Let’s embark on an accounting automation journey.
The Dawn of Accounting Automation
Ah, the digital age! With rapid technological advancements, the accounting landscape is no exception. Today, we’ve moved leaps and bounds from traditional pen-and-paper methods. Automation in accounting isn’t just an option; it’s become an imperative for businesses to operate efficiently and effectively, especially in the e-commerce space, where many struggle to cope with huge volumes of data and complicated workflows created from the various online platforms and payment providers they rely on to be able to run their sales operations.
Now what exactly do we mean by automation? Well, accounting automation tools are nifty software systems designed to replace many manual bookkeeping and accounting processes. They’re like a virtual accountant that never sleeps, working 24/7, streamlining tasks, minimizing human error, and offering real-time accurate data insights. And, they’re perfect for a growing e-commerce venture, where transactions are repetitive in nature, with sales platforms already in the cloud and offering API connectivity, and there are continuous huge volumes of data generated across different systems.
They also say cash is king, and whilst it’s simple to see what is sitting in your bank account when live bank feeds are used, its difficult to keep up with what you’re owed, from whom, and whether you’re payment providers have paid you what they should, automation can come in and monitor your receivables so you can be confident you’re not being short-changed and you can see how your bank balance will grow day on day.
Remember the Manual Era?
Cast your mind back to a time when stores where solely brick and mortar, and shop owners would diligently make handwritten records of every transaction in their hefty, physical ledger books. Romantic? To some extent. Efficient? Far from it.
Things have obviously moved on quite a bit since then, for one retail is on a far larger scales and more complicated than those individual stores once where, and solutions had to progress in line with this. Technological advances saw the creation of digital records, and early accounting systems, and though these were an improvements on the handwritten ledger book, they still involved a lot of manual recording of entries, albeit on a computer instead of pen and paper.
The manual system, for all its charm, had and still has its pitfalls. Errors were frequent, and reconciliations were daunting and had to be performed line by line. Let’s not even get started on year-end reports! For a dynamic e-commerce platform, with transactions happening round-the-clock, the demand for something faster, something more efficient, was inevitable. And this is where Cloud based Accounting software for small business can really make a difference. The most widely known as market leaders in the SME space are Xero and QBO, both of which come with incredibly comprehensive app stacks, and integrate incredibly well into some of the platforms and solutions used by small e-commerce businesses, making manual entries history.
Unraveling Bookkeeping Magic
Bookkeeping – the very term might evoke images of stacked invoices, bills, and the painstaking process of recording each one. But with automation, this picture undergoes a dramatic transformation. It’s out with all the paper, and in with the digital, be it e-mailed PDF invoices, bank feeds, or transactions sent via API.
OCR technology scans, reads, and automatically records data from invoices. Your systems connect directly to bank feeds, ensuring every transaction is captured in real-time. Plus, with tools that allow you to set up recurring transactions, monthly expenses like rents and subscriptions are automatically recorded. Imagine the hours saved!
This can seem too good to be true for some, but popular accounting solutions, like Xero and QBO, already integrate into most of the market leading online marketplaces, such as Amazon, eBay, Etsy, as well as payment providers like Stripe, Paypal, Braintree, Apple and Google Play, so no matter what your workflow and set up looks like, chances are you’ll be covered and all your sales will be sent in directly too.
This isn’t unique to those systems as well, in fact there are hundreds of solutions covering all of the Bookkeeping lifecycle, all of which will have different functionality, integrations, specialisms and pricing. This can be overwhelming when deciding what would work for you, so a good place to start is our app centre, full of useful information for a wide range of systems, so you can familiarise with some of the OCR, scanning and payments specialist solutions: https://4pointzero.co.uk/app-centre/ .
Modern-Day Accounting Superheroes
These tools are more than just software. They’re virtual superheroes, making business owners lives easier. Popular names like QuickBooks, Xero, and FreshBooks have become synonymous with efficiency and reliability, but there are many others out there which also offer excellent solutions whilst not being widely advertised in the media.
Whilst Xero and Quickbooks and their app stack have done a great job at integrating into software used in the e-commerce sector, we do have some tools which provide business owners with more flexibility in the solutions they can use, and how much data they can pull in from their existing workflows. We often find connectors such as Quaderno, A2X or Silver Siphon can make a huge difference by sending data into your accounting system where integrations may not be available or may need customising to make sure you capture the level if detail you need for meaningful reporting. If you don’t use these yet we would strongly recommend that you do, especially where you find you are still relying on posting some transactions manually.
There are also incredibly versatile reporting tools, which can not only integrate into your existing operational and financial systems to produce detailed reports in real time for the business, but can also carry out an element of accounting automation too. Our App Centre is again a good place to start, but we have had great success using Ezora for some of our existing clients in the SME and E-Commerce space. Ezora handles 2 specific functions, analytics/reporting and accounting automation. We have been able to integrate Quaderno into Ezora, which has provided sales data at a more granular data than that which is usually imported into the accounting system. This means you can produce much more detailed reports, for example product sales performance by demographic and region, automatically, and then aggregate daily sales totals to post into the accounting package each day. A well designed solution will deliver on reducing manual data input whilst improving the quality of reporting, and provide you with the flexibility and scalability to ensure you are covered as your business grows.
We can’t get away without mentioning the emergence of AI in accounting. It’s groundbreaking. AI-powered analytics can offer forecasts, helping you make informed decisions. From predicting future revenue to highlighting spending patterns, AI provides an accounting experience like never before. It’s not just about recording transactions anymore; it’s about understanding them, and a portion of that analysis can now be performed without human input.
Smooth Sailing with Payments
Cash flow reigns supreme, even more so for SME’s and E-commerce. And what ensures a smooth cash flow? Efficient handling of accounts payable and receivable.
Whilst this sounds simple in theory, in practice this becomes quite convoluted very quickly, especially when you have hundreds or even thousands or transactions flowing through each day, and potentially sell on multiple platforms, using different payment providers. If you don’t have the correct set-up from the start, and find your business grows extremely quickly, you find yourself quite easily in a tight spot, trying to unpick and reconcile your cash receipts to sales whilst the wheels continue to spin, and falling behind on your workflow.
Automation simplifies this, starting with management of Accounts Payable – invoice processing and approval at the click of a button via OCR/scanning software, teamed up with live bank feeds means your creditor ledgers are always up to date. Ready for payments? The payment process becomes a doddle, using the system to generate bank payment files to upload or transfer to your banking portal for settlement. With smooth and on-time payments, you can build positive relationships with your suppliers, and your business ultimately benefits.
Most are well versed in automation for accounts payable, the real trick lies in mastering automation for accounts receivable, specifically for e-commerce businesses, with high volumes of sales and instant payment. We have implemented solutions for clients which automate the reconciliation of your online sales and cash received from payment providers used for each transaction, so you can have comfort that what you are receiving from your payment provider is exactly what you are owed, and you can see what cash you are expecting to come in net of fees in advance, given many hold back sums on account to cover eventual chargeback or refund requests from customers.
Moreover, tools equipped with AI can detect irregular patterns, safeguarding businesses from potential fraud, and flagging concerns for you to review quickly.
Tax and GDPR – Staying Compliant
E-Commerce is often a global affair, and whilst it is a great advantage to be able to reach customers across the globe, this presents very specific challenges with regards to exposure to the various tax jurisdictions in the countries where your customers are.
Trying to keep track of this is complicated, luckily online marketplaces such as Etsy, Ebay and Amazon marketplace will cover this for you. However, where you market your products through you’re own platform and/or website, it can be much more difficult to configure the Tax settings. We love Quaderno where clients of ours are making international sales, as this has great functionality for ensuring your sales are treated correctly to be fully compliant with Tax regulations over a wide range of jurisdictions.
Integrating your sales data into your accounting system also means you can keep track of your sales taxes due by jurisdiction, which is handy when it comes to your returns, and keeps you covered if the tax man ever comes knocking.
GDPR is also a consideration – financial data is sensitive, especially where you are transacting direct with your customers. And in the age of cyber threats, ensuring its security is paramount. Automated systems, especially the cloud-based ones, offer encrypted transactions, ensuring data remains out of the wrong hands, and dual-factor authentication as standard, so only you can access data.
As an additional solution we like Single-Sign On platforms, these remove the risk of having employees using simple and repeat passwords for all their systems, introduces dual-factor at that stage where this may not be available on certain systems, and makes user management simple. For organisations with lots of employees it’s easy to miss potential leavers and revoke access, or make a mistake on what systems and data they have access to if they shouldn’t.
Adopting the Future with 4PointZero
Change can be intimidating. Understanding the process and the benefits can make the transition smoother. It’s essential to identify current bottlenecks and choose an automation tool that addresses these issues, and schedule regular training sessions to ensure that your team stays updated with the latest features and makes the most of your systems. This can be a lot to think about, and why working with specialist consultants such as 4PointZero might be a better use of resources and provide you with more specialist knowledge and experience.
We are well versed in designing and implementing great systems for E-commerce businesses – providing efficient and workable solutions which can scale up with the business for years to come, and keep them up to date with all the latest developments relevant to them.
In one instance, our client was using a combination of systems including Shopify, Paypal, Stripe and then merging this data into Quaderno. We felt it best to retain these as they were already working well for the client, however we identified that we could improve and elevate the process by building an integration between Quaderno and Ezora, thus pulling in all sales data and payment provider information into Ezora on a real-time basis.
This meant we were able to aggregate sales into daily totals and post these into Xero directly. With a reduced transaction count being posted we could extend the the life of their current accounting package whilst still capturing exactly what was needed from a financial compliance perspective in the accounts, and having the granular sales data within Ezora to work with.
We were also collecting information from Paypal and Stripe, to identify which payment provider was used on each sale, giving us an anticipated receipt balance for each provider, to allow for these to be reconciled against actual bank receipts being recorded in Xero via bank feed functionality. This could then raise any anomalies in the payment provider process on a daily basis via a three-way reconciliation, split by each system, and give the client ample time to investigate and address these anomalies.
Being able to automate the receipt of data at the most granular level into Ezora from Quaderno and Xero then gave us the opportunity to design a whole range of custom detailed reports for the business. This covered financial statements, but also product sales performance by demographic and region, so the business can truly see how it is performing in real-time. Whilst this product specific reporting can be supplied by marketplaces directly, collating these from across the multiple platforms used by the client would have involved significant staff time and the use of spreadsheets and manipulating the data formats due to the different system outputs, with this solution everything was available in a single place for the client automatically and on a live basis.
Not only did this save significant amounts of staff time, and provide more accurate reports, this also increased the timeliness of information. Accounts which were previously being delivered weeks after a period end date and across multiple spreadsheets are now available by all online instantly, and with Ezora we were also able to incorporate operational performance metrics, as well as product fulfilment requirements.
Wrapping Up With Some Wisdom
Financial reporting and compliance is often seen as an afterthought, but at the heart of every successful e-commerce venture lies effective financial management. And as we step further into this digital era, automation will play an even more pivotal role. It’s not just about simplifying; it’s about optimizing. Accounting automation enable smart categorisation of transactions, predictive analysis for cash flow management, anomaly and fraud detection, and automated reporting. Having Cloud based accounting solutions also facilitates collaboration among your teams, with secure automatic data backups and seamless software updates without user intervention.
We’ve created some great solutions for clients in this space before, and working with us you can access over 10 years of specialised experience in digital financial system implementations, training and support, with a team of tech consultants who are themselves qualified accountants and have a deep understanding of the needs of business owners as well as the inner workings of finance teams.
If you would like to know more about the work we do and solutions we have designed and implemented for E-Commerce clients please do not hesitate to get in touch with the team at www.4pointzero.co.uk.
