FinanceWhat is Data Extraction in Accounting?

What is Data Extraction in Accounting?

Accounting is one of the most challenging professions regarding work stress and pressure. Trying to keep pace with a steadily increasing flow of data and numbers can be overwhelming. Even the most competent accountants will be burned out from the stress. 

The management of a company’s daily expenses and cash flow, in general, requires 13-14 hours of technical expertise and pressure-handling ability to get the job done. Accountants are expected to stay current on the ever-changing exchange rates and international financial regulations. In addition, they need to manage several spreadsheets and partake in strategic decision-making. 

This is almost superhuman by any estimation. To prevent burnout in your organization’s accounting department, data extraction and analysis should be adopted

Accountants want to go back home to rest, fully confident that their books are completely settled for the day. How does data extraction factor in accounting?

How do Data Extraction and Analysis Apply to Accounting?

This is a form of automating some finance-related tasks. Activities such as data entries, preparation of financial statements, and accounts reconciliation can be automated. Accounting departments can utilize data extraction to streamline the process to ensure it runs seamlessly without much human involvement.

Data extraction is not without its hitches, though. A significant challenge associated with data extraction is that the information you source from multiple locations comes in various formats. In accounting, the information is mostly invoicing. Every department uses a different document format for processing documents in the emails of the legal and accounting departments. 

Several companies use Draftable to compare PDF and word documents and create and process their documents.  

Usually, some people do the grunt work of sifting through several documents and fetching relevant data. This process can take several hours. Thankfully, the whole process is automated and much quicker with data extraction. 

This doesn’t only save the company valuable time in quickly getting the information they need; it also saves the risk of having errors. The less human involvement, the better. Through data extraction, companies can now digitize sifting through information and fetching the information they need. 

The data extraction software also stores this information for future use. This process is especially beneficial for large organizations because they process more documents. 

How Does Data Extraction and Analysis Benefit Accounting?

  • No Room for Errors in Data Entry

You could have a very competent team of accountants and financial experts. However, errors in data entry can stem from factors that are beyond the organization’s control. Issues such as changes in regulations, claims from vendors, and even seemingly insignificant errors can lead to mistakes in data entry

However, there’s no room for mistakes when data entry is automated. 

  • Improved Performance

When data extraction automation is properly executed, it can enhance the efficiency of your organizational workflow. For instance, getting good invoice software can solve your invoice management issues. Check out this invoice parser if you want to automate invoicing in your organization. 

Data extraction can relieve your employees of several office chores which they would rather avoid doing. Not only will these tasks be handled efficiently, but they will also be completed in much less time. 

  • Quick Approvals

While automating the process of extracting information in your organization, you can also take it further. You can arrange for approval on things such as applications for reimbursement or budget approval. Automating approvals alone can save you up to 8 precious work hours weekly. A lot can be done with that. 

Approvals automation can also relieve you of the stress of checking lengthy email threads while monitoring the status of certain requests. 

  • Easier Implementation

Cognitive automation can be adopted for your data extraction process. Unlike some AI systems, it’s user-friendly and easy to implement. Cognitive automation is preprogrammed to automate certain organizational processes. Furthermore, they don’t need much data to create an impact. 

Also, with cognitive automation, you don’t need the services of data scientists or IT specialists to develop intricate models. Cognitive automation is perfect for corporate users, including accountants. It may take some time to set up, but once done, everything else sorts out itself. 

How does Data Extraction Software Reviews Accounts Receivables and Payables?

Accounts Receivables

Data extraction software analyses an organization’s account receivables by;

  • Comparing the current total and individual customer balance in current receivables to previous periods
  • Categorize receivables via credit and debit balances
  • Aging all accounts
  • Performing sales cutoff
  • Scanning account receivables for large items and so on. 

Account Payables

Data extraction software analyses an organization’s account payables by:

  • Comparing invoices to the approved vendor list
  • Scanning payables for large items
  • Classifying vendor balances
  • Performing purchase cutoffs
  • Reviewing for duplicate payments and so on. 

To Sum Up

Aside from the account receivables and payables, your data extraction software can also review your inventory, revenue, general ledger, payroll, etc. Organizations should adopt automated data extraction for enhanced efficiency in their day-to-day activities. 

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