Bookkeeping, the methodical practice of recording a business‘s financial transactions, is a backbone of the global economy. Yet despite its importance, many view bookkeeping as a tedious, error-prone chore. In fact, an estimated 88% of businesses make bookkeeping mistakes. But thanks to recent innovations in automation, artificial intelligence (AI) and machine learning (ML), the bookkeeping process is undergoing a technology-driven revolution promising far greater speed, accuracy and strategic insight.
Overview of the Bookkeeping Software Market
The global bookkeeping software market has experienced rapid growth in recent years, fueled by automation capabilities and intelligent technologies. According to leading research firm Gartner, the market reached nearly $4.8 billion in 2021, reflecting an impressive CAGR of over 11% from 2018-2021.
North America makes up the largest portion of revenue currently, but the Asia Pacific region is forecast to grow fastest over the next several years. Cloud-based solutions are the clear preference over on-premise ones, expected to become nearly 80% of total bookkeeping software spend by 2025.
With labor representing over two-thirds of bookkeeping costs traditionally, leveraging automation promises major cost reduction benefits. Leading research predicts over $450 billion in annual savings possible globally from automating finance activities over the next decade.
In this comprehensive guide, we will explore the most impactful applications of automated bookkeeping, from streamlining payment workflows to effortlessly adapting to evolving tax codes. Discover how leading companies both large and small have leveraged intelligent automation to eliminate grunt work while gaining valuable visibility into the true financial health of their business. The automation genie is out of the bottle, and it’s here to relieve your finance team so they can focus on more rewarding initiatives. There has never been a better time to upgrade your bookkeeping tech stack for the future.
AI and Machine Learning Applications in Accounting
Artificial intelligence and its subset machine learning comprise a powerful set of modern technologies well suited to amplify efficiency and insight across the bookkeeping process. Let‘s examine some leading applications:
Predictive analytics leverage historical patterns in transaction data to forecast future outcomes like cash flow, revenue and expenses. Understanding expected working capital needs well in advance allows finance leaders to optimize capital allocation decisions.
Smart anomaly detection examines enormous volumes of accounting data to pinpoint outliers, exceptions and unusual situations that warrant further audit. Spotting potential fraud, overpayments or compliance issues faster minimizes financial risk and enhances internal controls.
Sentiment analysis techniques mine commentary from earnings calls, executive meetings and email conversations to derive the overall mood and outlook held by organizational leaders when assessing operating performance.
Rapid growth anticipated in AI applications across accounting and financial management (Image source: Deloitte)
Let‘s explore some real-world examples:
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Enterprise software giant Workday utilizes machine learning to recommend optimal payment choices daily to its over 9,000 customers based on transaction history, balances and past behavior. This boosts return on cash.
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Cloud financial management leader Anaplan leverages predictive modeling and scenario analysis to provide revenue forecasts with over 97% accuracy – better equipping sales leaders to meet growth targets.
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Top accounting automation platform Appzen analyzes over $1 trillion in transactions annually to detect accounting anomalies in real-time – ensuring books balance and preventing fraud faster than auditors can manage manually.
The applications of AI and ML will accelerate significantly as finance functions collect and connect more systems data with advanced analytics capabilities in easy, self-service offerings.
Cybersecurity Controls Critical for Finance Data Protection
While automation promises big boosts in bookkeeping efficiency, utilizing sensitive financial data mandates rigorous security protocols and controls. Organizations must institute safeguards across three key dimensions:
Infrastructure security maintains data protection while at rest and in transit – including encryption, access restrictions and surveillance monitoring. Cloud platforms offer inherent advantages over legacy on-premise systems with proactive threat detection and rapid remediation built-in.
Access management governs permissioning ensuring only properly authenticated and authorized users or applications can view and manipulate information. Privileged access should implement strict controls including just-in-time elevation and session recording for audit traceability.
Resiliency protections shield systems from emerging cybersecurity threats like denial-of-service attacks that aim to disrupt availability. Secure code review, penetration testing and business continuity measures provide additional hardening.
Top-tier solution providers invest heavily in layered defenses – for example Sage Intacct conducts over 100 independent security assessments annually across 12 critical control areas spanning data encryption, physical infrastructure, network traffic inspection and access governance.
While outsourcing to reputable secure SaaS vendors allows relying on dedicated security resources purpose-built for intrinsical protection, organizations still need principals like a Chief Information Security Officer (CISO) to coordinate oversight. Cybersecurity requires balancing risk mitigation with business enablement translating technical controls into actionable policies, training and metrics monitoring. Procurement checklists should probe vendor security posture across infrastructure, software and business continuity when evaluating bookkeeping solution suitability.
Process Mining Lays Foundation for Optimization
Process mining comprises specialized analytics examining system logs and application trails to understand precise execution flows including variants, performance metrics and interplay between human and automated tasks. This empirical assessment contrasts theoretical process documentation which rarely reflects reality post-deployment.
Common insights derived from process mining include quantifying:
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Actual process cycle times by stage
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Volume and variability across workflow execution paths
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Automation rates vs manual interventions
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Frequency of exceptions and deviations
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Impact on downstream processes (ripple effects)
Armed with this granular level visibility, business leaders can pinpoint optimization areas, model tradeoff decisions and justify investments in automation tools.
Process mining delivers complete visibility into orchestration environments spanning business processes, decisions rules and RPA bots (Image source: Celonis)
Let‘s examine some real-world applications in finance:
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Business process analytics firm myInvenio helped a banking client identify over 120 distinct process variants across just 3 assumed paths in their mortgage lending practice – enabling streamlining efforts.
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ERP giant SAP applies their process mining module to uncover automation opportunities within its own organization – saving $20 million annually since 2018.
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Procurement optimization leader Sievo analyzed invoice processing workflows to determine 70% of activity came from just 6% of suppliers – allowing targeted bot deployment.
Applying process mining best practices to bookkeeping delivers fact-based guidance to drive efficiencies. Key recommendations include:
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Instrument critical processes early to establish performance baselines
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Analyze as-is workflows first before developing to-be process changes
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Update assumptions periodically as behaviors evolve over time
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Utilize mining insights to size automation benefits and form ROI projections
Whether assessing capacity constraints, compliance adherence or value stream cycle times, process mining illuminates the real-world truth so you can optimize bookkeeping processes confidently.
Building the Business Case for Automation
Migrating any bookkeeping workflow from manual to automated entails considerable change management spanning people, processes and technology. Beyond assessing solutions, developing a compelling business case helps secure leadership endorsement and funding. Critical components include:
Cost/benefit analysis: compile current state process costs across labor, errors, tools and overhead. Contrast future state benefits via baselining, benchmarks and vendor ROI calculators.
Payback period: based on your specific automation capabilities and deployment model (on-premise vs SaaS delivery), determine the breakeven timeline. Short duration paybacks ease approval.
Risk evaluation: willingly discuss potential downsides like disruption or skill gaps needing mitigation via training and governance.
KPI assessment: define key metrics spanning efficiency, error rate, cycle times, capacity utilization and end-user adoption that demonstrate impact over time.
Ongoing governance: highlight post-implementation support model through centers of excellence to direct enhancements, broker system access and align usage to strategy.
Forecasting over three horizons (short and medium term via comparable results / long term via industry analysts) strengthens credibility. Utilize process mining output to inject facts. Illustrate pilots that encourage progressive buy-in. With diligence delivering clarity on the investment rationale and oversight model, finance leaders can secure funding to automate bookkeeping for sustainable transformation.
Evaluating Automation Needs and Solutions
As we have explored across the various bookkeeping automation use cases, modern platforms apply intelligent technologies like ML, NLP and RPA to ingest data from multiple sources, process information based on rules and policies, handle exceptions, and integrate with downstream systems.
Key considerations when evaluating your organization‘s automation needs include:
User experience: ensure the solution provides transparency into workflows with dashboards, alerts and visibility to support change management
Information security: rigorous access controls, encryption and cybersecurity protections should be standard
Compliance: audit trails validate SLAs and business controls are followed systematically
Scalability & reliability: cloud infrastructure allows adding capacity easily and guarantees uptime
Ecosystem integration: open APIs and pre-built connectors simplify connections to upstream/downstream systems
Ongoing governance: flexibility to adjust workflows, rules and policies as needed
Business continuity: failover capabilities minimize disruption in case of internet / cloud outage
Carefully examine solution vendors across these criteria relevant to your specific process requirements. Inventing everything in-house is challenging – buying best of breed accelerates digital transformation.
The Outlook for Finance Process Automation
Intelligent automation has already delivered tremendous value optimizing efficiency, accuracy and visibility across critical bookkeeping workflows. But substantial runway remains ahead as adoption continues maturing.
Broader penetration of cloud, increased API-connectivity and marketplace models will drive automation in bookkeeping especially across SMBs. Forrester predicts RPA adoption alone to grow over 25% annually over next few years. More turnkey SaaS solutions specializing in accounts receivable, accounts payable, journal entry and payroll processing will democratize benefits for smaller teams.
Expect exponential expansion of AI/ML capabilities around document ingestion, predictive recommendations and conversational user experiences to further eliminate human friction. Voice interfaces will facilitate new modalities for exception handling.
Incorporating unstructured data from emails, meetings, chat and shared drives with structured ERP outputs will enrich embedded business intelligence – stronger predictions, alerting engines and process recommendations to amplify impact. Emergence of low code automation platforms empower finance users to tailor solutions to their evolving needs with minimal dependency.
While bookkeeping may never reach top career choice lists, technology offers immense opportunities to uplevel organizations. Leading enterprises recognize smart software investment combined with visionary leadership yields a powerful formula to outperform competitors. The future remains vibrant for progressive finance functions positioning themselves at the forefront of operational excellence thanks to automation.