An accounting process is mandatory! Both in terms of regulations and business development. Knowing the economic reality of a company doesn’t necessarily help you make the right decisions… but it does help youavoid making the wrong ones.
When we go beyond these fundamentals, many opportunities can be seized by companies:
- Automate the accounting process to save time, money and improve reliability
- Interconnect your business software with your financial software to capture crucial information in real time
- AI (Artificial Intelligence ) for powerful financial analysis
In this article, we’ll start by outlining the fundamentals of an accounting process, and then go on to describe the challenges, use cases and risks associated with each opportunity. Finally, we present the main tasks to be carried out to ensure the success of an accounting process project.
The fundamentals of an accounting process
What is the accounting process?
“Accounting is the means by which financial information is communicated to those who need it to make informed decisions.” – Arthur Andersen.
By processing all the financial transactions and financial flows of a company, an accounting process provides a picture of the company’s economic landscape. This is made possible by a set of correlated or interacting activities that transform input elements into output results.
All these accounting activities are the safeguards that ensure total compliance of information.
Accounting objectives
As Warren Buffet famously said, “Accounting is the language ofbusiness“.
The language of business regulation
Without accounting, public authorities will wipe you off the face of the earth because you won’t comply with tax and regulatory requirements.
The language of fundraising and governance
Accounting is the first thing investors, banks and shareholders look at…
The language of growth
It enables you to grow your sales or your margins through reliable strategic decisions based on financial information and forecasts.
What are the activities involved in an accounting process?
1- Transaction identification
Define the nature of a transaction using invoices, contracts and purchase orders, and identify accounts.
2- Recording transactions
Record transactions chronologically in accounting journals.
3- Ledger publication or posting
Transfers journal entries to corresponding general ledger accounts.
4- Calculation of the accounting balance
Comparison of credit and debit balance sums to ensure they are accurate and balanced.
5- Preparation of financial statements
Preparation of income statements, audit balance sheets, adjustment analysis and presentation of financial statements.
6- Closing the accounts
Accounting for changes in inventories, impairment losses and provisions.
Depreciation and amortization.
7- Checking ledger balance
Comparison of credit and debit balance sums to ensure they are accurate and balanced.
8- Drawing up the final balance sheet
General ledger entry.
Credit accounts are entered in the assets column.
Opportunities to improve your business operations
Automating accounting processes
Reduce low-value-added tasks, cover loopholes and save time
Repetitive manual tasks on software or multiple entries of the same information in different tools are sources of wasted time, money and motivation for some employees, and represent a high risk of errors.
Thanks toautomation, they’re disappearing!
It also provides traceability and impartiality to protect the company from fraud. All automation flows are listed.
Numerous automation use cases are possible
Invoice entry
Automatic data extraction from paper or electronic invoices using OCR technology
Bank reconciliation
Automatic comparison of bank transactions with company accounting records.
Expense Claim Management
Use of mobile applications to collect receipts for employee expenses and costs in real time.
Inter-company mergers
Comparison of frequent financial movements between different entities or business partners.
Generate Financial Reports
Consolidate financial data and generate customized reports.
Generate Financial Reports
Consolidate financial data and generate customized reports.
Alerts
and Notifications
Generate alerts in the event of financial irregularities, budget overruns, etc.
Automating the purchasing process
Automated data entry, generation of specific approval circuits…
Automation points of attention
- The technical stability of the automation you’ve implemented. Watch out for breakdowns!
- While ROI can be impressive, beware of initial and maintenance costs!
Find out more in our article on process automation
Integrate your relevant business software with your accounting process
Imagine having real-time access to your business-related financial flows!
Without going into too much detail, as this is very much linked to automation, by connecting your business software or ERP, you can send valuable information to your accounting teams, and save them the trouble of having to search for information among their staff.
Conversely, the various business departments can receive real-time financial information , enabling them to make the right decisions at any time.
Artificial Intelligence (AI) for financial analysis
AI, an advisor who will dig into the darkest corners of your data without complaint
To make the best decisions, it is important to improve the quality of forecasts and provide in-depth strategic analyses. By integrating AI-based solutions for accounting and finance, you’ll have access to predictive analytics, trend detection, financial decision optimization…
Numerous use cases involving AI are possible
Financial Trend Prediction
Predict future performance and help you draw up more accurate forecasts.
Fraud Detection
Monitoring financial transactions for suspicious patterns and unusual behavior.
Expense categorization
Automatic categorization of transactions according to their nature.
Predictive Cash Flow Analysis
Anticipation of future cash flow variations by analyzing historical patterns, seasonal trends and other factors.
Virtual Assistance for Users
Helps users solve accounting problems, provide information and guide employees in the use of accounting systems.
Preparation of Financial Reports
Intelligent data aggregation and analysis. Formalization of working versions of reports.
Points of attention with Artificial Intelligence in an accounting process
- AI is highly dependent on data quality.
- You need to know how to properly formalize your needs with the AI.
- Misinterpretation of results can lead to erroneous decisions.
Whatever opportunity you decide to take up, there are a number of points to bear in mind.
Every project starts with the right framework
We share with you the main points to bear in mind when setting up an accounting process optimization.
Identify and prioritize your needs with all stakeholders in the accounting process
It’s not the happiest stage, but it’s essential! You’ll have to get out your best investigator’s suit and go and meet as many employees as possible to cross-reference information. These will enable you to list your needs and map your processes. A hole in the racket could lead to a very nasty surprise at the end of the project.
It will then be important to prioritize your needs to identify the most important ones. So those who have will have the best financial or non-financial return on investment (image, team morale, compliance…).
This phase is called a “process audit” and requires a specific method. To make your work easier, we have written an article to guide you: Process audit – which method to use?
Identifying solutions
Prerequisites: the difference between a solution and a tool
If, and only if, you know all your needs, you’ll be able to consider solutions. A solution is not a tool.
Indeed, the mistake frequently made by companies is to think directly in “tool” mode, and thus lose interest in other possibilities, which are often the best.
Looking for a solution
In the previous steps, you identified a need. This needs to be transcribed into an objective. For example, the objective “Increase the number of orders” answers the problem “I’m not generating enough orders”.
To meet this objective, there are many possible solutions, and it’s important to list them exhaustively. In our example, for “Increase the number of orders” various solutions are possible, such as :
- Solution 1 – Free up salespeople’s time
- Solution 2 – Hire new sales staff
- Solution 3 – Partially outsource order generation
- etc.
Next, you need to define your functional and technical requirements.
Be careful not to confuse the requirements with your choice constraints such as price, impact on organization, hosting, storage, maintenance, security, integration with existing software, etc.
Examples of functional requirements :
- Dunning and notifications
- Input form
- Validation workflow
- Task automation
- Training
- Data recovery
Examples of technical requirements :
- Real-time operation
- Workstation and equipment
- Network quality
- Offline operation
- Hosting
Once the requirements have been defined for each solution, define the possible tools for meeting them.
For example, solution 1 can be covered by :
- Salesforce
- Hubspot and Lapala
- Salesforce and Lemlist
- Zapier
- etc.
Solution 2, on the other hand, doesn’t need any tools.
Throughout this process, it’s important to check that the solutions you’re considering fit in with your company’s constraints, so that you can eliminate those you know to be unviable as soon as possible.
Don’t hesitate to ask for help in these matters.
Particularly in identifying solutions, tools and drawing up specifications
Take a look at
our guide to writing
a specification
Identify the right tool and features
In this phase, you’ll be pitting the tools you’ve chosen against each other. These will offer you a list of features that will cover your needs to a greater or lesser extent.
This is where your preliminary work of listing and prioritizing your needs will be most useful. You can then choose which of the accounting functions are most important to you.
Example of accounting functions: Invoicing, Template, Storage, Integration, Dematerialization, Notifications, Alerts, Automation, Expense reports, Security protocols, Expert contact…
Produce a process sheet
The process sheet is a crucial tool for guaranteeing the long-term viability of an activity and ensuring simplified improvement whenever necessary. It brings together key information such as process mapping and performance indicators.
The process sheet will also facilitate the implementation of new projects, audits, controls and reviews.
However, there’s a fine line between “having a useful process sheet for your company” and “having an unused, obsolete sheet lost in the depths of your storage space”.
To explore this topic further, we have written another resource to help you produce a simple process sheet (with a sample process sheet).
Now you know all about accounting processes. Now it’s your turn! See you soon for more content!
Also interested in reading other articles on processes?
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