7 Common Accounting Errors and How Automation Can Save the Day

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This blog identifies common accounting errors and how automation can mitigate those errors and reconcile your accounting books accurately.

CFOs in your organization make financial decisions based on the accuracy and consistency of their ledgers. If the decision is made on inaccurate financial statements, it would wreak havoc in your organization. Tracking back the mistakes would lead to erroneous manual data entry, which your finance teams and accountants will attempt to address. This requires correcting both debit and credit entries to keep your books consistent. However, human error is inevitable with the manual handling of accounting and finance operations. For an accounting system to ensure the accuracy of your ledger, automation can help.

What are accounting errors?

Error in typing, omissions, or similar anomalies are referred to as mistakes and inaccuracies in the accounting system. There are many reasons for those errors, including manual data entry, technological glitches, or incorrect implementation of accounting standards.

The accounting and finance operations encompass accounts receivable (AR) and accounts payable (AP). AP involves making payments to suppliers, while AR consists of collecting from customers. If there is a mistake, you might offend your customer or hurt your cash flow by sending a wrong invoice to your customer or billing inaccurately. These accounting errors lead to erroneous financial statements for your CFOs and CEOs to make strategic decisions.

7 Common Accounting Errors in an Organization

When the financial statements in a company are inaccurate or not balanced, there are certainly errors. Those errors can be slight mistakes or blunders due to the snowballing of more minor calculations that often lead to greater miscalculations. Your accounting teams need more resources and time to repair those issues to balance their transactions. Following are some common kinds of accounting errors you may face.

1. Subsidiary Entries

If a transaction is entered incorrectly, it is referred to as a subsidiary entry. It is challenging to find such a mistake because it appears when reconciling your bank statement. The reason for this type of error is usually a typo which can also lead to a disputed invoice. To mitigate this issue, your finance teams need to focus on invoice dispute management, else it would lead to payment delays. For example, entering $2500 instead of $25000 is a small mistake but can lead to a blunder due to the snowballing effect.  

2. Rounding Errors

This type of accounting error seems to be forgiving, but this can lead to a financial disaster due to snowballing effect of errors. Accountants often make this error while making a manual entry to record a transaction or invoice. Using an Excel spreadsheet to manage entries is another reason for this error. For example, rounding off a number from 2.9018 to 3 or entering 43.56 instead of 43.566.

3. Error of Commission

This type of error appears when a mistake is made due to an action that shouldn’t have been performed. The error of commission refers to an incorrect transaction, such as entering the wrong number or account code, which may lead to inaccurate financial records. For example, an error of commission in accounting would be if a company's accountant accidentally recorded a payment of $5,000 to the wrong vendor.

4. Transposition Errors

Another common type of error is transposition error, which happens when two digits are reversed. This mistake often occurs when making a new entry to record transactions. Though it appears a simple error, it can lead to significant financial losses. For instance, instead of making an entry for $2580, the accountant enters $2508, changing the entry values.

5. Error of Principle

In finance and accounting systems, compliance with generally accepted accounting principles (GAAP) is essential. It typically involves the use of an inappropriate accounting method or the misapplication of accounting rules. This type of error affects the fundamental accounting treatment of a transaction. For example, purchasing machinery of $10,000 with a helpful value of 5 years should be depreciated over time. Recording the entire matter as an expense in the first year will be against the GAAP rules, making it an error of principle.

6. Entry Reversal

Manual data entry requires to make both debit and credit entries. An entry reversal in accounting is a transaction made to undo or reverse a prior accounting entry. However, entering the entry as credit instead of debit, or vice versa, causes an entry reversal error. For example, if a company accidentally recorded a sales transaction twice in its books, it would need to reverse one of those entries to eliminate the duplication and correct the error.

7. Error of Omission

This is another error that finance teams and businesses experience in their finance department where the transaction isn’t recorded or documented. By making this mistake, your accounting books will be inconsistent because of overlooked entries. For instance, you hire a technician to manage your server issue and forget to enter the $500 amount as a service payment.

Mitigating Accounting Errors with Automation Solution

In the B2B landscape, accounts receivable automation software is the need of the hour because it keeps your accounting books consistent, eliminating manual data entry and improving the efficiency of your operations. Following are the accounts receivable automation benefits you can achieve, and also improve the accuracy of your financial operations.

1. Detecting Errors in Real-time

Some automation solutions are AI-powered, checking your data in real time and notifying you with alerts to take action. It establishes regular patterns and detects variances that may suggest an inconsistency in your books.

2. AI-powered Alerts for Potential Anomalies

Using an AI-powered automation solution, you get alerts for potential errors and omissions to keep your books consistent. By creating patterns and identifying deviations, you can determine mistakes and take steps to keep them consistent.

3. Higher Visibility of Transactions

With higher traceability of your accounting automation solution, you can get visibility into your invoices and payments, allowing you to track potential issues before they affect your cash flow. This power of automation ensures the consistency of your ledger.

4. Improved Audits and Compliance

With all the information available in one place, auditors can access and find the correct information to ensure the accuracy of financial statements. It enables organizations to achieve greater accuracy and efficiency in auditing and compliance efforts.

5. Better Collaboration of Accounting Teams and Defined Workflows

When an anomaly is identified and necessitates further investigation and correction, you can initiate a task within a structured workflow process. This streamlined workflow process helps track and manage corrective actions more effectively, ultimately improving operational efficiency and transparency.


It is common in accounting and finance to make errors, often due to manual data entry. Though there are a variety of mistakes that you can experience, there is a solution to mitigate those errors. An accounting automation solution helps address those issues, keeping your books consistent. This also improves your cash flow by collaborating with team and automating workflows. When your cash flow is managed with accuracy, and your books are consistent, this makes sure your organization is moving in the right direction.


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