By Stacey Howard
The world of accounting has seen constant evolution. What started off with simple bookkeeping, evolved into accounting that entailed not only the recording of transactions, but also of drawing summaries and insights for effective decision making.
It enabled businesses, large and small, to maintain books of accounts scientifically and on the lines of generally accepted accounting standards, helping them with strategic and expansion plans, as well as financial compliance. Through this, what remained constant were manual entries, manual summarizations, and manual evaluation and reporting.
With the steady strides of technology, this dependence on manual intervention started to reduce over the last few decades. By the turn of the century, with the advent of a plethora of digital tools and platforms, there has been a faster evolution and transition to the digital world.
The world of accounting started undergoing a radical change. Technology, that was initially an ‘option’, and a ‘good to have’, turned all pervasive. Today, it is an imperative. Businesses cannot afford to rely on manual accounting anymore. Instead, they have to embrace technology and leverage it for the growth and expansion of their enterprise.
Robust digital infrastructure for accounting
The question lies, “How to begin the transition to digital infrastructure for accounting?”
This article attempts to provide the areas of accounting where digital tools can revolutionize the way organizations function and handle their businesses.
1. Robotic Process Automation (RPA)
At the very base of digital transformation for the accounting process lies robotic process automation, more popularly referred to as RPAs. RPAs automate processes through robots. The type of processes that are most suitable for RPAs are the basic, ground-level transactions that are repetitive, rule-based, manual, and error-prone.
Invoice processing, payroll, expense accounting, bank reconciliation, invoice-payments matching, payments initiation, invoice approval procedure, billing, customer payment reminders, reconciliation of billing vs. collections, etc., are areas where RPAs can be plugged. RPAs aid in the streamlining of processes, making them more efficient and productive.
2. Cloud Computing
Cloud computing entails accounting ‘via the internet’. This essentially shifts all the accounting processes from an organization’s desktops and servers to cloud platforms. Accounting departments of organizations gather, store, access, and process invoices, purchase orders, and account statements in the form of electronic documents that are shared and saved on the Internet.
Benefits of cloud computing include:
- Access to financial records, numbers, and reports from any location, both within and outside work premises that have internet access gives accountants flexibility of work and business leaders the availability of crucial data on a need basis.
- Real-time updates of statements and reports, thereby helping the management with quick and detailed information about their organization’s financial position.
- Minimal downtime, multi-level access, and the availability of the latest software versions at the click of a button make cloud computing easy and convenient.
- Scalable software allows businesses to ramp up operations without worrying about record keeping and accounting.
McKinsey & Company defines blockchain as “a secure database shared across a network of participants, where up-to-date information is available to all participants simultaneously.” Blockchain technology provides certainty over the history and ownership of assets. Every transaction can be traced back to its origin, thereby reducing the time spent by accountants and auditors to ascertain the credibility and accuracy of financial transactions. As a result, it reduces the costs of the finance department and makes it more efficient.
Additionally, blockchain help finance functions by giving real-time visibility into the availability of resources and the liabilities of their organizations. It has the potential to bring about sweeping changes in the basic duties of the finance function – their role will change from mere record-keepers to financial analysts, helping the organization make strategic and tactical decisions.
Laying the groundwork for the digital transformation of the accounting function
Digital transformation of accounting and finance departments will bring about cost efficiencies, reduce the incidence of errors and revenue leakages, increase productivity, heighten customer experiences, and help businesses grow on a firm footing. For organizations that are new to technology, it can start with simple processes and go on to be executed for advanced and complex functions.
Often, businesses might not have bigger budgets and the technical expertise for a complete digital overhaul. It goes without saying that the IT team of an organization has to be very strong to support the technical changes expected in an accounting division.
In the absence of such in-house capabilities, the best recourse is accounting outsourcing to business process management organizations with the technical capability to introduce and implement systems and tools for digital transformation. Accounting outsourcing services will not only prove cost effective in the long run but will also ensure real-time upgrades and scalability.
Begin your digital journey
With accurate and insightful accounting remaining the most crucial aspect of a well-managed business, digital tools, and platforms are poised to enhance the accounting function’s role by making them more creative and responsive to management information and decision-making requirements. These, in turn, will strengthen businesses and give them the resilience and flexibility to change with the times.
About the Author
Stacey Howard is an accomplished blogger with over decade of experience in the field of accounting and bookkeeping. With her extensive knowledge and expertise, she has been working as an accountant at a leading outsourced accounting firm Cogneesol. Throughout her career, she has developed a passion for sharing valuable insights and information on various accounting industries through her engaging and informative write-ups. Her contributions to the accounting community have been widely recognized, making her a sought-after expert in the field.