Before the advent of technology, accounting was a time-consuming mess of handling documents like invoices, statements of account, quotations and purchase orders. In addition to using up more time, businesses had to spend more money hiring interim or permanent accountants to perform accounting operations. The issue of errors during record entry was inevitable, and businesses had to pay heavily for the consequences of these errors. However, upon the emergence of digital accounting, the financial industry has experienced a new, convenient way to balance accounts and record financial transactions.
Digital accounting involves the generation, management and transfer of financial data in electronic formats. It employs advanced technology to deliver real-time accounting and financial management data to the relevant stakeholders. It is further assumed that the presence of digital accounting displaces the job of accountants. However, this isn’t true as digital accounting only makes the responsibilities of accounts easier and more efficiently done. While a lot of businesses and accountants are already integrating digital accounting into their accounting routines, here are eight reasons why digital accounting is the future:
1. Makes Accounting Easy, Efficient and Cost-Effective
For businesses, time and cost happen to be very important commodities. More often than not, you’ll find business owners looking for ways to minimize costs during business transactions and operations.
Digital accounting makes it easier for businesses to perform operations that would otherwise be cumbersome when done manually. For example, accounting software that automatically matches payments with respective orders relieves the business owners of the time and resources they would have spent completing such tasks manually.
Performing financial operations electronically also makes accounting endeavors more efficient for business owners. Errors associated with manual entry are also eliminated by digitalization. Even customer and vendor management have become relatively easier and more efficient with digital accounting.
In the long run, a business that harnesses the advantage of digital accounting will spend less. The costs involved in correcting manual entry errors will be eliminated, and the extra cost of hiring professionals to fulfill specific responsibilities will be reduced.
2. Powered by AI to Automate Activities
Various industries are currently faced with fierce competition. If your business must thrive under this condition, you must be able to automate most, if not all, of your business procedures. Gone are the days when customers/vendors would wait patiently for their orders to be passed from one desk to another before approval. And, of course, no client will appreciate it if you have to sniff through piles of documents to find their files and solve their problem.
AI-powered automation makes it effortless to initiate, monitor and complete financial transactions. This means that accounts payable and accounts receivable operations can be done automatically; invoices can be auto-generated, payments can be completed promptly, and statement reports can be automatically retrieved from a digital accounting system. Sometimes, a single click is all you need to complete certain tasks. Advanced accounting platforms do not even need human input to perform certain transactions. For instance, QuickBooks automatically imports and matches your bank feeds with the accounting records.
3. Enables Permanent Storage of Records
Your business data is as important as your business itself. As a result, the extent of growth your business achieves at any point in time is greatly dependent on how you manage your business data. You should also be able to store data permanently for reference, tax and legal purposes.
Digital accounting is the future because, in addition to automating data entry, it enables you to store your financial records permanently. Paper storage is not only labor-intensive and costly to maintain; it also put your records at risk of loss when there is a flood or fire incidence. With digital accounting, you have all your records automatically stored, and there’d be no need to rummage through 10ft of paper files to locate an invoice. Even when your business decides to move locations, you won’t have to worry about hauling a trailer load of files along with you.
4. Integrates Well with Other Platforms
The physical transfer of data from one platform to another can be a significant source of delay. There is also the possibility of erroneous entries whenever financial information has to be entered from one platform to another. What about businesses that use a range of digital platforms? Manual accounting cannot be the way forward.
Digital accounting is the way forward when dealing with multiple financial systems. It allows for integrations among financial tools like payroll, POS platforms and website orders. This integration provides flexibility and efficiency during accounting activities.
With digital accounting, you can have all your financial data (entered from different platforms) synced with your accounting program. You’ll also be able to manage what happens at different units of your business from one place, and there’d be no need to pay for extra hands in managing individual platforms.
5. Minimizes Environmental Footprint
With the devastating rate of climate change currently experienced around the globe, eco-friendliness is gradually becoming the aim of most businesses. Business owners are actively looking for ways to significantly reduce their environmental footprint as they run their day-to-day accounting. Fortunately, some businesses have discovered the way out – digital accounting.
The use of paper – for invoices, receipts and account statements – does a lot of harm to the environment. Imagine how many trees get cut down to supply a large company the receipts, invoices and bookkeeping materials they’ll need in an entire year. Now imagine what happens if that company stays in business for 50 years! Don’t forget that the fuel burnt to duplicate or scan these documents also increases the company’s emission of greenhouse gases. However, with digital accounting, there’s no need to print out or scan invoices before payments. Receipts, reports, and order fulfillment forms can all be accessed from an online platform. In addition, no tree will be cut down before a business can make or receive payments.
6. The Popularity of Cloud Computing
Similar to data storage on paper, onsite servers can expose your business data to the risk of getting lost. In the event of a fire, flooding or theft, data stored on servers can get lost or compromised. The way out is cloud storage, and this is where most businesses are channeling their resources. Digital accounting platforms that support cloud computing allow businesses and accountants to complete accounting tasks remotely. This means that irrespective of their location or device, they can generate, manage and store financial data at any given time.
Cloud computing also enhances collaboration among the users/team members of an accounting program. They can share, manage and record accounting data without the need to be physically together. Lastly, cloud computing increases efficiency as activities are automatically synced and updated to the accounting system. And if accountants can ensure accurate data entry at each point, there might be nothing to reconcile at the end of the day.
7. Rise of Blockchain Technology
The advancement in blockchain technology has resulted in increased patronage for digital accounting. Since blockchain is significantly reliable, businesses are finding fewer needs to employ accountants for basic accounting operations. They are actively looking for ways to include blockchain technology in their accounting systems. In addition, popular tech firms are also introducing newer and more advanced blockchain-based products.
In the long run, integrating blockchain with digital accounting will make accounting less demanding as it automates tedious tasks and operations. Since experts may still need to analyze and verify the system’s result, it does not eliminate the role of an accounting expert in a business.
8. The Trend of Remote Working
Since the advent of the Covid-19 pandemic, remote working has become the order of the day. Businesses have ever since sought ways to eliminate the need for physical presence at work, and nothing fosters this cause better than digital accounting.
Since digital accounting provides a means for accountants to manage their client’s financial profiles and analyze AI processes’ results, it sure fosters remote working. Vendors do not also need to be physically present in a firm to receive payments from them.
Digital accounting also makes it possible for team members to remotely complete and record financial transactions, with the members having access to the files simultaneously. It then becomes obvious that more and more businesses favored by remote working will embrace digital accounting in the nearest future.
In summary, it is now clear that growth is significantly linked to digitalizing this process for businesses that rely on an efficient accounting process. So, whether you’re an entrepreneur, a sole proprietor, or a partner in a business, digital accounting is a necessary push for success.
While it may seem that digital accounting has come to rid accountants of their job, the opposite is the case. Digital accounting makes financial transactions, recording and analysis a lot easier than manual reconciliation. With this AI-powered technology, businesses get to spend less time, less money, and less human resources in completing accounting procedures. Since these resources can be channeled into other growth-inducing aspects of a business, more business owners will embrace the concept of digital accounting in the nearest future.