How Automation is Revolutionising Accounting

In Singapore and across the globe, the accounting profession is confronting a significant manpower shortage. This pressing issue has led to a growing emphasis on enhancing workforce productivity. Historically, training and effective on-the-job coaching were key to improving productivity. The challenge is now being met with a more potent solution: automation. In an era where digital transformation is paramount, the role of automation in accounting has become increasingly crucial.

In financial reporting work, automation shows up in the month-end close and financial statements preparation. Tasks like trial balance consolidation, mapping to disclosure line items, and recurring reconciliations are repetitive and rules-based, making them strong candidates for automation. Done well, this reduces rework and helps accountants focus on review and judgement.

Why are Accountants Embracing Automation?

The impact of automation on accounting goes far beyond just streamlining processes. As explored in our discussion of human vs bot employees, it represents a paradigm shift in the profession, elevating job satisfaction and altering the traditional perception of accounting work. There is a widespread belief that accountancy involves mundane, monotonous and repetitive tasks. This view has contributed to a decline in the number of students pursuing accounting degrees in Singapore and their subsequent progression into accounting careers. Automation is addressing this challenge head-on.

This perception holds some truth but does not capture the entire picture. The "boring" tasks are just a fraction of an accountant's mission and work. Accountants are vital to every organisation and the backbone of market stability. The mundane and repetitive tasks are often not the most valuable part of the role. We should seek to eliminate them from our daily routine through properly designed automation.

A 2019 Forbes survey of senior executives involved in automation implementation showed that 92% indicated an improvement in employee satisfaction as a result of these initiatives, with 52% observing a 15% increase in employee satisfaction post-implementation.

Removing such tasks from our to-do lists not only reduces the notorious long working hours common in our industry but also indirectly improves workforce retention. It enhances job satisfaction by freeing up time to focus on value creation — for professional development, the organisations we work for, and the profession as a whole. By reducing mundane tasks, we can make ourselves and others realise the value of our work and increase our visibility.

Additionally, automation is bridging the historical gap between accuracy and speed in accounting. In an era where technology drives business processes, stakeholders expect both precision and swiftness. Automation offers a solution to this challenge, harmonising accuracy with efficiency. By integrating advanced technology with deep-rooted accounting expertise, the profession is achieving new heights of operational excellence.

The implementation of automation in accounting is not merely about adopting new technologies. It is about fundamentally enhancing the nature of accounting work. It allows professionals to dedicate their skills and knowledge to areas that have a significant impact, thereby adding immense value to their roles and the industry. As the business world continues to evolve, the strategic application of automation ensures that the accounting profession remains relevant and vital.

Is it Really Worth the Cost and Resources?

These are critical questions faced in the realm of digital transformation in accounting. Many people are reluctant to invest time in automation due to the initial time investment, which can be substantial. Consider this example: a team member was tasked with sending intercompany confirmations to group entities, a process requiring 8 man-hours. Unwilling to accept the dullness of the task, he spent 8 hours programming a workbook to automate it. The result was a reduction from 8 hours in the first month to 30 minutes in subsequent months — a saving of 7.5 hours a month or 90 hours a year. This equates to an impressive elevenfold annual return on investment.

However, the barriers to embracing automation extend beyond just the time commitment. There is often a psychological hurdle, primarily the fear of being judged by managers for not making immediate, visible progress. Imagine that a manager comes over to check on the progress of sending the intercompany confirmations after 8 hours, only to discover that none have been sent. This situation can create a perception of inefficiency or lack of progress, even though the time was invested in developing a more efficient, automated solution.

Additionally, there is the apprehension of being replaced by technology. In practice, advocacy for automation has not led to replacement. On the contrary, it has resulted in positive feedback and career advancement due to the efficiencies introduced.

Another instructive example involves an accountant with 30 years of experience who transitioned from manual journals and ledgers to computerised accounting systems. Her colleagues who did not adapt to this change had to retire early. History tends to repeat itself. Technological advancement — in this case, automation — will not replace accountants. The profession will evolve. But those who do not embrace technology and progress will be replaced, not by technology, but by their peers who do.

The reallocation of time saved from automating repetitive tasks, which often contribute little to professional development, offers a substantial benefit. It opens opportunities for accountants to engage in more challenging and value-adding tasks, thereby enhancing their professional experience. This shift not only elevates the role of the accountant but also enriches their career trajectory, aligning their work with more strategic and impactful objectives.

How Should You Proceed with the Automation Journey?

Implementing automation does not always have to be a major finance transformation project. The approach should be to identify a clear end goal and take baby steps toward it. As small changes are made, the impact and benefits become visible. No budget is too small for automation, making it accessible for all sizes of firms.

Automation can be as simple as a well-designed workbook template used in the monthly close. The objective is to achieve maximum impact with minimal effort — aiming for an 80% improvement from just 20% of the effort. Identify areas with the most manual, repetitive tasks. More often than not, you will find them in the Excel workbooks in the finance shared folder. Many finance teams' activities, if not done in the ERP or accounting system, are executed in Excel or other spreadsheet tools. Therefore, when talking about automation or improving productivity, Excel is naturally the first step.

The choice between developing in-house capabilities through training or outsourcing to a professional lies with the organisation. The crucial factor is taking that first step on the automation journey, especially in the close and reporting cycle where the same tasks repeat every period.

Many automation projects fail because requirements are lost in translation from business needs to technical requirements. Accountants who are familiar with both the technical accounting rules and the technical aspects of available technological tools are the best candidates for this job. They know what can be generalised and what cannot. They know exactly what the expected outcome should be.

What are the practical tips for automation?

As Elon Musk once said, "Possibly the most common error of a smart engineer is to optimise a thing that should not exist."

Not all processes and steps are worth automating. If a step is not necessary, remove it before considering automation.

Newly graduated accountants often start by casting financial statements, a task that has evolved through various methods: from a calculator to Excel, then outsourcing to a typist, and finally using Word add-ins. This is something that should not need to exist at all, as is the Word add-in to help with casting. Looking at the fundamentals, the most effective approach that solves the root cause is to have a rounded, balanced trial balance that serves as the data source for all primary statements and notes in the financial statements. When this happens, there is no need to worry about casting and internal inconsistencies.

The 80% Rule

In automation, a crucial consideration is the scope and applicability of the processes being automated. A sound principle is to avoid automating processes that do not apply to at least 80% of the transactions or the population. The rationale behind this is rooted in the practicality and effectiveness of the automation project. When a process is riddled with numerous exceptions, automating it often leads to more complications than solutions.

Consider a scenario where an automated system is implemented, but it fails to handle exceptions, which occur in half of the use cases. This inconsistency not only undermines the reliability of the automation but also leads to frustration among its users. The consequence is a low adoption rate, as the automation, instead of being an asset, becomes a liability. It is seen more as a source of complication rather than an enhancement to the workflow.

This approach to automation is about striking a balance between innovation and practicality. It is about ensuring that the automated processes are robust enough to handle the majority of cases they will encounter. This increases the likelihood of successful adoption and integration into the daily workflow, making automation a valuable tool rather than a burdensome addition.

What is the future of automation in accounting?

The integration of automation into accounting practices is a pivotal shift towards a digital-first future in the industry. This transition not only boosts efficiency and accuracy but also reinvigorates the accounting profession. As accountants embrace these technological advancements, they are positioned at the forefront of strategic, value-driven operations, significantly contributing to organisational success. The evolution towards automated accounting ensures that the profession remains dynamic, relevant, and crucial in an ever-evolving digital landscape. Embracing this change, accountants are not just future-proofing their careers but are also spearheading a new era of innovation and strategic significance in accounting.