Simply put, automated bookkeeping is the completion of bookkeeping tasks by computers. By using artificial intelligence (AI) and machine learning (ML) technologies, automated bookkeeping mimics human data entry in finance software tools.
You might already be using some elements of automated bookkeeping to handle your business accounts, although you may not be aware of it. Many popular accounting software platforms—such as QuickBooks Online and Xero—use automated bookkeeping to complete basic data entry, for example, to organize data feeds from other tools like your bank or expense system.
However, most businesses aren’t using automated bookkeeping to its full capability. By leveraging these technologies, you can minimize manual errors in your bookkeeping, reduce time spent on repetitive tasks, and ensure your accounts are always up to date. Here’s what you need to know to get the most out of automated bookkeeping.
The Benefits and Drawbacks of Automated Bookkeeping
Benefits of Automated Bookkeeping
- Automated bookkeeping minimizes time spent on menial tasks. Rather than spending hours on manual data entry, your finance team can focus on the tasks that need their expertise, such as analyzing data, improving processes, and building financial projections.
- Automated bookkeeping provides real-time data. No need to wait until your bookkeeper has time to work on the accounts—automated bookkeeping updates your records as soon as the data is available, so you’ll always be working with real-time insights.
- Automated bookkeeping reduces errors. Computers are far less prone to error than humans, so you’re less likely to have duplicate or missing records.
Drawbacks of Automated Bookkeeping
It’s important to have realistic expectations: Automated bookkeeping is not a direct replacement for a human bookkeeper and an experienced finance team. There are three key reasons why you still need human bookkeeping:
- Automated bookkeeping lacks judgement. Automated bookkeeping is great for repetitive actions that don’t require judgement, but it can’t handle tasks that are ambiguous or nuanced. For example, human accounting professionals will need to decide on the required level of detail for the chart of accounts.
- Automated bookkeeping requires human setup. Automated bookkeeping is based on computers following rules that are established by a human. It’s vital that someone who understands the business and the fundamentals of accounting sets up rules to suit your specific revenue model and business requirements. If the rules you create are inaccurate, automated bookkeeping software will magnify the initial mistake across hundreds of future transactions.
- Automated bookkeeping needs human review. Automated bookkeeping still requires the review of a finance professional to catch any errors and make necessary adjustments, particularly for month-end close.
To minimize the amount of finance work you need to manage in-house, you can hand over the human aspects to an outsourced bookkeeper or finance firm.
5 Tasks You Can Streamline With Automated Bookkeeping
1. Transferring Bank And Credit Card Data
To gain an accurate picture of your business’s cash position, your accounting software should reflect the debits and credits on your bank accounts and corporate cards as soon as possible. Automated bookkeeping can pull transaction data from your bank and credit card accounts and instantly record it in your accounting software. This ensures that the transaction details match across your finance systems and the cash balance and cash flow data you use for analysis and reporting are always up to date. This automation requires input from both the accounting software and banking platform, so you’ll need to check if your accounting software offers an integration with your specific bank or credit card provider.
2. Categorizing Transactions
Using ML technologies, you can automatically sort transactions into the relevant categories in your accounting software. For example, a business that pays $100 monthly subscription for a CRM platform can use automated bookkeeping to instantly sort these transactions into their Software expense category. This is particularly helpful for low-value, high-volume transactions that regularly repeat: Manually categorizing a large number of transactions is time-consuming, but ML can quickly understand these transactions and accurately sort them for you.
3. Managing Accounts Payable Invoices
When suppliers send invoices as email attachments, your bookkeeper or finance team usually has to find the relevant entry in the accounting software, email the invoice to a manager for approval, and file the invoice for audit purposes. Alternatively, you can set up an automated accounts payable system to detect which attachments are invoices and review the information. Using these details, the system will match the invoice to the relevant expense and any supporting documents (e.g., purchase orders), apply the correct category code, and assign it to the appropriate person in your approval workflow.
4. Filing Receipts
If you use corporate credit cards or reimburse employees for expenses, automated bookkeeping can eliminate the need to keep track of paper receipts. All you or your employees need to do is to scan or upload images of receipts, and the system will take care of the rest. The automation will extract key information from receipts, add the data to your accounting software, and archive images of the receipts. Some platforms also automatically trigger reimbursement payments to the individual who submits the receipt. Plus, many automated bookkeeping software options have mobile apps, so you can easily upload receipts as soon as you’ve made the payment.
5. Handling Payroll
It can be nerve-wracking trying to track and calculate the payroll for your business manually—there are numerous laws and regulations to follow—and significant penalties if you get it wrong. Automating your processes with a payroll tool can give you peace of mind by removing the risk of human error. Some accounting software platforms feature built-in payroll automation, but several specific payroll tools, such as ADP or SurePayroll, can also do the job. Payroll automation features will track employees’ hours, calculate their pay (taking into account commissions, bonuses, and wage deductions), calculate payroll tax amounts, and generate paychecks.
If you’re already using accounting software, your existing platform may have automation options that you aren’t currently implementing. Here is how some of the most popular accounting software options measure up on automated bookkeeping features:
Get The Best Of Automated Bookkeeping and Human Expertise With Zeni
Zeni is a full-service finance firm that uses a combination of artificial intelligence-powered automation and human expertise to handle all your bookkeeping, accounting, tax, and CFO needs. Many bookkeeping services take up to two weeks to complete month-end close, and in fast-moving startup environments, a lot can change in the time you’re waiting for your monthly numbers. Because Zeni uses AI and ML technologies to automate many bookkeeping processes, you get continuous accounting and immediate access to reports. We update your books daily using automated transaction syncing, so the numbers you see and the financial statements you download will always be up to date.
Zeni is designed specifically with startups in mind: We are the only automated bookkeeping and accounting solution that provides your business with key metrics via the Zeni Dashboard. Rather than wading through dozens of spreadsheets trying to find the right numbers, you get instant, self-serve access to startup KPIs and data, such as net burn, cash position, and operating expenses. The Zeni Dashboard presents the metrics that founders need in an easy-to-interpret format that is ready to present to board members and investors.
Zeni’s CPAs, accountants, tax advisors, and FP&A experts apply their years of experience to set up your systems and oversee your accounts, so you can be confident that your bookkeeping is accurate and GAAP-compliant. Plus, you’ll get access to a finance concierge who can answer any questions—all for a flat monthly fee,