aren’t seeing the improvements you were hoping for, you’ll need to understand why and make necessary adjustments.

It’s also important to listen to the feedback of those using the software day-to-day. Have they found it easy to use? Are they more productive as a result? Do they need additional support and training to fully utilize the software?

Challenges in adopting automation

Change is often challenging, regardless of the benefits it can bring. In your journey to a more automated and streamlined accounting practice, there may be several bumps in the road. By understanding potential issues beforehand, you can better navigate your way around them. 

Here are some key challenges to consider when implementing accounting automation software in your practice:

Initial setup and integration costs

Upgrading from legacy systems or adding new tools to your accounting tech stack doesn’t come for free. But rather than focusing solely on the cost of new software, we recommend that you also factor in the return on investment (ROI) they will bring to your firm — as well as the opportunity cost of doing nothing.

By making your practice more efficient and scalable, automation will save you countless hours — and in accounting, time is money. For this reason, you should see accounting automation software as an investment that will pay dividends over time. 

Think of it this way: when your direct competitors are automating their processes, can you afford not to?

Data security and privacy

Any new software or app represents a new data risk, as well as a new attack vector for potential hacks. Accounting automation software needs to access highly sensitive financial data to work its magic, raising concerns about data security and privacy.

By choosing automation tools that offer advanced security features — such as encryption, multi-factor authentication, and regular security updates — you can mitigate these risks significantly. And with more than 80% of cybercrime incidents being caused by human error, awareness training is also crucial.

Resistance to change

Many accountants see automation and AI as a threat to their jobs. This is perfectly understandable, but it isn’t true. Rather than replacing accountants, automation will help them do their jobs faster and better than ever before. 

To successfully implement automation software, you’ll need to get buy-in from your staff. As we’ve already explained, this will involve effective training, highlighting not only how automation works but the huge benefits it can bring.

Integration with existing systems

Adding new tools to your current tech stack can cause concerns around integration. To sidestep this issue, choose software that offers native integrations with the platforms you already use. The best software providers will guide you through the implementation process, ensuring that the new software is seamlessly connected to your other systems. 

In some cases, you might find that your new accounting automation software replaces your legacy apps altogether by combining multiple features and capabilities in one platform. Generally speaking, the fewer systems you need to jump between, the better. 

Data quality and consistency

To work effectively, automation tools need access to high-quality data. If your data is poor quality or incomplete, you’ll get inaccurate outputs that could jeopardize your firm’s processes and decision-making.

You can avoid this issue by establishing robust data governance policies, implementing data cleaning procedures, and making sure your automation software has seamless access to different data sources.

Scalability issues

Every business wants to expand its client base and increase revenue. But if your software isn’t able to scale as your business grows, you’ll be fighting an uphill battle. This is why it pays to choose automation software that can scale seamlessly, easily handling spikes in data volumes. 

Concerns about compliance

When it comes to adopting new tech, one of the biggest concerns accountants have is regulatory compliance. This is made even more pressing given that rules, regulations, and standards are constantly evolving. 

The best accounting automation tools have compliance built into their processes. And with regular updates, you can ensure that the latest version of the software always reflects the latest regulations.

Future trends in accounting automation

Automation is still a relatively new technology in accounting. In the coming years, we’ll see important accounting trends unfold as the role and scope of automation increases. Here are some key examples. 

Increased adoption of automation and AI

The adoption of automation and AI in accounting will only continue to grow. Instead of being considered a novelty, advanced automation features will be a baseline expectation when buying new accounting, bookkeeping, or tax software. 

The scope of automation will grow as well. As AI and ML algorithms become more sophisticated, they will be capable of automating complex accounting tasks such as risk assessment, financial analysis, and strategic planning.

Increased use of NLP and large language models

While many accountants have dabbled with NLP-powered tools, this technology will become an indispensable tool in the modern accountant’s toolkit. Accountants will find new and creative ways to use tools such as ChatGPT, which will act like digital sidekicks, available to help out with anything and everything. Prompt writing will become a key skill. 

At the same time, NLP will enable voice-activated accounting systems that allow accountants to interact with software using natural language commands. This will usher in a new era of usability, convenience, and efficiency.

Lower barriers to entry for small accounting business

The vast majority of accounting firms today are considered small businesses. Fuelled by the rise of automation, that trend will continue, with more people deciding to go it alone and start an accounting practice. 

Automation will make it easier than ever for fully remote solo businesses to serve more clients. Small firms will also be quicker to adopt new technologies, giving them an advantage over larger businesses when it comes to speed, agility, and delivering personalized client experiences.

Real-time financial analytics, reporting, and monitoring

Accounting firms will rely more heavily and extensively on automated analytics and reporting, enabling them to understand business performance, industry trends, and risk better than ever before. 

Automation will also enable firms to conduct continuous auditing, providing insights and flagging issues in real time. This will drastically reduce the time required for traditional audits while improving regulatory compliance.

Greater personalization, customization, and flexibility

Automation tools will offer greater personalization and customization, allowing businesses to tailor accounting processes to their unique needs and preferences. At the same time, AI-powered systems will adapt to your business’s unique workflows and practices, continuously improving their performance over time.

RegTech and automated compliance

Compliance and risk management processes will be increasingly automated, with a new generation of regulatory technology (RegTech) platforms reducing the burden on accounting teams. With automatic updates, firms can ensure that they’re always working in line with the latest regulatory requirements.

Integration with the Internet of Things (IoT)

The Internet of Things — i.e. the ecosystem of devices connected to the internet and each other — will help automate processes involved in inventory management, providing accountants with real-time insights and alerts relating to stock levels and the condition of vehicles, machinery, and other equipment.

Ethical AI and transparency

As AI becomes more integrated into accounting processes, there will be a growing need for ethical AI to ensure transparency, fairness, and accountability in automated decision-making. 

While AI will become more trustworthy in general, decentralized AI models stored on blockchains will remove concerns about built-in biases, bringing a more transparent and democratic approach to AI usage.

How to choose the right accounting automation solution

Before you look into software, you’ll first need to understand the type of tasks and processes you want to automate. Modern accounting platforms such as QuickBooks Online, Xero, and Sage Intacct offer excellent automation capabilities that are growing all the time. 

Generally speaking, the fewer tools you have in your accounting tech stack, the simpler your accounting workflows will be, so look for platforms that cover multiple automation needs. 

You’ll also need to consider factors such as pricing and weigh it up against potential return on investment (ROI). Make sure you sign up for free trials and product demos to understand how different systems work — and how much time and money they could save you.

While you’ll have your own unique needs and goals, there are some features and factors that are objectively important when it comes to choosing new accounting software, including: 

• A simple and intuitive user interface
• Seamless integration with other key software platforms
• Automation that is customizable and adaptable
• The ability to scale seamlessly as your business grows
• A team that continually releases new updates and innovative features
• Excellent user reviews and ratings
• Demonstrable ROI

We also recommend choosing software providers that will guide you through the implementation process, helping you to set up integrations and configure the system to meet your needs. The best software providers also offer hands-on and self-paced learning materials to help you master core features.

Conclusion

Automation has transformed the accounting industry in recent years, allowing accounting firms to do more with less, and faster. In the coming years, we can expect to see increasing adoption of automation software, powered by groundbreaking technologies such as AI and machine learning. 

While this trend may cause accountants to worry about the future of their jobs, it’s important to note that automation is simply a tool like any other. It’s there to make accountants’ lives easier and drive new levels of productivity and accuracy. 

Given the huge advantages that automation brings to accounting practices, this isn’t a trend you can ignore. Firms that fail to take advantage of accounting automation will fall behind those that do. By following the steps and advice outlined in this article, you’ll be well-placed to implement automation and take your firm to the next level. 

Automation isn’t just limited to accounting work, however. To run a truly efficient accounting firm, you need technology that can automate and enhance the day-to-day running of your business — everything from client communication and onboarding to task, team, and document management. This is where a comprehensive practice management platform such as TaxDome comes in. 

To see how TaxDome can take your practice to the next level, request a demo today.