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The Evolution of Accounting Automation

Featured image by Tumisu from Pixabay 

Accounting automation is a pretty recent phenomenon. Let’s take a look at the evolution of accounting technology and see how its automation has been an incredible bonus for business.


In today’s lightning-fast economy, we take it for granted that we can click a button on a website, enter our payment information, and ta-da, that deluxe widget will land on our doorstep in just a few days.

But to make that happen, there’s a lot of automation that goes on behind the scenes, especially in the accounting system. Automation in accounting is a pretty recent phenomenon. Let’s take a look at the evolution of accounting technology and see how this has been an incredible bonus for business.

Paper and Pen Were the Height of Accounting Technology for 400 Years

For almost 400 years, accountants did everything by hand, just as Luca Pacioli first described double entry bookkeeping in 1494. In the 1880s, the mechanical adding machine was invented. Then a punch card machine came along that could process census data and accounting records.

However, most accounting was performed with paper ledgers and pens. Those other innovations only helped with adding up account balances.

The First Computers Ushered in Accounting Automation in 1955

Computers didn’t come on the scene until 1955, when GE bought a Univac computer to process payroll. That task required 40 hours of solid number crunching, but that was an improvement over doing it by hand.

Then Came the Electronic Data Interchange

The next big advance in accounting automation came in the 1960s with the development of electronic data interchange (EDI) by the automotive industry to streamline payments and orders.

EDI allows for the processing of orders and invoices without human intervention. However, for years, this innovation was only available to large companies that could afford their own mainframe computers. Small business accounting was still a manual process.

QuickBooks Was Born in 1992

That changed in 1978, when Peachtree was introduced as the first accounting software for the growing desktop computing market. A few years later, in 1983, Intuit released Quicken for personal finance. When Intuit realized that people were using Quicken to track income and expenses for small businesses, they launched QuickBooks in 1992.

While these new accounting programs did make it easier to summarize and report business performance, accounting remained a largely manual process. Humans still needed to enter information from paper documents into computers.

The Internet Changed Everything

The internet changed that with an explosion of innovations that began to move accounting online in the early 2000s. At first, downloading and importing bank and credit card transactions was a big labor-saving innovation. Now, every accounting system has application program interfaces, or APIs, which automatically connect banks and other applications with accounting software to import transactions.

Another big innovation in the early 2000s was the refinement of optical character recognition (OCR) technology. OCR technology makes it possible to enter transactions simply by snapping a photo of a receipt with a smartphone or scanning a document. By now, this technology is within reach of most small businesses and is built into many of the automation tools accountants use.

Touchless Accounting Is the Wave of the Future

Now we are entering the golden age of accounting automation. Artificial intelligence, robotic process automation (RPA), and machine learning, combined with APIs, bank feeds, and cloud accounting, mean that bookkeeping can now be a largely hands-off process. New tools come on the market every day that can automate entire end-to-end processes like order to cash. This technology pulls orders from a portal, enters the order in the general ledger, and routes that information to the correct people for approval and order fulfillment.

Instead of needing a team of people who spend all day manually entering customer orders, just one or two people need to monitor the system and resolve anomalies.

What Are the Advantages for Small Businesses of Accounting Automation?

Overall, accounting automation saves time and money. Let’s look at the different ways this happens.

  • Scale up without increasing headcount. With robust automation systems and procedures in place, you can easily scale up (or down, as happened during the pandemic) with only minimal changes to headcount, if any.
  • See your financials in real time. Automation means you can update your books in almost real time, so you always know where you stand. You have a full picture of your cash flow, and you can make decisions based on your whole financial picture, not just your online bank balance.
  • Get paid faster. With a manual system you have to create an invoice, mail it out, and wait for a check to arrive by mail. But by automating the process, invoices can go out as soon as the work is completed. Online payment methods mean the payment can be in your bank account today.
  • Have improved accuracy in your numbers. Manual processes are inherently error-prone, so until you have reconciled your bank accounts, your numbers may all be suspect. Automation eliminates the majority of errors and makes reconciling a breeze when everything is there and is correct.
  • Make better use of your CPA’s brain. Accounting automation doesn’t mean that only robots will do accounting in the future. On the contrary, when your accounting is automated, your accountant will have the bandwidth to tell you what your numbers mean.
  • Solve the oncoming talent problem. According to a recent report, in less than ten years, the world may face a talent shortage of 85 million people. Baby boomers are retiring in droves, but there aren’t enough younger people to replace them. Skilled accountants are already hard to find. With automation, you won’t need to hire as many people for your back office functions. 
  • Retain your star employees. By eliminating tedious, manual data entry work, your employees will be working at a higher intellectual level. This leads to greater employee engagement. Research by Gallup shows that engaged employees stick around longer. Companies with engaged employees also are more profitable.


Accounting Automation Will Save You Time and Money

Saving time and money are always at the forefront of every small business owner’s mind. Automating your accounting will help you do both. Plus, it will give you the information you need when you need it so you can reach your goals.