The Digital Accounting Era: Five Steps For Accountants To Succeed

Digital transformation is an inevitable trend that appears in almost every type of business today, and accounting is no exception. Accounting operations are changing significantly to adapt. This trend can be described as the Digital Accounting Era, where traditional operations gradually become obsolete and replaced by modern technology. So what do future accountants need to do to succeed in the Digital Accounting Era? This article will give you the answer to your question.

What is digital accounting? 

Digital accounting doesn’t have a standard definition, but it merely refers to creating, representing, and transferring financial information in an electronic format. Instead of using paper, all accounting transactions are manipulated and transmitted in an electronic environment. 

Digital accounting doesn’t eliminate the role of accountants or reduce the importance of accountants in the business. In fact, it values and empowers accounting professionals by making their work more proficient and effective. AI, cloud-based systems, and accounting task automation have left their marks on accounting practices. 

There are various reasons that more businesses are choosing digital accounting instead of traditional accounting today: 

  • Time and cost-saving: In medium and large-sized businesses, even a skilled accountant may need to spend up to 4 days operating invoices such as reading, putting data to Excel tables, verifying information, etc. These tasks may require hours and a lot of energy to complete. It also can cause error and fatigue during peak days. With the development of new technologies, such as RPA (Robotic Process Automation), most data is automatically handled by digital tools, leaving no room for error and fraud. It is much cheaper than labor cost and helps businesses wrap up these tasks in a shorter time. 
  • Accuracy and scalability: For a long time, manual processes have been a constant in various finance functions. Today, going paperless is the new standard as it is faster, cost-saving, and reduces errors. Digital accounting takes over manual accounting processes, from making statements, reports, invoices, budgeting with an undeniably accurate result. 
  • Easy access to financial information: A cloud-based system gives accountants, businesses, and other related departments the ability to access their data information at any time, from anywhere within an imperative. It means that you no longer need to be at the office or carry tons of paper to access crucial information. It is particularly helpful in managing and analyzing cash flow, making prompt and accurate decisions, and having better control over the input and output of the business. 

For example, Shoeboxed is an expense & receipt tracking platform that helps accountants get reimbursed fast and maximize tax deductions. By receiving customers’ receipts by mail or scanned documents, extracting the most important data to one organized place for easy and at-a-glance expense tracking, Shoeboxed allows customers to view and export their data anytime and organize them in their categorizations. This is by far the most effective way to organize and store businesses’ financial data for years to come. 

  • Data security: 

Data safety is a top priority of many businesses when cyber-attack continues to rise. Digital accounting software has extra security layers, such as authorized access, two-factor authentication, and regular backup. This brings businesses better protection to their financial data. 

  • Convenience and improved productivity: 

When an accountant is free from doing time-consuming, energy-wasting tasks, he can spend more time developing strategy, analyzing data collected by technologies, and focusing on tasks that require creativity and ingenuity.

As digital accounting has remarkably changed accountancy and brought various benefits for businesses performing accounting operations, it is more important than ever for future accountants to adopt digital accounting. Digital transformation requires accountants to have creativity in accounting tasks, stay ahead of the curve and constantly search for new solutions. Strong knowledge of modern technology helps you adapt and stand out in an era where technology takes over traditional accounting tasks. Chief Financial Officer (CFO), finance leaders, and accountants will need to be greater at planning strategically, organizing, foreseeing, and adequately channeling their financial processes.

However, it is simple to start your digital accounting journey with a clear plan. 

5 steps for accountants to succeed in the digital accounting era

1. Learn and practice technologies simultaneously

During the pandemic, we have seen that technology is one of the most rapidly growing sectors. Many businesses depend their lives on the development of technologies. Many business owners had to figure out a way to cope with the pandemic – going to digital transformation is one of the most effective ways. According to researchers, the accounting sector is greatly affected by the Fourth Industrial Revolution in general, and the digital transformation trend in particular. You will be in a great position if you have the necessary skills to support this rapid transformation and master new technologies. On the other hand, lack of digital skills will also become a weakness once opportunities in this sector become narrowed, and the demand for traditional accountants and auditors will decrease. Therefore, every future accountant needs to emphasize data management, system monitoring, and consulting skills to beat other competitors. 

2. Be able to analyze and present data effectively

It is important to know the way around technology, but it is even more important to make the most out of the financial data with the help of digital transformation. Changing the way you generate, analyze, and present data can be challenging because you need to think and work in a different way. However, if you keep your mind open and always stay innovative, you will soon get adapt. 

Especially in the time when digital transformation takes over most of the manual tasks, accountants will be free to discover and develop themselves more with the strategy and creativity in accounting – things that digital accounting can not provide yet. 

3. Cultivate strong critical thinking and communication skills

Future accountants need to ask the right questions and tell powerful stories to help people make accurate decisions. A combination of an inquisitive approach, powerful storytelling, the ability to leverage technology, and a deep understanding of business support, will help you achieve a firm position at any business. 

Just leveraging technology is not enough – you also need to integrate it with your existing knowledge and experience. While learning new solutions to your daily tasks, you should make a list of your expectations. Add what matches the task requirements or the software tools to your list and narrow down your final options. This way helps you not to be overwhelmed by the ocean of information. 

At the same time, you need to enhance the ability to observe, analyze and predict the data and information that digital transformation provides. This ability helps you to make accurate judgments for the business or conduct decisive strategies.

4. Be willing to discover and learn new technologies

Among all the necessary skills for a successful future accountant, agility is perhaps the most critical. Agility is about how flexible you are for a new organization, a process, or even a new change. Embracing agility means considering learning as a continuous process throughout our career. It would be best to remind yourself that the more you learn, the better you adapt to this evolving world. When you are agile, you are also more well-prepared for new opportunities. Signing up for digital courses, subscribing to technology newsletters, or simply taking notes on new knowledge when surfing Facebook… the way you learn is unlimited. 

5. Seek opportunities in tech-based companies

Tech-based companies know that technology is the future, a long-term investment. Working with digital technology helps many processes reach greater effectiveness and efficiency and drive you to the greatest results. When applying to tech-based companies, you will have a chance to observe and have hands-on experience in the smartest and most efficient way. You will also have access, be trained, and practice with the most modern software, helping to free employees from daily manual tasks and boring routines. The environment at tech-based companies is also extremely open and creative. This is an effective way to keep yourself innovating every day.

Final thoughts

Digital transformation has significantly changed the way that accounting works. With evolving customer expectations, technology development, stiff competition, and a higher demand for high-quality laborers, future accountants need to constantly learn, innovate and cultivate the most modern technology to stay on top of the game and succeed in the era of technological accounting.

Are you ready to enter the digital accounting journey? Subscribe to the Shoeboxed blog for more inspiring stories about entrepreneurship, staying organized and DIY accounting, and learning the latest digital accounting products. 

Accounting Vs. Bookkeeping: What Are The Differences?

In finance, accounting and bookkeeping go side by side. They both have the same goal, and each requires basic accounting knowledge to work with financial data. While many people may confuse and use these two terms interchangeably, they are in fact different.    

Basically, accounting is the overall process, while bookkeeping is a step within that process. The accounting process involves recording, summarizing, analyzing, consulting, and reporting on a company’s financials. Bookkeeping is the recording step of that process, in which all of the business’s financial transactions (revenue and expenses) are recorded onto a database.

This article will explain how accounting and bookkeeping are not the same by highlighting 10 key differences. Before presenting a table of those differences, the definitions and scope of bookkeeping and accounting will be covered. 

What is bookkeeping?

Bookkeeping is the systematic process of recording and classifying all business transactions that occur while operating a business. All financial activities: sales, purchases, taxes, interest, payroll and other operational expenses, loans, investments are recorded in books of accounts. Bookkeepers post these transactions to the general ledger, which is then used while preparing a balance sheet.

Bookkeeping is an indispensable part of accounting and is primarily focused on tracking day-to-day financial transactions. Its purpose is to gather financial information and make sure that every record is correct, up to date, and complete. As a result, accuracy is critical to this procedure. The complexity of a bookkeeping system depends on the business size and the total number of transactions completed daily, weekly, and monthly.

Bookkeeping tasks

The responsibilities of a bookkeeper will vary depending on the model of your business. Here are some typical tasks for a bookkeeping position:

  • Recording financial transactions
  • Billing for goods sold or services provided to customers
  • Processing accounts receivable and accounts payable
  • Recording receipts 
  • Verifying invoices from suppliers
  • Completing payroll 
  • Maintaining and balancing subsidiaries, general ledgers, and historical accounts
  • Performing bank reconciliation

In short, bookkeeping is integral to the effective day-to-day running of a business. As bookkeepers’ primary responsibilities focus on organizing and recording financial transactions, they lay a solid foundation for accounting analysis. In other words, a business’s performance will go downhill if its bookkeeping system is not working properly. 

Read/check out these articles (from Shoeboxed) to learn more: 

What is accounting?

 Accounting is a broader concept than bookkeeping. Accounting is the process of reviewing, interpreting, and summarizing the financial records provided by the bookkeeping system to issue financial statements. A complete accounting cycle starts from recording business transactions and finishes by publishing financial reports at the end of a fiscal year. 

Accounting is also known as the language of business, as it helps stakeholders grasp the overall of a company’s financial performance. It tells you whether your business is making a profit, the current value of your assets and liabilities, where your money goes, and what changes should be made in the future. 

Accounting tasks 

An essential part of accounting is presenting financial information in the form of multipurpose financial statements (balance sheets, profit or loss statements, cash flow statements, etc.). These reports must adhere to generally accepted accounting principles, known as GAAP or US GAAP.

Below are some of the main tasks for an accountant: 

  • Reviewing and verifying financial data 
  • Analyzing operational costs 
  • Filing income tax returns, conducting tax planning and providing tax advisory services
  • Preparing financial statements
  • Ensuring regulatory compliance  
  • Assisting the business owner in making financial decisions
  • Undertaking financial audits 

It goes without saying that every business, regardless of size, needs accounting. Thanks to thorough accounting practices, managers and external stakeholders can fully understand what’s going on financially within the company, allowing them to make informed, strategic decisions for future growth.     

Read/check out these articles (from Shoeboxed) to learn more: 

Top 10 differences between bookkeeping vs. accounting 

Bookkeeping and accounting sometimes overlap each other, but the following are 10 major differences to help you distinguish between the two:

Bookkeeping Accounting 
Definition Bookkeeping is the activity of recording and categorizing business transactions systematically.   Accounting is the art of analyzing and communicating recorded transactions.   
Purpose Bookkeeping’s purpose is to maintain a proper recording of all financial transactions. Accounting’s purpose is to provide valuable and reliable financial data for stakeholders.
OutcomeBookkeeping provides input for the accounting process.Accounting provides financial statements for critical decision-making.   
Job title Bookkeeper/Bookkeeping clerkAccountant 
Skills Bookkeeping work is clerical; hence, no special knowledge or skills are required.   Accounting requires higher-level skills with a deep understanding of various accounting practices and regulations. 
Preparation of financial statementsThe bookkeeping process does not involve the preparation of the financial statement. Accountants are responsible for preparing financial statements and reports.
Decision making Bookkeeping data is not comprehensive enough for managers to make decisions.Accounting data enables decision-makers to take critical actions.
AnalysisThe bookkeeping process does not require any analysis. Accountants analyze and interpret records provided by bookkeepers.
Qualifications A bookkeeper only needs to be meticulous and knowledgeable about some financial aspects. No financial qualification is required. Accounting has a more complex nature. That’s why an accountant typically must have a bachelor’s degree in accounting or professional qualification such as CPA (Certified Public Accountant)

Salary 
Because of their additional education and certificates, accountants usually get paid higher than bookkeepers. 

Conclusion 

Bookkeeping provides accurate financial data for further analysis and interpretation to be performed by accountants. While bookkeeping and accounting are different, they both help businesses manage and control finance in a logical and systematic way. 

With today’s technology, software can simplify and automate both bookkeeping and accounting processes. Shoeboxed does just that.

Shoeboxed digitizes and extracts important data from receipts, invoices, and other accounting papers in just one click. With a proven, unique human-verified function, Shoeboxed guarantees every document is scanned thoroughly by a team of data experts to verify and make necessary corrections. 

Try Shoeboxed for FREE!  

Real Estate Bookkeeping: A Basic Guide

Many people from different walks of life have strived to buy or invest in properties. However, the real estate industry has witnessed some of the major crises, leaving many people nothing but significant damage to their assets. 

The most destructive one was the collapse of the U.S. housing market due to the financial crisis in 2008. After almost a decade later, when the real estate industry has gradually recovered, and people have started to feel a sense of stability, there comes another wave hitting the industry once again – the Corona pandemic. 

Hence, understanding the driving factors that change the price of real estate is helpful in improving your real estate bookkeeping. You can make better financial analyses and more rational decision-making for your properties. 

Real estate bookkeeping guide 

What can impact the growth of real estate?

Demography

The baby boomers born from 1946 to 1960 have been ending their working careers. The number of people heading to retirement will then go up dramatically. These people tend to sell their houses after that, resulting in an ample supply and lack of demand in the housing industry. The price of your properties might go down eventually.

Moreover, the U.S. will have a smaller workforce, and production will decrease. As a result, fewer people invest in the market, foresaying another financial disaster in the near future.  

Technology

It goes without saying that technology has constantly been growing in recent years. The advancement of blockchain technology has transformed the whole real estate industry. Instead of conducting offline transactions, blockchain has allowed us to trade real estate on digital platforms in many ways. This can lead to a cost down due to eliminating intermediates, saving a lot of dollars, and changing the properties’ price. 

Optimistic forecast by analysts

Analysts place an essential role in shaping investors’ perception of real estate and changing their decision-making. One of the most valuable things we can withdraw from the financial crisis in 2008 is not to always trust the analysts because they also make mistakes. They were confident that investing in mortgages was the best of the best, with nearly no risks involved and high returns. The credit rating agencies also overrated the mortgages with poor credits, making the investors throw loads of their money into the housing market in the U.S. Then, when the housing bubbles popped, not only the investors but the whole economy had to suffer. 

Real estate is a very capital-intensive industry. Every wrong decision would cost you thousands to millions of dollars. Therefore, you must equip yourself with fundamental financial knowledge to predict the changes in real estate, adopt rational thinking, and make a more accurate decision. Let’s start with the basics: bookkeeping. 

What is bookkeeping? 

Bookkeeping is the process of recording all the transactions. In simpler terms, it means that whenever you purchase, sell, borrow or loan something, basically everything monetary, you have to jot down the details, such as the name of the transaction, the date, or the amount of traded money. The products of bookkeeping are financial statements. These statements are then analyzed to understand your financial performance and plan the next moves. 

Let’s look at this example: You have $100,000. You borrow a bank $400,000, and you then buy a $500,000 house. 

How many transactions are there in this example?

The answer is two: transactions between you and the bank and between you and the house-seller. In reality, the trades are more complicated with more accounts that you need to take into more consideration. 

Why do you need efficient real estate bookkeeping? 

Easy reporting to the externals

The creditors (such as banks) or the IRS need to view and get updated about your current net worth and gains from your properties to quantify appropriate interest rates or tax rates. All the financial statements, including the balance sheet, income state, or cash flow statements, demonstrate all the value of your real estate. 

Better Decision-Making

The bookkeeping provides you with organized financial statements, helping you with more straightforward at-a-glance checking. An efficient bookkeeping process can lead to accurate information, assisting you in better analyzing your current net worth and real estate performance. Besides understanding current financial capabilities, bookkeeping makes you review past transactions and figure out what works and what does not. Therefore, you can have better planning for the next moves in the future. 

Tax preparation

You have to pay taxes on your properties based on your financial statements withdrawn from the bookkeeping process. Real estate is taxed at ordinary rates, but fortunately, with deductions.

You need to file a tax return every year, whether you are just an individual or a business owner. Having bookkeeping functioning in place can save you a lot of time and effort. But it is not an easy task for everyone. Millions of business owners have to scramble all-around their offices to track down all the bills and record the transactions. Does it sound familiar to you? If so, don’t worry. You can outsource to a third party to record your expenses. Shoeboxed is a very reliable service, using both A.I. and specialists to track your bills, helping you get rid of paper receipts in your desk drawers. All you need to do is scan your receipts, then you can get access to organized documents containing accurate data for your at-a-glance expense tracking. Moreover, the bills are kept in “digital forms” on the cloud for 3 to 5 years with Shoeboxed, so you don’t have to be afraid of missing paper bills anymore. 

Real estate has become a symbol of one’s affluence and power, especially in the United States. If you get married, the first thing that may come up in your mind is buying an ideal and cozy house where you can raise your kids. And if you are a business owner, investing in real estate is the first step to grow your business. Last but not least, if you are a financial investor, real estate is a good bet, as it can bring you passive income, freeing yourself from exhausting labor hours, and gives you a lot of tax advantages. Prepare yourself with sufficient financial knowledge to make the best out of your investment in those properties.