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Accounts Payable Automation

Advantages and Disadvantages of Accounting in Technology

by Yooz the 01.4.2023

advantages and disadvantages of technology in accounting

Accounting operations have undergone tremendous change over time, moving from a pre-computer era to the current modern, tech-savvy society. No longer do bookkeepers need to rely on manual labor and ledgers to record everyday transactions. Nor do they need to rely on the basic machines that took over many of the routine tasks, handling them faster and with greater accuracy than humans or even the supercomputers once priced out of the general public's range.


Today's technology is smaller, easily accessible, and affordable. It is a driving force behind business efficiency and productivity in all areas, including finance. Indeed, technology has transformed the entire accounting profession by automating the constant complex, repetitive tasks and processes while transforming the accountant's job into a more strategic, innovative position.

To further understand how technology - and accounts payable automation in particular - is shaping tomorrow's finance department, you'll need to take a closer look at the advantages and disadvantages of accounting in technology.




Why should I care


Accounting is at the most basic level the process of measuring, processing, and sharing numbers (specifically financial data and other related information about businesses and corporations). It is by necessity an exact science but also highly repetitive and historically paper dependent. In other words, there is plenty of room for mistakes to occur that can affect the entire organization. Unfortunately, the possibility of risk and error only increases as companies grow.

Wouldn't you be interested if something could essentially remove the possibility of mistakes? Add security? Streamline operations and improve both staff and vendor relations? Management certainly is. According to the numbers, this is exactly what is happening.

Research has shown that the global digital transformation market is projected to grow from 389.49 billion GBP in 2020 to 837.17 billion GBP by 2025, at a compound annual growth rate (CAGR) of 16.5% during this period. With this in mind, 70% of organisations have a digital transformation strategy or are working on one; a statistic also driven by the ongoing adaption of new legislation such as Making Tax Digital (MTD).

However, technology also has limitations that can have a negative impact on business processes. It is important to recognize and account for them so that they don't become major problems in the future.

Let’s take a closer look at some of the advantages and disadvantages fueling this financial technology (Fintech) growth.


Advantages of technology


As mentioned above, one of the most important benefits of using technology in accounting is the ability to automate processes which in turn simplifies the Accounts Payable (AP) process, leading to:


1. Cost-savings

First and foremost among the advantages of technology in accounting are the cost savings. Upfront costs are quickly regained, and savings occur in every area through increased processing capability, a reduction in time spent researching red flags, eliminating a need for paper and onsite storage, and more. In fact, early or on-time payments can even become a revenue source by through reward and incentive programs. Technology in accounting also centralizes storage and automatically syncs financial information between systems, eliminating what used to be a manual, labor-intensive bookkeeping process.


2. Security

With nearly two in three (64%) of UK companies reporting that they have experienced fraud or economic crime in the past two years, security is of paramount important to executive management teams. Quality technology provides an extra layer of safety, double and triple checking information at the very start to prevent errors and possible fraud.


3. Efficiency

Technology (and automation in particular) streamlines operations which in turn creates significant cost savings. Among other things, it enables fast and efficient processing, eliminates former roadblocks by enabling rapid changes in processes (including workflow and approvers), enhances online data integration with other systems (and thus speeds transactions), and automatically creates a digital audit trail for reference.


4. Accessbility

Cloud-based SaaS not only makes technology more affordable to companies of all sizes, it creates a centralized and accessible storage database that can automatically collects, organizes, and analyses data. Not only can this information be used for real-time reports and strategic decision-making, it allows for 24/7 access from any mobile device. This enables business operations to continue seamlessly - increasingly important as the work environment continues to trend towards a mobile, hybrid, or remote framework.


5. Digitalisation

Technology makes accounting accessible to everyone. No longer do you need an advanced degree, be a CPA, accountant or even a financial professional to understand the ins and outs of credits, debits, asset classes, etc. Today's computerized accounting packages and programs are user-friendly and typically easy to understand, helping to increase further digital adoption among employees and expand their skill sets.


6. Environmental, social, and corporate governance (ESG)

Technology and automation supports ESG and sustainability initiatives by eliminating paper and waste. With research showing that 84% of CFOs claim to have an ESG, CSR, or sustainability policy in place at their firms and the UK government set to consult on regulation of ESG ratings and a new green finance strategy in 2023, this type of support is key.


Disadvantages of technology


It is important to note from the start that the quality of the technology itself is a key factor when it comes to identifying both advantages and disadvantages.  In addition, technology in accounting has its limitations and possible downfalls that can have a negative impact on business operations. However, acknowledging and recognizing them allows them to be addressed before they can become a major problem.


1. Technical Issues

When dealing with technology and computerized systems, issues can arise in everything from power outages and viruses to simply knocking a computer off a table and destroying it. This is a one case where a cloud-based platform and instant, automatic backups are particularly beneficial. It is also important to ensure that your business uses a reputable accounting software platform where you can receive rapid customer service.


2. Security

The same technology that helps secures systems also creates new opportunities for cyberattacks and fraud. This is one of the primary reasons to ensure that you have quality software as well as a cloud-based platform that can be constantly updated with new technology.


3. Cyber limitations

A system is only as good as the information entered, including the setup, workflow, and information entered. Proper planning and installation can go far towards mitigating effects from these limitations.


4. Specialized Needs

Although a standard accounting software package will generally fit most needs, businesses with specialized requirements will need to refine it or change their processes. This can involve extra time and cost.


5. Cost

Although software is more affordable, accessible, and result in many cost savings, the initial cost may still be more than some smaller businesses can pay and prevent entry. Note that this cost is not just monetary but also in terms of time (both for implementation and training).


The bottom line


Technology (and technology in accounting) is constantly but rapidly evolving). Applying it correctly can help, doing it incorrectly can hurt. They key is to recognize the possible downfalls and account for them so that they can be avoided. Done right, accounting and technology are the perfect pairing.


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