How to improve your accounting process: 9 must-know tips

Having a smooth and efficient accounting process isn’t just about saving time and money. It’s vital for accurate bookkeeping, tax compliance, and effective cash flow management. Whether you’re an in-house accounting team or an accounting firm, chances are your finance processes have some room for improvement.

Here’s how you can streamline the accounting process with AP and AR automation, outsourcing, cloud-based accounting software, and other must-know tips.

Why accounting firms struggle to stay efficient

Even experienced finance professionals can face inefficiencies during the accounting process. The more complex your accounting system, the faster things can break down and lead to errors and inaccuracies. Let’s take a look at five reasons why accounting firms struggle to stay efficient and what you can do about it:

Using the wrong tools

One of the biggest mistakes is using the wrong tools — often, in the form of outdated technology that’s no longer fit for purpose in today’s highly-automated world. If you’re still relying on spreadsheets, manual data entry, or handwritten ledgers, then it’s no surprise that you’re struggling with accuracy and efficiency.

Even if you use modern accounting software, you may still find yourself dealing with inefficient workarounds if it isn’t the right fit for your workflow.

Disorganization

Without clear roles and responsibilities, it’s easy for team members to step on each others’ toes and make duplicate entries or fail to record transactions altogether. The more people who are involved in your accounting firm or in-house team, the more important it is to ensure your system is consistent and organized.

Likewise, if you don’t integrate your accounting tools, you may end up with multiple instances of the same information or incompatible data silos.

Failure to standardize

Policies and procedures keep your accounting process from becoming a free-for-all. A lack of standardization across your entire organization means that different employees may use different methods for tracking invoices or expenses, and clients or customers may fail to address outstanding invoices in a timely manner.

From numbering invoices to setting out clear payment terms, standardization keeps different business units on the same page and minimizes misunderstandings.

Insufficient training

Finance professionals need to stay ahead in a rapidly-evolving landscape. From new automation technologies to changing regulations, insufficient training can mean that team members overlook new solutions or fail to upgrade their processes.

Not every employee has the same technical skills or accounting experience, so the more complex your system, the more important it is to provide sufficient training.

Lack of audits

Errors and omissions are more likely if you don’t review your accounting system on a regular basis. Internal audits can identify inefficiencies before they become recurring issues, while a lack of audits allows problems to fester and snowball.

Catching issues early gives you a better chance of resolving issues and maintaining compliance, so you’re less likely to face an external audit later.

5 areas in need of accounting process improvement

Any area of accounting that involves time-consuming, repetitive tasks may benefit from improvement, but some areas may be in more urgent need of an upgrade than others. When evaluating which accounting processes to optimize, remember that these five areas nearly always stand to benefit from process improvement:

• Accounts payable and accounts receivable: Accounts payable (AP) refers to your outgoing bills and expenses, while accounts receivable (AR) refers to the payments you’re owed from customers or clients. Even small inefficiencies in either department can result in late payments to or from business partners, directly impacting your reputation and cash flow.
• Financial planning: A big part of accounting involves financial planning and analysis (FP&A), which helps you make accurate decisions about the future of your organization. From generating financial reports to cash flow forecasting, efficient financial planning can make a big difference to your bottom line.
• Compliance: When it comes to tax and regulatory compliance, physical paper trails are out and digital paper trails are in. Not only are traditional paper trails more likely to be lost or damaged, but by digitizing your accounting process, you’ll have less work to do when faced with an internal or external audit.
• Reconciliation: The reconciliation process involves confirming that the numbers in your book match the numbers in your bank account. When you use accounting software with an automatic reconciliation feature, you can reduce the amount of manual labor that goes into this tedious and time-consuming task.
• Invoice management: Whether you receive digital or paper invoices from your suppliers may be out of your hands. But with invoice management software, you can use optical character recognition (OCR) to scan paper invoices, track them digitally, and streamline the approval process.

9 tips to improve your accounting process

Accounting process improvement doesn’t have to happen all at once. By choosing the most urgent areas to focus on, you can gradually update your existing processes until they’re as efficient and accurate as possible. Follow these nine tips to improve your accounting processes and build a modern, automated accounting firm:

1. Take stock of your existing workflows

The first step to improving your accounting processes is to identify the strengths and weaknesses of your current workflows. Review your chart of accounts, walk through your AR and AP processes, and interview stakeholders to identify pain points.

Make a list of the most obvious inefficiencies, such as manual data entry, delayed incoming payments, or a convoluted payment approvals process.

Also take note of your technology stack — i.e., your accounting tools and software solutions. Do they offer integrations with other platforms so you can build on your current workflow? Or will you have to replace them and start from scratch?

By documenting your existing processes, you’ll be able to identify whether your biggest inefficiencies are a software problem, people problem, or workflow problem.

2. Automate Time-Consuming Tasks

Automation is your ticket to eliminating manual tasks like data entry. Automation ranges from robotic process automation — the use of software bots to perform routine tasks — to AI-powered automation that can scale your finance workflows.

You can use automation to perform the repetitive tasks that no one on your team wants to be doing or that are especially prone to human error, such as:

Data entry

Manual data entry wins the title for the most globally hated task among employees. A study conducted by Automation Anywhere surveyed over 10,000 office workers across almost a dozen countries to understand current frustrations with time-consuming responsibilities in their job roles. The participants revealed they spend over 3 hours a day conducting these repetitive tasks, which result in decreased productivity and — you guessed it — human errors. Luckily, there are ways to automate this labor-intensive process to streamline your accounting system. 

Invoice processing

As a business owner, it can be easy to get lost in the sea of invoicing responsibilities. Between extracting the right data, tracking payment dates, following up with customers or vendors, and more, the process quickly gets overwhelming. Thankfully, software can also help you automate invoicing from start to finish. This comes in handy for your own firm and for your clients.  

Payroll

Calculating payroll can take hours and require high attention-to-detail, removing business owners from other important operating tasks. Automation tools can simplify the process and handle these calculations with accuracy and precision, freeing up valuable time for you and your client.