The A to Z of Automating Bookkeeping Services for Bookkeepers & Accountants.
You keep hearing about Automating Bookkeeping Services, and how it can save both bookkeepers and business owners time, and make everyone more productive and happy.
Sounds perfect, but what exactly are the components of bookkeeping automation, and how does it work in practice.
In this article we will explain:
- How bookkeeping worked in the beginning. There was only paper documentation. Clients use to either drop the bookkeeping at the bookkeeper each month, or the bookkeeper would work on the premises at their client.
- How bookkeeping evolved with cloud accounting, digital documentation, and less paper documentation
- How bookkeeping will become more automated in the future
Great, you excited to see how Automating Bookkeeping Services will work for you and your clients, and how you can take advantage of this new innovation? Lets begin.
Bookkeeping in the dark ages
Well, not that dark – we’re not talking about bookkeeping 300 years ago, we’re talking about bookkeeping up to around 2 decades ago, when computers weren’t so common, and most documentation was still paper based.
Lets call our Bookkeeping company, Paper Bookkeeping, and our client can be Mom & Pop Services.
So every month Mom & Pop Services would collect a shoebox fill of their documentation – all the bills they received paying for their business, and all the expense slips such as restaurants and cab expenses.
And at the end of the month, Mom & Pop Services would drive to Paper Bookkeeping, and deliver the documentation.
Paper Bookkeeping would spend a few days, capturing all the information into a desktop based accounting system.
It wouldn’t be so smooth sailing. Think of the problems that emerged:
- Paper Bookkeeping would be missing a couple of documents that they were expecting, perhaps such as the electricity bill that they received every month
- A number of the documents that Paper Bookkeeping had in their possession were damaged or had been left in the sun, and it was difficult to read the documents
- Paper Bookkeeping had questions for Mom & Pop Services such as why the VAT / GST number was missing from the bill, or why the details of Mom & Pop Services were incorrect, or a multitude of other questions. Before email, the way to get answers was to jump in the car, and visit the client, or perhaps call them and explain to them over the phone.
And when they had answers to most of the questions, Paper Bookkeeping would create the monthly management accounts, and then needed to personally get it to Mom & Pop Services!
Bookkeeping welcomes Cloud Accounting
And then suddenly overnight, innovation and technology started transforming the bookkeeping industry.
There were 3 main changes:
- Cloud accounting software emerged, such as Xero and Quickbooks Online, but there are now literally hundreds of options of cloud accounting software throughout the world. Mom & Pop services now wasn’t in the dark on where Paper Bookkeeping was in the process. They could login to their accounting software anytime, probably while watching their favourite TV program in the evenings, and see the progress.
- If Cloud Accounting Bookkeeping Services (yes, they changed their name as they realised that the old way of doing things just didn’t cut it anymore), had queries, they simply sent an email, and often got answers from Mom & Pop Services in minutes, and there was a trail of all the correspondence if they wanted to look back at it later.
- Many vendors were no longer giving paper documents. Sure, there was still a fair amount of expenses that were paper based, especially when using a credit card, but a lot of the bills were now emailed through to Mom & Pop Services, or they were available on the online websites, and Mom & Pop Services could simply forward the documentation via email to Cloud Accounting Bookkeeping Services.
The time consuming side was the following:
- Cloud Accounting Bookkeeping Services was getting documentation all over the place. Some documents were emailed to them. Some documentation was uploaded to their cloud servers, such as Dropbox or Box. Some documentation was still physically dropped at their offices each month, and they needed to scan it in. And some documentation was sitting on websites, such as Amazon, or the ISP, or utility bills such as electricity or water, and they needed to login to retrieve it, or ask their clients to download it, and then send it through to them. Finding this documentation later on was often a challenge, especially when Cloud Accounting Bookkeeping Services got an urgent call from Mom & Pop Services saying that they needed certain documents for their Tax Assessor or Auditor, or for an application at the bank, or numerous other times, and they just didn’t have the time to find it, or they had already spent a huge amount of time trying to find it, and couldn’t.
- Cloud Accounting Bookkeeping Services needed to figure out from each document what the bookkeeping entry was. Each bookkeeping entry consisted of lots of entries such as the date, vendor name, paid or unpaid, bank account paid from, VAT or no VAT, different line items, different classes, the ledger accounts, the actual amounts etc.
And of course, because most of the documentation from EVERY one of Cloud Accounting Bookkeeping Service’s clients, not just Mom & Pop Services, came in at Month end around the same time, they were relatively quiet the whole month, thinking that there was plenty of time to get everything done, and then at month end, chaos broke out, they often had to hire some temporary people to help out, and it was very unpleasant for all involved, as they tried to both collect all the documentation, create the bookkeeping journal entries from each document, deal with queries with documentation with their clients (and of course Mom & Pop services is also busy with their own month end issues) and then as quickly as possible, get the trial balance, or monthly management accounts over to Mom & Pop Services.
Bookkeeping 3.0 – How Automating Bookkeeping Services Works
Now that pre-accounting software like Dokka has emerged, life for both Automated Bookkeeping (you got it, they changed their name again!) and Mom & Pop Services is far more relaxed, controlled and timely.
What are the main changes that pre-accounting software brings to the bookkeeping and accounting industry, so that the entire cycle is partially or totally automated?
- Document collection tools – Tools have been created for both the business and the bookkeeper to collect documentation quickly and easily. So Mom & Pop services now has a mobile app on their phone to click any paper documentation they receive. And a unique email address that they forward all emails containing financial documents to. Automated Bookkeeping logs into the cloud platform, and see’s instantly all this documentation. If Mom & Pop Services still wants to deliver some paper documentation to the Automated Bookkeeping office, then they simply connect their scanner to the platform, and upload the documentation. So ALL the documentation is in one place and both Mom & Pop services, and Automated Bookkeeping have full access to it.
- Smart document management – Not only are all the documents in one place, but there are multiple tools available to find the documents later on, or to create reminders of items that need to be done with the documentation including:
- All content on the documents are instantly scanned and indexed when the documents come into the platform, so you can find any document later on instantly – the same way that you would find a document on google just by searching for it.
- If you want to add your own tags, for a variety of reasons, then you click the document and add a tag. Now these tags are available for searching as well. And the artificial intelligence understands that similar documents that are uploaded later, should have the same tags added as well.
- In the old days, you would take a stapler and would staple multiple documents together in a pack. In the new way of automating bookkeeping, Automated Bookkeeping would simply drag the documents together in the platform, and they would have a virtual staple attaching them together.
- And in the old days, you would take a post-it note, and add it to the document. In the new way of automating bookkeeping, you would add a digital post-it note onto the documents.
- So now, every document is not only in the same place, but AI & Machine Learning are working to ensure it’s easier for you to find the documents you want anywhere, anytime you want. The auditor wants 45 different documents over the last year? Easy, just tag the 45 documents with an “auditor” tag, create a virtual folder, and the auditor can either login and view the documents, or you can send them a link so they can view them.
- Chat colloboration tools – and problems with the documents that we discussed earlier? Will Mom & Pop services still get their regular telephone calls to resolve issues? No! With Bookkeeping 3.0, Automated Bookkeeping will simply write a message on the document that they have a query with, and Mom & Pop Services will get a message instantly showing them the query, and best of all, the message will be attached to the document, so they’ll have context. They’ll know what document the message relates to.
- Instant Bookkeeping Journal Entries – probably most important, is that Automated Bookkeeping doesn’t need to create the bookkeeping entries from each document. The platforms know the history of each one of Automated Bookkeeping clients, and so will understand all the requirements Mom & Pop Services has for each document. And the more documents Mom & Pop services passes to Automated Bookkeeping, the smarter the platform will become. This is the power of Artificial Intelligence and Machine Learning. The bookkeeping entries are created instantly each time a document is added, with all the requirements – not just OCR to extract data – but creating a full bookkeeping journal entry instantly, going so far as to break it down into multiple line items, and classes, so it can be analysed in a number of ways. And if the bookkeeper see’s something is wrong before accepting, then the system will become smarter the next time round.
This is the crucial element.
Bookkeepers are not going to go away!
Sure, some of the documentation is so repetitive that the bookkeeper might trust the pre-accounting software platform to push the bookkeeping journal entry direct into the accounting software package, but the more tricky documentation they’ll still need to keep an eye on.
So the bookkeeper of the future, is going to do less number crunching, and manual data entry and more value add for their clients. Bookkeeping is becoming real time, so that as the documents get passed into the pre-accounting software platform, the bookkeeping entries get created, and updated in the accounting software.
So happier bookkeepers, happier clients.
The clients know at every step of the way what is happening with their documentation, and is getting more real time data to make business decisions.
And the bookkeepers have more time to spend making sure the data is quality data, and ensuring that the businesses have the information they need.
Where will automating bookkeeping services be in the future?
So bookkeeping has come a long way since the Bookkeeping dark ages. From paper documentation that kept teams of people busy the entire day, to cloud accounting which allowed greater transparency, we’re now entering an era where number crunching is becoming a thing of the past, and the bookkeepers have the time to focus on fixing the tricky areas (and there are still plenty of those) and becoming closer value add partners to their clients.
Of course, automating bookkeeping services is just at the beginning, and there are still a large number of problems that occur, and features that need to be added.
But just like the first windows machine of a few decades back, innovation in the bookkeeping and accounting space is happening at a rapid rate, and rapidly freeing up time for the Bookkeepers.
The Bookkeepers that embrace this innovation will see their businesses grow, as all customers and clients in the future, will want to leverage the advantages we’ve described above. But it’s not going to happen overnight, and so the quicker you as a bookkeeper or accountant are in embracing this new way of working, the more advantage you will have over your competitors.