How automation facilitates the accounting in the company

Nowadays, it’s hard to meet a company that doesn’t keep management records or, at least, tries to. Accounting helps to make strategic decisions, see the growth opportunities as well as bottlenecks. However, the way it’s organized may vary. Start-ups conquer Excel, while the more experienced companies work with other information systems. The difficulty occurs when all these systems exist, but are not connected to one another and do not show the full picture of what is going on in the business in real-time. All of this has its impact on managerial decision-making. In this article, Invento Labs experts Daria Kasperova and Eugene Shishkov explain how automation can improve the accounting process in the company.

Important to note. Why do we need accounting and analytics?

In many spheres, business develops rapidly, so the owners, top management, and just managers need qualitative and relevant information to make the decisions needed for today, not yesterday. Accounting works with actual numbers, which show what happens in the company from the managerial point of view. It describes the current situation and allows to keep track of the changes. Accounting is based on the rules set by the business owner and top management for their own company, to evaluate the state of things and make rational decisions.

There are managers, who can make decisions intuitively, feeling the situation by the tips of their fingers. There are a few of them, but even those need reliable analytics. There should be a mathematical model in every business to show what happens if one of the parameters changes. Automation will speed up the data processing, cut down the time spent on collecting the valuable information and making managerial decisions, - says Eugene Shishkov, Deputy Director of Sales.

The evolution of accounting automation

In any company, accounting automation can have several stages of evolution: from its complete lack of in the business to the creation of a unified system. This is how it happens:

  1. The 1st  stage - automation of primary processes and digitization of primary data. For a business owner, it’s crucial to have the main financial reports, which answer the key question: “Where is the money?” and show how much the company has earned. At this stage, Excel covers all the needs.
  2. The 2nd stage - here comes the understanding, that finances are the tip of an iceberg, behind which hides the work of procurement, sales, HR, marketing departments. To get the full picture, it’s necessary to digitize everything: purchase orders, communications with potential clients, their management through the sales funnel, HR-managers job interviews with the candidates. This data can be collected in any form and digitized on different systems, such as bookkeeping systems, adapted for management accounting, CRM, Excel, and others.
  3. The 3rd stage - the company grows, the departments expand, the tasks differentiate and become more complicated.  The need for automation occurs in each work direction. Most often at this stage, different departments choose for themselves the automation system for their needs and can even fail to notify the departments they cooperate with. If there is no strategy in the company aimed at management accounting automation, we receive information that doesn’t add up in its indicators, cannot be measured and controlled.
  4. The 4th stage - this is the story of a big business, which has a complicated enough structure of a management accounting and heterogeneous IT landscape. The managers understand that they lack a system to unify it all. They face a choice either to synchronize the one they have or to build a new system from scratch.

If there is no one unified system, there are going to be some difficulties

If there is a lot of information, but no unified system in a company, there are going to be the following difficulties:

  • The most serious one - the manipulation of information. Lack of transparency is fraught with employees using the beneficial information, concealing the not-so-beneficial one, and hiding the negative consequences of their actions.
  • Management based on unrepresentative parameters. The same information, taken from different sources, may not add up. This leads to distortion and duplication of data, thus creating difficulties in cooperation between departments.
  • Unpredictable situations because of the information gap. A simple example - a manager took a peek into the inventory system and informed the client that there are already finished goods in the warehouse and they are ready to be shipped. However, another manager has already booked this product and added the information into their system. The product will get the one who ships it first. The existence of several systems not connected to one another leads to the connections creating on an interpersonal level. And the risk of unforeseen situations only increases the loss of information, its inconsistency, lack of data control. The information gap occurs when there are no synchronized channels of communications and business processes. Business owners may think that it is long and expensive to solve these problems, but in perspective, they can lose much more, - comments on this situation Daria Kasperova, Deputy Director for Business Development.

How to solve these problems

There are two ways how to do it - either by implementing a completely new system or by coordinating the interaction between the existing ones. The first variant will be more expensive for a company, but with a long-term aim in mind. The second solution will be cheaper but may last only for some time. Nowadays all the programs are suitable for integration, that’s why there should be no problems with that. You can build on a unified data warehouse, which will choose for itself the necessary numbers and work with them. As a result, we have a continuous process, all due to a single source of information.

Sometimes you can face an illusion that it’s enough to automate only some of the processes to synchronize the whole system. Warehouse and sales tasks are usually considered as the priorities, but for proper management accounting, you have to have all the company’s data in your possession. You have to orient towards the goals and strategy of a company. The main thing at the final stage is to have all the blocks deeply interconnected with one another, - says Daria Kasperova.

Time and cost

Everything depends on the complexity of the company’s organizational structure, its departments, and processes, which have to be automated. If a company is relatively small, everything can be done in a few months, when a project for a big business may last a year or more.

The amount of business processes and the number of users, services provided by the integrator, deadlines, and business needs - everything affects the cost and timing. Automation of one block on a turn-key basis, no matter whether it’s a system for sales or procurement, takes on average 3-4 months. If we automate several modules at once, the overall time spent decreases. A complex approach economizes on time and money in a phase of business analysis. If your company is not a big one, take a look at free solutions which are available in the public domain. They will teach you from the very beginning how to digitize all the data (which will definitely be useful in the future!), and you will use the information systems whose logic and structure have been tested by many businesses before yours, - advises Eugene Shishkov.

Main thoughts on the matter:

  • To make the right strategic decisions, plan the budget and work of the company in addition to the manager always having precise and relevant information in front of their eyes;
  • Any company must have a unified decision support system;
  • There are two ways how to create a unified decision support system. The first one is to implement a completely new system. The second one is to synchronize the ones, that already exist;
  • Make it a rule to digitize all data, even if you are just starting your business;
  • Excel - it’s already an automation. You can also set up other free programs if they will be able to solve your tasks.
  • The complex structure and heterogeneity of automation systems can become the reason for the issues within the company. One of the main ones - manipulation of information.
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