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Month: September 2019

How to Automate Your Accounting? Part 3: RPA and The Future of Automation

Posted on by Andres Aavik

This article was initially published by our client, Robby & Bobby, for whom we have built various accounting automation solutions.

Given how much accounting has changed over the last 30 years, we probably cannot even imagine what the next 30 years have in store for us. Some trends are predictable, such as accounting becoming more automated in the future, or programs being able to figure out which invoice belongs to which account. But there are solutions that are quite affordable and can already be implemented today – one of them is robotic process automation, or RPA. 

What is robotic process automation aka RPA?

RPA (robotic process automation) means entrusting repetitive and time-consuming activities to a robot so that your employees can dedicate more time to value-adding activities. Routine and time-consuming activities include for example data entry, verification, comparison, and amendment, or gathering information from various systems. Accountants still do many of these kinds of task.

RPA is very useful if you need to use several programs that cannot be connected via an API. RPA is also useful when one of the programs is an email software, Messenger or some old-fashioned program that you do not yet want to replace.

A few years ago, I saw a video where an RPA checked the documents submitted by a new employee, asked for missing documents via e-mail, sent a confirmation to the employee via e-mail that everything was correct, then registered the person in various registers, and ordered a work computer for the employee. Wow!

Basically, RPA is an extension of the Excel macro, except that while macro only works within Excel, RPA can work between different programs – take something from here, paste it there when it is done, upload the file to Drive and send the link via email. Sounds unbelievable? Or rather genius?

It is important to understand that RPA is a “macro” that works based on algorithms, not an AI application or artificial intelligence. RPA is exactly as smart or dumb as the software created by its developer. No IT person can develop a functional accounting RPA alone because an RPA that is actually useful requires input and control by an accountant who understands the processes. This is why there are only a handful of these applications used in accounting.

The operating principle of RPA differs significantly from traditional system integrations. Namely, RPA is capable of combining a wide variety of programs and can be called the greatest advancement in automation. In the long run, RPA will result in lower labour costs, faster processes, increased precision and simpler workflows. On the micro-level, robots are able to perform activities that traditional solutions can never do.

Benefits of RPA for accounting automation:

  • Fewer errors – automation reduces man-made mistakes and helps limit costs.
  • Increased efficiency – robots are faster and more efficient at performing routine tasks. This gives employees more time to do meaningful work.
  • Lower costs – if necessary, robots can work 24/7 without taking coffee breaks, getting sick, or demanding a pay raise.
  • Job satisfaction – reducing the unpleasant routine part of a person’s daily life makes them happier. It increases employees’ job satisfaction and creativity.
  • An abundance of options – the use of RPA in accounting is not limited to one particular process, it can be applied to many processes simultaneously – obligations, claims, closures, controller work, financial planning and financial analysis, cost management, and even taxes.
  • Low requirements to readjustment of existing programs – implementing RPA does not require major reorganisation, RPA is both a bridge and a roof, existing above the current programs and reducing the need to make changes to existing programs.
  • No adjustment time – unlike an employee, the robot does not require a long adjustment time; you can install an RPA in less than a week. You just need to carefully analyse where to apply it in accounting to really benefit from it.

For what activities can RPA be used for in accounting?

The following is by no means an exhaustive list, but here are a few examples of uses for RPA:

  • insurance of data consistency and quality control, checking data consistency across programs and identifying errors
  • balance sheet maintenance – comparing balances with analytics, the analytics may also be contained in different program modules, handwritten Excel tables or another program
  • other checks related to closing a month
  • transferring data from one program to another if an API connection is not possible – it is often the case that one of the programs is very restricted or out-dated but the process itself can be clearly described
  • importing supplier data into the program – automatically filling in credit score, tax information and other important information
  • importing customer data and periodically updating key data
  • data comparison between two programs or different modules of one program
  • comparing the final balance of the bank statement and debit/credit turnover with the data in the accounting software
  • retrieving a report from the software, analysing it and forwarding it via email/uploading to a cloud
  • sending various reminders
  • adding cost breakdown data to invoices according to a provided table
  • generating invoices based on received data and sending out invoices
  • price comparison between different suppliers
  • market analysis
  • conducting background checks of customers and suppliers
  • checking the compliance of invoices with contract terms

Possible issues with using RPA

RPA often depends on the visual solutions of programs – if the location of a button is changed in a program or website, the corresponding change must also be made in the RPA. Also, RPA needs regular maintenance, you cannot just develop it once and expect it to work for the next 5 years.

If an API connection can be used between programs, you should definitely choose it. If it is possible to use a special program (for example, to manage purchase invoices or receipts, forward e-mails, etc.), this should also be preferred. But if there is no other option, RPA can be a very useful and enormously timesaving solution. 

The future of automation

As we already said, we probably cannot imagine what the next 30 years have in store for us in accounting. However, there are some trends that can be anticipated in addition to robotic process automation.

Reports. One definite future solution is smart apps that collect data from various sources and combine them into analyses and information you require. However, creating a smart app requires the involvement of at least one knowledgeable accountant-controller in the development team who can understand in detail where the data are retrieved from and how these data are combined into reports. As a result, there are still only a very small number of these kinds of solution and IT developers cannot handle them alone.

Real-time accounting In the future, all financial transactions will be recorded immediately and automatically, and you can view the analytics the next morning. In some areas of work, we may have almost achieved it, but there is still room for improvement.

Learning programs. The ability to learn will definitely be incorporated into programs. For example, when a new e-invoice arrives, the program is able to read what is on the invoice (for example, a mobile phone) and suggest that the relevant account is 5340 Telephone Expenses.

 

You can also read previous posts from this series:

How to automate your accounting? Part 1: Sales transactions       

How to automate your accounting? Part 2: Purchase invoices and receipts

How to Automate Your Accounting? Part 1: Sales Transactions

Posted on by Andres Aavik

This article was initially published by our client, Robby & Bobby, for whom we have built various accounting automation solutions.

Accounting has undergone tremendous changes in the last 30 years. Accounting done on paper has practically disappeared. Much like taking physical payment order forms to a bank. Thanks to software that is able to read purchase invoices and is compatible with banks, accounting has become significantly more automated and time spent on accounting has notably decreased. Let us take a closer look at how to automate your accounting, more specifically your sales transactions.

The first step in accounting automation: cast paper aside. Giving up paper saves a great deal of time, as well as money previously spent on paper, paper folders, and storage space. Storing electronic invoices has also been completely accepted by the tax authorities for several years.

Issuing single service invoices

Service invoices can be very conveniently issued directly from an accounting software program. Beautifully designed invoices have mostly fallen into disuse anyway and only data are exchanged. Thus, a brief sales invoice issued by an accounting software program that contains all the necessary data is generally well suited.

Some programs let you define articles, such as Consulting Services Estonia and immediately associate the correct income account of the income statement and VAT rate with it. This greatly reduces the work of the accountant in checking the invoices issued.

Benefits of invoicing directly from an accounting program:

  • convenience – an invoice can be prepared and issued from one place
  • the timely receipt of the invoices can also be monitored from there
  • an easy option for sending reminders (if needed)

PS! Good practice dictates that monthly sales invoices should be issued at the end of each month, not the beginning of the next month. This allows both the seller and the buyer to close their month faster.

Issuing recurring service invoices

Several programs allow you to save templates and issue recurring invoices automatically based on a predefined schedule. This is very convenient, for example for membership fees, fixed monthly payments, etc. If your company uses recurring invoices, select a program which enables it and gets this job done – it will save you a lot of time in the future.

Issuing e-invoices

An e-invoice is not a PDF but a machine-readable invoice. The information on it is easily readable and there is no need to digitise or manually enter anything. If the recipient of the invoice is able to receive e-invoices (this can be checked in the e-Business Register), you should definitely issue invoices as e-invoices. Sales invoices to the public sector can only be issued as e-invoices as from 01/07/2019, so we are finally reaching a point where e-invoices are becoming more widespread.

You should ask the developer of the program about the capability to issue e-invoices. Although some programs let you issue e-invoices without entering into an additional agreement (e.g. Merit upon agreement with Omniva; e-Financials), most of the time you have to conclude a contract with an operator such as Omniva, Fitek, Telema or e-Financials to issue e-invoices.

Recognition of sales in an online store

Sales made in an online store should be sent to an accounting software program through an API. Find an accounting software program that is compatible with the respective online store. The benefits of using an API include significant time savings and error prevention and it can also be used to forward detailed sales information to the accounting software, process this information, and conduct the necessary analyses.

What is an API?

To facilitate information exchange between the two programs, they both need to have the necessary gateway (API) for open communication and the other program needs to be given an API key to open the gateway. Both of the programs grant the other one permission for data exchange through the key. Settings determine how much data can be exchanged.

Data exchange is organised by a special little program (interface). Sometimes this interface is built into one of the programs, sometimes it is provided by a third party and sometimes you have to order it yourself. Creating an API is usually not a very large-scale and expensive job, but, as always, its profitability should be evaluated.

Forwarding sales transactions from a self-developed platform

The method is the same, data should be forwarded via API. As you have developed the sales platform yourself, you have more opportunities to choose the level of detail of the data being forwarded and you have more control over these data.

Alternative to API?

If you do not have an API, you can also transfer data from one program to another in a file form – you export it from the sales software, process it if necessary and import into the accounting software.

Note! If sales (and stock records) are conducted in another program, it is very important:

  • to apply strict deadlines and close the forwarded period in the sales software. Once sales data from May have been sent/imported, May is closed and can no longer be edited. All necessary corrections must be made the next month. Otherwise, differences with the accounting software will arise and it will take a lot of time and effort to find and correct these differences.
  • In addition to establishing and implementing rules, it is essential to regularly compare the data. Both people and software programs sometimes make mistakes and new data can even creep into a closed period through the keyhole. Ensuring data consistency between the two programs is a very important job. This requires the accountant to work accurately and be able to use programs correctly.

 

If you have not begun automating your business yet, start by mapping out how different transaction information is currently being recorded.

Sketch out the sales, purchases and bank transactions and think of the following:

  • how could the data flow?
  • what programs could be used?
  • what connections do you require?

If you are having trouble choosing the right accounting software or have any other questions about sales transactions automation, please contact us.

How to Automate Your Accounting? Part 2: Purchase Invoices And Receipts

Posted on by Andres Aavik

This article was initially published by our client, Robby & Bobby, for whom we have built various accounting automation solutions.

In the second part of how to automate your accounting, we focus on making the exchange of purchase invoices and receipts automatic. Let us now have a look at whether you can give up receipts and how to simplify the process of entering purchase invoices and receipts into the accounting software. 

We will view receipts and purchase invoices separately

A receipt is a confirmation of a purchase made from a store, an original document, which is mostly in paper form. Here are a few examples – I bought a box of sweets from the store for my business partner, refuelled the car, took a taxi, etc. A receipt may be paid by cash or card, using the employee’s own money or a company card.

Are receipts unavoidable or can we make do without them?

Dealing with receipts is annoying, as storing all the paperwork, collecting it and submitting to the accountant in a timely manner can be a real challenge even for the most punctual person. In addition to the fact that receipts tend to get lost, they are not everlasting, as information on them fades. It should also be borne in mind that receipts always mean extra work for the accountant because they have to be entered manually.

To reduce the number of receipts on paper, collect all the receipts from the last few months and analyse what purchases they are associated with. If possible, find a way to avoid receipts, for example:

  • instead of taking a regular taxi, enter into a business customer agreement with Bolt
  • enter into an agreement with a large chain of gas stations to receive a monthly invoice instead of making random purchases
  • favour purchasing goods from places where you can pay by invoice (in case you had not heard, even Selver is able to issue regular invoices to be paid afterwards to companies).

Use a handy app for receipts you cannot avoid. Expensify is popular in the English-speaking world, while in Estonia CostPocket (former tsekk.ee) is used.

This is how things work in CostPocket. The purchaser takes a picture of the receipt by phone using a special application and adds a note whether it was paid using a company card or is to be reimbursed to an employee and presses the button. That is it! The employee may throw away the receipt and the information on the receipt will be entered into an accounting program electronically.

CostPocket can be connected to the most common program (Merit, Directo, Standard Books, etc.) Check out the longer list here: https://costpocket.com/et/kuidas

There are three different options for processing purchase invoices automatically:

  • a digitisation service provider – software for both digitisation and purchase invoice management
  • a digitisation service provider – digitisation only
  • digitisation capabilities of the accounting software itself.

There are at least four digitisation service providers in Estonia – Omniva, Fitek, Telema (eFlow) and Envoice. Telema also has the capability to manage invoices (EDI solution), while others handle service invoices.

PS! If your business is a little larger, your invoices require approval from multiple people, and you have a precise cost allocation logic and multiple cost items, using an invoice management software program is definitely a good idea.

The logic of invoice management software:

  • The seller sends a purchase invoice to an invoice management program either directly as an e-invoice or via email through a digitisation centre.
  • The invoice management program marks the correct expense accounts and expense items for the purchase invoice, and an approval round can be used if desired. The invoice management software also serves as an archive for purchase invoices. In addition, you can send receipts to the invoice management program along with cost statements to have everything conveniently in one place.
  • After making the entry and confirming it, information about the purchase invoice is sent to the accounting software program.

Approval round for purchase invoices

Approval round for purchase invoices means that an invoice can be approved by several people. In large companies, the use of an approval round can help speed up the invoicing flow significantly. It requires a considerable amount of time to carry around paper invoices with their approval folders or seek approval via email. In addition, the approval round may be quite big in large companies. First, the accountant adds the expense account and sends the invoice to the agreed approval round. Then the employee who made the purchase confirms the correctness of the invoice (adds cost breakdown information and comments, if necessary). Following this, the board member or the CFO will approve the payment of the invoice. Finally, the accountant reviews the data once more and forwards the invoice to the accounting software.

In smaller companies, the use of an approval round is primarily important for cost accounting. An invoice management system allows a company employee to correctly classify expenses. The employee who ordered the work knows exactly which project the purchase invoice relates to, unlike the accountant. Of course, information can also be forwarded via email, but this is far more error-prone and time-consuming.

  1. In a smaller company, only digitisation should be used, unless separate approval and addition of cost items is required. There is no point in making your life more complicated than it has to be.
  2. You can also use the accounting software’s own digitising capabilities – you send an invoice to the email address, it arrives in the accounting program, it is digitised (only by the program, the accountant checks and corrects it), and you use the invoice archiving function in the accounting program.

Disadvantages of this option:

  • greater reliance on the accounting software – invoices are stored in the program and downloading them separately is bothersome (although Merit now has the option of downloading invoices from a certain period together in a zip file).
  • currently, using only OCR (Optical Character Recognition) digitisation still provides poor quality (in digitisation service providers, a human reviews the files and makes corrections).

In addition, the company may not appreciate several employees having detailed information on the company’s finances. And accountants will definitely not like it if people without any accounting skills fiddle around in the program or accidentally corrupt something.

Possible issues when using an invoice management program

As with any program, errors can occur when using an invoice management program. Here are a few examples:

  • a purchase invoice never reaches the invoice management program (sometimes an invoice can slip through the cracks on the Internet and never make it)
  • the quality of the digitisation software is poor
  • invoices move slowly through the digitisation centre (especially at the beginning of the month)
  • cooperation between programs may fail (for example if the information is retrieved from a warehouse management program, data conformity must be checked from time to time).

Automation of bank transactions

If there is a small number of bank transactions and the transactions are not standard, they can also be entered into the accounting software manually. However, as the number of transactions increases, the easiest solution is to connect the accounting software with the bank via API (e.g. Merit is connected to Swedbank, SEB and LHV). This way you can send payment orders directly from the software to the bank and the bank, in turn, sends the information on receipts and other transactions directly to the software. It is fast, convenient, operational.

Remember that transaction information and the end-of-month balance forwarded via API must be checked.

Bank transactions are conducted once a day and are not yet completely automatic and in real-time, as they still require a confirmation from the accountant. We recommend that you reach an agreement with your accounting provider regarding at what time each day bank transactions from the previous day should be entered. In smaller companies, bank transactions could also be entered once a week, for example.

If the API is not directly connected, payment orders can also be sent to the bank in a file form – you prepare them in the program, save as a file, and import into the bank. Bank statements can also be downloaded as a file and imported into the accounting software. Although this is more cumbersome than the previous option, it is still a pretty convenient solution. Especially when transactions are simple, purchase and sales invoices have already been entered, and there are a lot of transactions.

 

If you want more information on automating purchase invoices and receipts then please contact us.

 

Also read the first post in the same series on automating sales transactions: How to automate your accounting? Part 1: Sales transactions