Does Your Small Business Need Automated Bookkeeping?

If you’re sitting there thinking, But my bookkeeping is automated, I’m using a computer, it’s time to rethink what you know about automated bookkeeping.

Using Excel spreadsheets and desktop accounting software might be more efficient than keeping a written ledger like an 18th-century shoemaker, but you’re still inputting and verifying your financial transactions manually.

Bookkeeping is only truly automated when the apps are doing the grunt work for you—identifying discrepancies in your records, organizing your data, and getting rid of manual data entry processes.

Good bookkeeping is vital because it enables you to always have a clear and up-to-date picture of your company’s financial health. As a small business owner, you probably look at bookkeeping as a necessary evil—a tedious and exhausting process that you’re constantly putting off.

But it doesn’t have to be that way. According to a recent finance effectiveness benchmarking report, 30% to 40% of time spent on financial processes, bookkeeping included, can be reduced with automation and behavior change.

Signs you need automated bookkeeping

If you’re starting to feel your current bookkeeping processes are no longer sustainable, that’s actually good news. It means your business is growing.

But how will you know when it’s time to make the switch to automated bookkeeping? Well, there are a few signs.

Your ledger is a mess

You’re still storing all your invoices and receipts in boxes or manilla folders with little rhyme or reason behind the process. Business and personal receipts pile up and aren’t separated. You’re sending and receiving financial documents by email with no real plan for organizing them. Because of this, monthly reconciliation—the process of comparing your documentation to what’s recorded in your bank and credit card accounts—to make sure your accounts are complete and accurate is an absolute nightmare.

Disorganization also makes it hard to get a loan, according to Ezra Cabrera of SMBCompass, a company that helps small businesses secure financing.

“From the lender’s perspective, we don’t just look at the borrower’s credit score when they apply for alternative financing. We look at their projections, cash flow statements, profit and loss, etc.,” she said.

“Not being able to bookkeep the inflow and outflow of their cash is a clear indication of negligence and inability to put the money where they should,” Cabrera added.

You keep putting off bookkeeping tasks

Poorly organized financial records are the grown-up equivalent of the mountain of unfolded laundry on the floor that you had as a teenager. You put off dealing with it as long as possible only to end up scrambling to get your books done during the final days of the month, compounding the stress you were looking to avoid.

Procrastination can hurt your bottom line as well. You can incur penalties and fines for missing tax deadlines. You might also lose customers by mismanaging payments or subscriptions. According to a study by American Express, 33% of people consider breaking ties with a business after just one instance of poor service.

You’re making mistakes more frequently

When your files are disorganized and your process is chaotic and stressful, you’re more likely to make mistakes. Gartner’s Data Quality Market Survey showed that data inaccuracy costs businesses an average of $15 million per year.

Errors in bookkeeping can lead to tax filing errors and missed tax deductions, which increases your chances of being audited. Believe it or not, bad bookkeeping also can lead to lawsuits.

According to the U.S. Chamber of Commerce, companies that botch payments to contractors and other partners can face liability lawsuits related to labor law violations.

You never have the data you need on hand

Disorganization, procrastination, and the resulting errors in bookkeeping make it almost impossible for you to see your business’s real-time data. When your books never reflect the true, current status of your finances, the chances of catching any errors you may have made are slim to none.

With no clear financial insights, you’re making business decisions based on hunches, not facts. Being able to harness real-time financial data also enables you to improve operations and anticipate future market conditions better. According to a McKinsey survey, business owners see profits increase when using real-time data to inform their business decisions.

Someone’s stealing from you

If you think someone is stealing from you or maliciously accessing and changing your financial data, you might be right.

“If your small business doesn’t have rules and procedures in place that allow for the right separation of powers and duties and effective checks and balances, it is at risk of massive losses due to internal fraud schemes, which might drive it to close for good,” according to Girish Redekar, cofounder of Sprinto, a company that helps businesses stay compliant and pass security assessments.

When your bookkeeping is in disarray, you have no way of telling whether someone else on your team is making unapproved changes to your data. Potentially disgruntled employees can maliciously destroy or alter your data to cause intentional harm to your business.

According to this Cost of Insider Threats report from 2020, insider-related incidents cost businesses an average of $11.45 million annually.

“If your small business doesn’t have rules and procedures in place that allow for the right separation of powers and duties and effective checks and balances, it is at risk of massive losses due to internal fraud schemes, which might drive it to close for good.”

The benefits of automated bookkeeping for small businesses

If you’re still on the fence about adopting automated bookkeeping, it’s important to note that bookkeeping and accounting professionals have never been more aware of its advantages.

In this recent study, 36% of companies surveyed claimed that they plan on implementing cloud-based accounting solutions in the near future. Another stated that more than 25% of mid-market organizations cite manual data entry and inefficient processes as a serious challenge when managing invoices.

Greater productivity

Automation significantly decreases the time you’re spending on performing repetitive, manual tasks.

According to work collaboration and management company Smartsheet and their Automation in the Workplace report, close to 60% of surveyed workers said they believe they could save six or more hours a week if repetitive tasks were automated. 40% said that they spend “at least a quarter of their workweek on manual, repetitive tasks.”

Automated bookkeeping software enables you to track, compile, and verify your invoices and receipts easily instead of digging through accordion folders the size of actual accordions, making tax preparation an error-free breeze as well.

Neat keeps you on track and productive by clearly listing uploaded items that need to be reviewed.

Fewer errors

Even the smallest mistakes can wreak havoc on your financials if they aren’t caught in time. Minor miscalculations stand to snowball if they go unnoticed. Next thing you know, your tax estimates are off and your projections make no sense. In the earlier-mentioned Smartsheet report, 66% of business owners surveyed said that automation has been key in reducing data errors.

A recent Gartner report claims that automation can save finance teams $878,000 and 25,000 hours of rework in just one year.

Real-time data access

In addition to simplifying processes and reducing the risk of errors, automated bookkeeping also speeds decision-making by providing data in near real time.

Gartner predicts that spending on real-time analytics, like the information you get from automated bookkeeping, will grow three times faster than any other type of analytics and will be worth $22.8 billion by 2022. And 90% of corporations say that kind of accurate data is an asset to small businesses.

In a recent Deloitte report, one-third of business executives asked about the effects of artificial intelligence (AI) and automation on their processes say automation improves decision-making while reducing time spent on mundane tasks. Additionally, 43% claim that automation leads to enhanced products and services, and 31% said it enables employees to spend less time on tedious manual tasks and be more creative.

Neat’s Insights dashboard provides actionable, real-time business data.

Stronger security

Automated bookkeeping solutions today live in the cloud, where your financial data are significantly safer. You don’t have to worry about anyone stealing your physical files or even your computer.

Neat’s security protocols include regular security audits and third-party testing to ensure that all data saved in Neat are always secure and up-to-date. All your financial data is accessible to only you and fully encrypted so malicious hackers can’t use your data even if they get ahold of it.

Automated bookkeeping solutions also give you complete visibility and the ability to trace every change made to your books, making internal fraud nearly impossible.

Better bookkeeping is the first step toward increasing business revenue

If you dislike bookkeeping, you’re not alone—40% of entrepreneurs say the worst part of owning a business is bookkeeping. And while it may never be fun, automating your bookkeeping will make it less of a hassle.

You don’t necessarily need an accountant for better bookkeeping. What you do need is the right tools. Tools save time and money you’re losing on inefficient and sloppy manual processes and increase the time and energy you have to focus on growing your business. Easy-to-use automated bookkeeping tools like Neat’s will help you take control of your finances independently.

Start a free Neat trial to see if it’s the right automated bookkeeping tool for you.