6 DECEMBER 2024 | Accounting

Top 5 Accounting Challenges and How Automation Simplifies Them

Managing accounting for a single business is no small feat—but what about handling multiple clients simultaneously? CPAs face a constant stream of challenges, from balancing cash flow statements to maintaining flawless records, with no room for mistakes. Yet, when errors somehow creep into the books—or when clients bring pre-existing ones to fix—the time spent untangling them manually can be overwhelming.

If late nights and error corrections aren’t your idea of fun, here’s some relief: automation. But what specific challenges can it tackle, and how does it simplify your workload? Let’s explore how the right tools can revolutionize your accounting process!

Key challenges in modern accounting and their solutions

To start, let’s clarify what we’re talking about. Among the many accounting challenges, these stand out:

  • Cash flow management
  • Accounts Payable (AP) and Accounts Receivable (AR) tracking
  • Revenue recognition
  • Tax filing and compliance
  • Payroll calculation

But it’s not that simple, so let’s look at each of them separately, and find out what solutions automated accounting software can offer.

Challenge #1: Cash flow management

The cash flow statement offers CPAs an in-depth look at a company’s financial standing, making it a crucial tool for managing client finances. As a CPA, you need to keep track of where cash is coming from and where it’s going. And preparing it can come with its fair share of challenges:

  1. Right recording: Timing is everything. Recording cash flows too early or too late can distort the financial picture, making it seem stronger or weaker than it actually is.
  2. Non-cash adjustments: Transactions like depreciation or stock options don’t involve actual cash but still impact financial statements. Without accounting for these, the picture isn’t complete.
  3. Foreign currency recording: For clients with international operations, fluctuating exchange rates add complexity to accurate cash flow reporting.

If cash flow isn’t managed properly, the risks can quickly pile up. Picture this: your client spends $10,000 on inventory while waiting days for customer payments to clear. In the meantime, marketing, shipping, and payroll still need to be paid. Without enough cash on hand, late payments, penalties, and delays can snowball, hurting your client’s business and putting you in a tough spot.

Solution

Tracking cash flow can be challenging, especially as the volume of transactions increases. Recording and properly arranging transactions manually can take a significant amount of time, for example, entering a single transaction into the accounting system can take up to 3 minutes of your time. Now imagine dealing with 100 or even 1,000 transactions. The stakes get higher, making automation essential.

With auto data collection and transaction categorization, you won’t need to worry about errors or duplicates. This will let you get real-time reporting and analysis, which enables you to quickly see where the client’s books are in their state, and troubleshoot any potential problems. When automation takes off some of your manual work to do, you can respond almost instantly to any problem that may arise.

It is very likely that a large fraction of your client’s cash inflow and outflow already exists in electronic form in their banking and credit/debit card accounts. Cashflow management tools such as Float, CashAnalytics, PlanGuru, and Scoro offer integrations that not only pull the transaction data automatically from the bank feeds but also send it to popular accounting software products. With the right technology in place, you can focus your energy on delivering the insights and reports that require your expertise.

Challenge #2: Accounts Payable (AP) and Accounts Receivable (AR) tracking

As an accountant, managing your client’s finances means keeping a close eye on Accounts Payable (AP) and Accounts Receivable (AR). After all, no client wants to deal with messy invoices or late payments—it’s up to you to ensure everything runs smoothly.

But of course, both areas are associated with specific challenges that can have an impact on cash flow and day-to-day operations.

Typical Challenges for AP and AR

Accounts Payable (AP)Accounts Receivable (AR)

Invoice creation: Creating invoices manually can lead to mistakes. Inconsistent formats or missing details can slow down the approval process and cause payment delays.

Late payments: When your clients’ customers don’t pay on time, it can create cash flow gaps, making it difficult for them to cover essential expenses.

Data entry mistakes: Manually entering payment data increases the chance of problems like duplicate payments or incorrect amounts, which can throw off the records and impact cash flow.

Tracking issues: Without correct tracking of outstanding invoices, it’s easy to miss follow-ups, resulting in unpaid bills and increased bad debt for your clients.

Fraud risks: Without solid controls in place, AP processes can become vulnerable to fraud, such as unauthorized payments or fake vendors slipping through.

Messy records: Poor record-keeping can create confusion, making it hard to understand which invoices have been paid and which are still pending.

Solution

Automation can take a lot of the stress out of managing Accounts Payable (AP) and Accounts Receivable (AR), making these tasks much easier to handle.

  • For Accounts Receivable (AR): With automation, creating invoices, tracking payments, and following up on overdue accounts won’t be so hard anymore. Invoices can be sent automatically, and payments are matched to the right invoices without you lifting a finger.
  • For Accounts Payable (AP): On the AP side, automation simplifies the entire process. It captures invoice details, matches them to purchase orders, and schedules payments, so everything stays on track and on time.

There is a vast array of tools available to both send and receive payments electronically, so that your AP and AR activities can seamlessly integrate into your clients’ operations. For many of your clients low cost options such as PayPal, Square, or Stripe should suffice for the actual invoicing and payment, while also offering the integration needed with your accounting software.

Challenge #3: Revenue recognition

Revenue recognition can be a tricky part of accounting, and as a CPA, you know how challenging it can be to determine when and how to record revenue accurately. If you’re a CPA working with a subscription-based client, you can’t recognize the full payment upfront—you need to spread the revenue over 12 months to align with the service delivery. If a customer upgrades or cancels mid-term, adjustments are necessary, making the process even more complex without the right tools.

Here are some reasons why it’s one of the accounting challenges for CPAs:

  • Complex transactions: Many clients have transactions with multiple layers, such as bundled products, long-term contracts, or variable pricing. Determining the exact point to recognize revenue in these scenarios often feels like solving a complex puzzle.
  • Changing standards: Updated regulations like ASC 606 and IFRS 15 force businesses to rethink their accounting processes. You need to ensure your clients remain compliant with these evolving standards is critical.
  • Industry-specific nuances: Revenue recognition varies widely across industries. For example, software companies with subscription models follow different practices than construction firms relying on percentage-of-completion methods.

Solution

By automating tasks and following industry standards, the right accounting software can eliminate the headaches associated with revenue recognition and accommodate industry differences. It takes care of complete scenarios (packages, long-term contracts, variable pricing) and won’t make you slip up or spend hours on calculations. What’s more, your client’s data will automatically flow into other automation tools like CRM and ERP software. Tools such as Zenskar and Softrax, allow you to set up the exact rules for how the revenue is recognized, and then automate data flows between your payment systems and accounting software. Many of them also offer additional features to help optimize your clients’ operations such as automated renewal workflows and postprocessing analytics.

Challenge #4: Tax filing and compliance

Tax preparation can feel like a major challenge for accountants, and here’s why:

  1. Complex tax regulations: Tax laws aren’t simple, and they’re always changing. State and federal tax codes keep getting updated in the U.S. It is very important to keep track of changes, like corporate tax rate shifts or deductions. As a CPA, you should know that if a client fails to file their tax return by the deadline, they typically face a penalty of 5% of the unpaid taxes for each month or part of a month that the return is late, up to a maximum of 25%.
  2. Data management issues: Accurate tax filings depend on clean, well-organized data, but that’s easier said than done. A recent report found that 45% of tax professionals say messy data is their biggest frustration. And when the numbers don’t add up, it can lead to incorrect filings, which may result in your clients overpaying taxes.

Solution

Accounting automation takes the stress out of tax filing and compliance. It organizes records for you, saving tons of time. With automated tax tracking and calculations, you can help your clients stay compliant and avoid penalties without breaking a sweat. Imagine preparing for tax season on behalf of your clients. Instead of manually sorting through spreadsheets and reconciling data, the software pulls in their financial information automatically, calculates taxes, identifies potential refunds, and flags any errors. It ensures everything is accurate and compliant with tax regulations, helping you avoid costly mistakes that could affect your clients. With this process automated, you can save valuable time and focus on activities, like strategic tax planning and advising your clients, rather than getting bogged down in tedious manual tasks.

Using tools such as Synder, QuickBooks, Xero, and Wave, you can directly collect organized accounting transactions for importing into the tax software.

Challenge #5: Payroll calculation

Payroll calculations present a significant challenge for CPAs, as they directly impact your clients’ financial accuracy, compliance, and employee satisfaction. Key issues include:

  • Compliance risks: Payroll errors don’t just create headaches—they can result in major financial consequences for your clients. In 2022, businesses in the U.S. paid over $6 billion in back wages due to wage and hour violations. Errors in calculating taxes or withholding the wrong amounts can also rack up penalties and interest charges, putting your clients at risk.
  • Calculating employee wages: Managing payroll involves navigating diverse pay structures, ensuring tax compliance, and tracking employee hours accurately. As an accountant, you have to deal with salaries, hourly wages, benefits, and deductions along with overtime as well as the changes in tax and labor laws to keep your clients compliant.

Solution

Accounting automation software makes payroll calculations so much easier and more efficient. It figures out wages, deducting taxes and benefits, paying or generating pay stubs or direct deposit files based on hours worked or salaries.

What if one of your clients had 20 employees, and every month you wasted hours on payroll — calculating wages, deducting taxes, and making sure they are compliant? It’s slow, tedious, and mistakes can lead to frustrated employees and extra work for you. With automated payroll software, payroll calculation can be done quickly and effortlessly. Calculations, tax deductions, and compliance take minutes, saving you time, cutting out errors, and keeping the client, their employees, and the authorities happy.

Tools such as PatriotSoftware, OnPay, Square Payroll, and JustWorks can not only automate your payroll calculations but also process the employee and tax payments electronically. The transaction data can then be imported into your accounting software.

Conclusion

Accounting involves everything from tracking client expenses and managing cash flow to ensuring compliance with tax regulations and preparing accurate financial reports. Let’s be real: it rarely goes that well.

If you are actively dealing with accounting challenges that keep you up at night - automation is your savior. Automating repetitive tasks saves time, reduces errors, and gives you more time to provide strategic advice to help your clients grow their business. The choice is yours, but why say no to a simplified workflow, fewer errors, and perfectly organized books for your clients?

Author’s Bio

Get more tax clients

Name: Yara Pross

Short Bio: Yara is a content marketing professional at Synder, a top-rated accounting software company backed by YC. With a background in web journalism and two years of focused writing for online businesses, she developed a keen interest in the dynamic nature of ecommerce sales and the complexities of customer relations.

This blog post was contributed by Synder Accounting Automation Software.

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