The Ultimate Guide to Automated Bookkeeping Software

In recent years, technology in bookkeeping has developed at a rapid pace. Driven by the continued rollout of the governments's initiatives (such as Making Tax Digital in the UK, or GST in Australia), these tools have evolved to automate an ever-increasing range of bookkeeping tasks that were once tedious and time-consuming. As a result, bookkeeping automation tools have become integral to the daily workflow for many small business owners, accountants and bookkeepers. 

In this guide, you’ll find everything you need to know about automated bookkeeping software, whether you’re already using the technology or just getting started. 

We’ll cover what automated bookkeeping software does, how it works, and what to consider when planning to implement a new tool. We’ll also explore the many different ways in which automation software can support the bookkeeping workflow in order to save time, increase accuracy and improve efficiency for everyone involved in the small business accounting process. 

What is automated bookkeeping software?

The term ‘automated bookkeeping software’ can be used to describe any digital tool that is driven by an algorithm to perform a bookkeeping task automatically. Usually cloud-based, these tools can range from small applications that focus on one particular task to full-blown accounting software. These larger platforms can automate multiple aspects of the end-to-end accounting process, including tax management. 

How does the technology work?

The software works by applying an algorithm to the bookkeeping data entered by small business owners, accountants and bookkeepers throughout the year in order to generate accurate outputs automatically. Today, these algorithms are usually supported by AI or machine learning technology.

While this innovation undoubtedly saves a huge amount of time, the software can only work if it is given data to process. For many businesses, the process of getting that data into the system on a regular basis can be time-consuming and difficult to manage, particularly for businesses with a high number of transactions. 

That’s where Optical Character Recognition (OCR) software comes in. It extracts text and data from images of receipts, invoices and bank transactions and converts the characters it recognises into machine-readable text. This allows users to digitise their paper receipts and then organise and store the information online. 

OCR software like Dext provides a quick and easy way for business owners, accountants and bookkeepers to input data and keep their financial records up to date. You can learn more about how the technology works in our article on the most accurate receipt OCR software. 

Key features of automated bookkeeping software

While every solution is different, most automated bookkeeping software - including Dext - offers the following core features: 

Receipt capture

Automated bookkeeping software powered by OCR technology can take almost all of the manual labour out of data entry when it comes to recording invoices, expenses and bank transactions. 

Some receipt-scanning tools, like Dext Prepare, even create accounting transactions from the data, which can then flow automatically into the business owner’s accounts through integrations with leading accounting software platforms. 

All the business owner, accountant or bookkeeper has to do is simply take a photo of a receipt, invoice or bank statement. 

Transaction categorisation

Some automated bookkeeping tools - like Dext - suggest categories for the accounting transactions they create, using machine learning algorithms to improve their suggestions over time. 

As these suggestions become more accurate, business owners, accountants and bookkeepers are gradually able to spend less time checking them. Before long, they can simply approve the suggested categorisations with the push of a button. 

Invoice and expense management  

Most automated bookkeeping software includes functionality that streamlines the process of managing invoices and expenses. This often makes it easy for business owners to stay on top of this aspect of their business bookkeeping, saving advisors a great deal of time in the process. 

Bank reconciliation

By creating and categorising transactions automatically based on captured data, many automated bookkeeping tools make the bank reconciliation process faster and more accurate. This transforms a once time-consuming manual task into the work of moments.

Advisor/client collaboration

Most automated bookkeeping software is designed to support collaboration between advisors and their clients. With up-to-date and accurate business figures available to all parties, conversations between business owners and their accountants and bookkeepers can become far more strategic and productive.

What are the benefits of automated bookkeeping software?

Before the advent of automated bookkeeping software, traditional bookkeeping tasks had to be performed manually. This was both tedious and frustrating, and presented a huge drain on time for everyone involved. 

It prevented business owners from getting on with running their businesses and prevented accountants and providers from having the time to offer clients advice and insight. 

Now, with technology taking care of many of those data-processing tasks accurately, everyone involved in the bookkeeping process can benefit from:

• Increased efficiency and productivity. By taking care of routine bookkeeping tasks, automation software gives business owners, accountants and bookkeepers time to spend on more meaningful and strategic activities.

•Greater accuracy. The algorithms that power automated bookkeeping software can process large volumes of data with precision, ensuring that financial records are accurate and reliable and significantly reducing the risk of human error

• Real-time insights and advice. Cloud-based tools make it quick, easy and convenient to keep a business’s financial records up to date. This also allows for real-time financial reports and insights, enabling accountants and bookkeepers to offer their clients timely advice and strategic guidance based on the most up-to-date picture of the business’s financial health.

How to get started with automated bookkeeping software

If you’re considering implementing automated bookkeeping software in your business or practice, there are a number of factors to consider. 

Firstly, which software is right for you? With so many solutions available today, the prospect of choosing a new tool can sometimes feel overwhelming. Taking the following variables into account should help you narrow the options down to a shortlist of suitable tools: 

• The main problem that you’d like the automated bookkeeping software to solve
• The results you’re hoping to achieve with the software
• The size of your business or accountancy or bookkeeping practice
• The industry that your business operates in or the industries that your clients operate in
• The ‘non-negotiable’ functionality that you require
• The ‘nice-to-have’ functionality that you don’t require but would appreciate
• Your financial budget 

When it comes to implementing your chosen software, it’s important to consider who needs to know about it. You may plan to use the tool to collaborate with other parties, for example, or you might be expecting other people to use the software themselves. Let these stakeholders know about the tool, ideally before you implement it. Share all the information they need and be prepared to answer any questions they might have. 

Another question to consider is whether there’s anything you’ll need to do from a technical perspective before you can start using the software in your business or practice. This might be the case if you have a high volume of data to enter or client details to add. Your software provider should be able to help you get ready to start using the tool. Many providers offer support through a structured onboarding process.

Once you’re up and running with the software, it’s a good idea to bookmark the Help Centre (or ‘Knowledge Base’) on the provider’s website. This will give you ready access to the software’s support documentation for any functionality you’d like to learn more about. If you run into any issues with using the product, most automated bookkeeping software providers offer customer support during business hours.

Pro tips: getting the most out of automated bookkeeping software

Once you’ve got to grips with the basics of a new bookkeeping automation tool, it’s time to explore the additional value it can deliver. Here are our ‘pro tips’ for making sure you get the most out of your automated bookkeeping software:

• Discover what other tasks or processes it can handle beyond its primary function. Many bookkeeping tools can automate repetitive admin tasks like sending out recurring invoices, sending overdue invoice reminders and scheduling payments to suppliers. 

• Explore the advanced applications the software might have, like financial forecasting and risk management. Business owners might prefer to do this in collaboration with their accountant or bookkeeper. 

• Learn how the software integrates with other digital business or bookkeeping software. Connecting the tools in your ‘tech stack’ can make them even more powerful, efficient and accurate.

• Stay up-to-date with the latest product updates as the software evolves. Most product teams are hard at work incorporating the latest technological developments into their solutions, so it’s worth taking the time to read any emails or notifications you receive about updates to the software.

What kind of outcomes can be achieved with automated bookkeeping software?

Here at Dext, we’ve seen accountants, bookkeepers and business owners alike achieve significant positive outcomes with our automated bookkeeping software. 

Dext Prepare has saved roughly two days of manual data entry work a month for NorthWest Construction Cooperative, while our tools have helped a busy e-commerce business to stay on top of thousands of transactions. 

The team at Gecko Bookkeeping has seen a 60% reduction in manual data entry since they started using Dext with clients. Dext Prepare played an integral role in LWA’s strategy for a client’s digital transformation journey. Our tools have also helped global accountancy practices like Mazars to digitise and scale up. 

Automated bookkeeping software FAQs

If you’re curious about automated bookkeeping software and would like to learn more, you might find the answers to these frequently asked questions helpful.

Q: Is it responsible to allow technology to handle something as important as business bookkeeping? 

While automated bookkeeping software can handle many traditional bookkeeping tasks, it’s important to understand that automated bookkeeping software isn’t designed to replace human thought. 

Human judgement is required when it comes to reviewing the output of any automation tool, and bookkeeping software is no exception. Writing on the topic of AI and human accountability, Stephen Edgington, our Chief Product and Technology Officer here at Dext, says: “The role of human oversight remains critical in ensuring that the output generated by AI is reliable and accurate”. 

No matter how advanced automation tools become, there remain many aspects of a bookkeeper’s role that will always demand the human touch. Automated bookkeeping software is not capable of cultivating meaningful relationships with clients, for example. It can’t consider nuanced scenarios or think strategically, nor can it make judgement calls or provide tactical advice or guidance. 

Q: How proficient with technology does a business owner, accountant or bookkeeper need to be to use automated bookkeeping software effectively? 

Automated bookkeeping tools are designed to be as easy as possible for business owners, accountants and bookkeepers to use. As a result, they require only a basic level of technical proficiency. Anyone who is comfortable with using cloud-based services such as online banking will have the technological expertise to use automated bookkeeping software. 

Tools that are available as mobile applications, like Dext Prepare, are even more straightforward to use. They only require users to perform simple tasks, like taking photos and executing a simple set of commands, on their smartphones.

Q: How easy is it to transition to automated bookkeeping software from old ways of working? 

Like any type of change, the transition to automated bookkeeping software might feel a little challenging at first. It can be difficult to abandon old ways of working that feel familiar, even when they’re inefficient, time-consuming or prone to human error. 

However, many users find that once they start using a new bookkeeping tool, they’re pleasantly surprised at how easy it is to operate and how much time it saves them. Before long, using the tool quickly becomes second nature and the old way of working no longer offers the same appeal.

Q: How can I trust that financial and personal data will be secure in automated bookkeeping software?

Given the huge amount of financial and personal data involved in the business bookkeeping process, security is an important concern. It’s also a topic that providers of bookkeeping automation software take very seriously. If you’re thinking about implementing a particular tool, we recommend consulting the provider’s website carefully to learn about their approach to security. 

In addition to a comprehensive data privacy policy, we recommend taking into account factors such as:

• Cloud security: look for tools certified in ISO 27001, PCI DSS and SOC compliance
• Network security: look for tools that undergo regular third-party penetration tests 
• Encryption: look for tools with robust encryption practices like TLS and AES-256

You can learn more in our article on the implications of AI on data privacy and security. 

Q: How easy is automated bookkeeping software for business owners to use with their bookkeeper or accountant? 

Many automated bookkeeping tools have been designed with client collaboration in mind. They include features that make it easy for small business owners to stay on top of aspects of their own business bookkeeping, giving their accountant or bookkeeper real-time access to their most up-to-date figures. 

As a result, conversations between clients and advisors can become more productive and strategic, as advisors are able to draw on this data to provide insight into the performance and health of their clients’ businesses.  

Business owners don’t need to develop any specific bookkeeping skills or knowledge about their numbers to use automated bookkeeping software; they usually only need to be able to perform simple tasks on a smartphone. 

Eliminate data entry and streamline expense management with automation 

If you’re searching for a tool that can automate tedious bookkeeping tasks and make expense management a whole lot easier, look no further than Dext Prepare.

Powered by state-of-the-art AI, Dext Prepare uses OCR technology to extract data from images of receipts, invoices and bank statements. It then creates categorised accounting transactions that can flow seamlessly into accounting software platforms, thanks to integrations with leading providers like Xero, Sage and Quickbooks.

Ready to say goodbye to hours of manual data entry? Find out more about Dext Prepare and start a free trial today.

Join us for an exclusive webinar with Dext's Product and Accounting Expert Paul Lodder on 4th June, where we'll show you how the right tech solutions can increase productivity and drive business forward. Register for free here: https://info.dext.com/bookkeeping-automation-with-dext