5 Ways Automation Transforms Compliance in Bookkeeping
When it comes to understanding the advantages of automated bookkeeping software, a number of benefits are likely to spring to mind. Like other automation tools, bookkeeping software can improve productivity and reduce costs. However, these outcomes only represent a fraction of the value the technology has to offer.
Here, we'll explore the many ways in which automated bookkeeping software can help bookkeepers comply with tax legislation and other rules and regulations. However, it’s important to recognise that not all automation tools are exactly the same. To bring this to life, we’ll look at the specific capabilities of Dext to support and streamline every area of bookkeeping compliance.
1. Improving accuracy
Automated bookkeeping software uses advanced algorithms, often powered by AI or machine learning, to process large volumes of data accurately. By extracting data directly from primary documents, the risk of human error caused by manual data entry is removed and data processing can be done more consistently and predictably.
Bookkeeping accuracy is crucial for compliance, as the penalties for submitting inaccurate information to the government can be significant. In the UK, for example, if inaccuracies arise from a lack of reasonable care, the penalty can be up to 30% of the extra tax owed.
While all automation tools remove the risk of human error, the degree of accuracy that can be achieved will vary from solution to solution. Using machine learning and state-of-the-art AI, Dext extracts data from receipts, invoices and bank statements with over 99% accuracy, making it the most accurate software of its kind.
Dext complies with all tax authorities that accept the digital storage of financial documentation as proof of purchase. These authorities include HMRC in the UK, the IRS in the US, the CRA in Canada and the Australian Taxation Office.
2. Saving time
Data entry, processing and calculations all take time when done manually. One of the biggest benefits of automated bookkeeping software is the amount of time it can save on compliance-related tasks and overall expense management. This allows bookkeepers to focus on growing their client base, adding valuable strategic analysis to the services they provide, or simply spending more time with their families.
With the right technology, much of the work associated with compliance-related tasks can be completed instantly through automated processes and streamlined workflows. For example, Dext takes out the manual data entry required to record invoices, expenses and bank transactions. All a bookkeeper or client has to do is take a photo of the relevant document and upload it straight into the system, or forward it via email - in fact, there are several submission methods. Dext analyses the data it captures to organise and categorise transactions, generate expense reports and present figures in a standard digitised format.
3. Driving efficiency
In addition to directly saving time through automating basic data entry tasks, automation software can improve efficiencies across your entire bookkeeping workflow. For example, automation tools make it possible to access up-to-date records in real time. This means bookkeepers can easily keep a close eye on their clients' numbers throughout the year to spot trends, identify bottlenecks and pinpoint opportunities.
Integrations with other accounting and business tools are also critical. Dext’s deep integrations with leading accounting software like Xero, Quickbooks and Sage, just to name a few, allow expenses data to be captured and directly imported to populate clients' financial reports and statements automatically.
For sales transactions Dext Commerce is a great solution, as it connects with point-of-sale systems and digital payment providers like Stripe and Paypal. It fetches the data from these transactions and converts them into a standardised format. Having a full overview of expenses and sales data in real-time is also a dream when it comes to managing cash flow and making quick decisions.
By connecting bookkeeping automation with this wider set of tools, bookkeepers and their clients only have to complete each task once and the data can flow seamlessly between platforms. This increased efficiency helps bookkeepers (and accountants) to stay on top of their clients' tax liabilities, which can reduce the risk of missed deadlines and subsequent financial penalties.
4. Creating clear audit trails
When it comes to compliance in bookkeeping, having a clear, accurate and transparent audit trail is nothing short of essential. It also allows bookkeepers to track changes in their clients' records more easily and respond rapidly to developments that need their attention. Examples might include unusual transactions, duplications, incorrect reconciliations or transactions that have been edited or amended.
Many of these benefits are realised simply by digitising the bookkeeping process and storing that information in a single tool. However, when choosing bookkeeping automation technology, it’s important to pay attention to the level of transparency provided.
For example, Dext delivers a submission history of each transaction, allowing bookkeepers to see if an item has been edited or moved to another category. This data is captured to populate accurate audit trails automatically. Every item submitted is also stored for easy access in cause of an audit.
This additional level of visibility helps support risk management as well as compliance. If bookkeepers spot any unusual activity, they can use Dext’s Item Messaging functionality to directly contact their client about the transaction in question.
5. Supporting security
In the bookkeeping profession, compliance isn't just about adhering to the rules of tax legislation. Given the huge amount of client data involved, accountants and bookkeepers also have important responsibilities in the areas of security and privacy. These are also top priorities for providers of bookkeeping software. In addition to the required automation features, a credible solution should include:
- Safe access: Tools should include a multi-step authentication log-in process, like 2-factor authentication, for secure access to the platform.
- Data privacy: Providers should have a comprehensive data privacy policy that complies with the principles of GDPR (the General Data Protection Regulation).
- Cloud security: Tools should be certified in ISO 27001, PCI DSS and SOC compliance.
- Network security: They should undergo regular third-party penetration tests.
- Encryption: They should have robust encryption practices like TLS and AES-256.
Dext is fully compliant with GDPR and stores digitised data securely for 10 years using bank-level encryption. The software provides bookkeepers and their clients with safe but straightforward access to the platform, including 2-Factor Authentication for additional log-in security.
Bookkeeping automation simplifies compliance, but can deliver so much more
By standardising, streamlining and tracking bookkeeping workflows, bookkeeping automation reduces the risk of error while minimising the time required to be compliant. But automation can do far more than improve productivity and reduce costs for bookkeepers. It creates opportunities to provide additional services, grow your practice and improve the accuracy of outcomes.
A KPMG study released in April 2024 about the use of AI in financial reporting and auditing revealed that almost three-quarters of companies used AI in financial reporting - with this proportion set to rise to 99% by 2027. The industry is changing, and bookkeepers who adopt automation now will guide this revolution - as well as future-proof their practices.
If you want to learn more about how Dext can support compliance and help you grow your practice, get in touch to book a demo today.
