May 10, 2023
5 min read

Digitizing your accounting: how it can help your business

A businesswoman digitising the company accounting processes using an expense management solution
Quick summary

As technology advances, many executives are discovering the enormous benefits of digitization. Rather than relying on manual methods like paper records and spreadsheets, digital record-keeping is a more accurate, efficient, and transparent way to understand company finances.

Table of Contents

    With advanced technologies like cloud storage, ERP integrations, accounting automation, and artificial intelligence, digital accounting can provide invaluable insights that manual systems can’t.

    Accounting digitization should be at the top of your to-do list if you’re part of an enterprise-grade company looking to optimize financial processes.

    What are the main pitfalls of manual accounting systems?

    Accounting and reporting are two of the most critical elements in expense management. Manual expense tracking can put an organization at risk of inefficiencies, fraud, lack of accurate expense reports, and loss of financial control. Manually managing finances is also a complex, time-consuming process, and as a result, you need more efficient record accuracy and end up wasting human resources.

    There are two main problems with manual accounting processes:

    1. Lack of reporting accuracy deems manual accounting ineffective.

    Since manual bookkeeping is a resource-heavy process prone to human error, achieving 100% accurate manual accounting reports is almost impossible. Moreover, if an error does occur — it would be complicated to trace back the source of the mistake due to the lack of visibility in accounting processes.

    More traditional business owners may hesitate to invest in digital accounting systems and prefer to keep their books on paper. But, the problem here is that the modern business climate is too fast-paced to reconcile books manually:

    • Businesses have 10s and even 100s of different suppliers
    • Companies often go through hundreds of transactions daily
    • Clients pay both in cash and digital assets, sometimes from abroad

    With hundreds of different transactions daily, manually keeping everything on track poses a considerable challenge. Having a digitized accounting system is crucial for the success of your business since it can help you streamline your expense management and save time and resources.

    An excellent example of such an accounting evolution would be Coca-Cola, which managed to move 40% of the team involved in manual and routine reconciliations to do more important tasks.

    And on a slightly smaller scale, our very own customer, Essentia Analytics, managed to reduce the time required by their financial controller by 50% (thanks to Payhawk automation), meaning that she can now support revenue generation instead by acting as a part-time SDR.

    The good news is that you can help your organization overcome these problems with an effective enterprise-grade expense management solution. This will provide for greater expense visibility, enable real-time analytics, and streamline the expense reporting process, keeping financial risks to a minimum.

    2. Lack of visibility into business finances makes reconciliation difficult.

    As a finance team, you can make decisions more quickly and confidently when you can access and assess all your expenses individually. But when you do your books manually, this is impossible. Without the proper financial control tool and reporting insights, it’s hard to get stakeholders on the same page and reconcile budgets, resulting in a lack of growth for a business.

    To ensure success in short-term planning and long-term management, business owners must understand their current financial health, forecast future cash flows, track budgeting accuracy, and have automated systems to help reduce errors. That’s where digital accounting software comes in handy.

    Check our accounting integrations

    Types of accounting software and how can they help you achieve accounting digitization

    Accounting software makes the process of managing finances effortless and efficient. There are two main types of software:

    1. Cloud-based software - An accounting application hosted on the web can be accessed from anywhere with an internet connection.
    2. Desktop accounting solution - These programs are installed directly onto your device and function as a standalone application.

    Cloud-based accounting software offers a myriad of benefits, such as improved communication between users, automatic synchronization across devices, no downtime for maintenance, simple accessibility for remote employees, and complete visibility of all the expenses within the company.

    Despite that, many companies prefer the familiarity of desktop options (since they are often more powerful and customizable to the organization's needs). With offline installation, they don't need to build trust or engage another vendor - they need to choose the system and purchase a license.

    When choosing an accounting solution that fits your organization's needs, assess how you run the business first.

    The rule of thumb is that smaller firms are better off with cloud-based software subscriptions with lower entry barriers (accounting software solutions like Xero and QuickBooks). At the same time, large organizations prefer an enterprise-grade solution like NetSuite (cloud or desktop) customized for them.

    Step-by-step guide on how to choose and implement accounting software

    Once the company management approves your accounting digitization plan, you could use the following five steps to implement the updated systems in place:

    1. Evaluate your needs - First and foremost, assess your current company workflows, and determine the points of inefficiency. Ask yourself questions such as: Can a computer program perform this action? What kind of reporting/exporting functions must I have in place? Do I need integration with other applications?
      Once you know what features are most important for your business, it’s time to look at different systems available today.
    2. Compare accounting software providers - Take some time to compare different systems to determine which offers the best value for money regarding features discovered in the previous step and relevant pricing plans available. You may also want to read online reviews on platforms like G2 to better understand the user experience before trying out the product.
    3. Set up your system - Once you’ve chosen a system that works best for your company’s needs, it’s time to set up the software on either a cloud platform or a desktop computer/laptop, depending on which type you decided on earlier. Ensure all employees have access to the system so everyone can always see vital financial metrics.
    4. Train employees - Finally, take some time to train all employees who will be using the new accounting system so they understand how it works and how they can use it most effectively in their daily operations. Most respectable software companies would offer a dedicated onboarding agent for such purposes. This ensures everyone is comfortable using the new system before switching entirely from manual processes or another existing system within your organization.

    Now that we’ve established the benefits of accounting digitization and the steps you need to implement it, you might ask yourself: “Now that I have an accounting solution in place, how do I ditch my old manual workflows?”

    How to effectively transition from manual accounting to a digital system

    Transitioning from manual accounting to a digital strategy is no easy feat, but the benefits far outweigh the cost and effort. To ensure a successful transition, meet with an experienced IT consultant to develop a plan and understand how your new digital system will work with existing processes.

    Once you have all the necessary information, implement the new system slowly and methodically so employees can become comfortable using it. When training, give employees time to learn before taking on additional tasks and provide continuous support throughout the learning process.

    Furthermore, use backup systems and continual tests to ensure correct data entry during this transitional period. According to Zoho.com, the transition may take between a month (for smaller companies) to several quarters for bigger organizations, so make sure to plan the move ahead of time.

    These steps can make transitioning from manual accounting to a digital system much smoother and more efficient.

    Ready to get started with accounting digitization?

    Now more than ever, businesses realize the value of digitizing their accounting processes. A modern accounting system will help you save time, reduce human error and make data more secure. To get started, determine which accounting processes can be automated with software within their organization.

    Then, look for experienced accounting software professionals who can help you integrate their software with these systems. When executed correctly, digitizing accounting operations can unlock insights into cash flow management, profit modeling, and other financial functions to ensure long-term success.

    Learn more about our accounting integrations. Or if you want to talk about easy expense management, receipt data capture, invoice payments, and more — book a demo today.

    Trish Toovey - Content Director at Payhawk - The financial system of tomorrow
    Trish Toovey
    Senior Content Manager
    LinkedIn

    Trish Toovey works across the UK and US markets to craft content at Payhawk. Covering anything from ad copy to video scripting, Trish leans on a super varied background in copy and content creation for the finance, fashion, and travel industries.

    See all articles by Trish →

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