[IMGCAP(1)]Automation is the best friend of productivity. Yet there is only so much automation in many finance and accounting organizations and, therefore, only so much productivity.
Too many accountants are still bogged down in the trenches using spreadsheets to accomplish complex accounting and finance tasks. The various processes involved in closing the books, reconciling intercompany transactions and tracking key finance controls are completed the same way they were completed a generation ago: manually.
This is no way to operate a modern finance organization. The enormous amount of time these manual processes consume can be redirected to assist the CFO and the company’s enterprise performance management agenda. In many businesses, the CFO is charged with enhancing business intelligence, developing more accurate forecasts, and tightening internal controls to assure accurate financial reporting and proper compliance. These needs would benefit from the intellectual firepower of finance and accounting, if only accountants had the time to provide it.
Here are five acute problems dogging finance and accounting, preventing accountants from doing more purposeful work for the office of finance:
1. Account Reconciliations. It is not uncommon for a large, multinational organization to produce a general ledger comprising 100,000 balance sheet accounts. While ERP systems can tally these accounts into a total, they do not provide the granular level of detail needed by CFOs for business intelligence and performance management purposes. Hundreds of accountants often have to evaluate tens of thousands of spreadsheets, an effort challenged by the different ways these documents were created and used across the business. Accounts often are added and deleted by individuals who leave no mark. Version control issues and mistakes must be corrected.
2. Journal Entries. Many organizations have multiple ERP systems across their global operations, with hundreds of people manually keying in journal entries. These documents typically are uploaded from the employees’ respective locations. Some documents are scanned and saved in different formats; others are printed. For compliance purposes, the backup documentation is stored—but not in a centralized repository where the data can be easily accessed. Thus, there is no visibility into this information for tracking and verification purposes. From an internal control standpoint, finance and accounting professionals struggle to verify the underlying information. Errors are common, requiring time to correct the slip-ups.
3. Task Management. To manage their tasks, finance and accounting staff often rely on the use of corporate and departmental check lists. Accountants physically compile these lists using spreadsheets to manage their different responsibilities related to internal controls and reporting. Inconsistent manual processes increase the risk of human error, with associated impact on the accuracy of the balance sheet and profit and loss statement. Since tasks towards the financial close often are dependent on colleagues’ input, email or telephone correspondence is undertaken to detect and correct errors. This exercise is challenged by the departure of a colleague from the organization that may not have saved physical records. Finance and accounting departments strain to obtain a single version of the truth, but the prevalence of spreadsheets offer limited visibility into prior actions.
4. Transaction Matching. One of the most pressing responsibilities of finance and accounting is the need to verify the accuracy of thousands of account balances in the general ledger, and then prepare the balance sheet as part of the organization’s financial reports. To ensure the balance sheet is exact, accountants must compare general ledger account balances with the myriad sources of this data, such as bank statements and high-volume transactional data. In many multinational businesses, dozens of accountants must manually sift through thousands of balance sheet accounts across multiple entities’ charts of accounts. Merely matching transactions across the banks is a byzantine endeavor, given the thousands of checks and bank deposits by wire, ACH and/or other payment methods. Reconciling the volume of credit card payments is equally drawn out. Simple omissions are made because accountants are overwhelmed by the manual burdens, resulting in spreadsheet errors and workflow problems.
5. Intercompany Transactions. Few manual finance and accounting processes are as demanding as the need to account for, reconcile, and settle intercompany transactions (dealings between two or more associated entities within an enterprise filing a consolidated tax return or financial statement). Various entities may produce hundreds of thousands of transactions in a wide range of currencies in different ways, using diverse systems that entail dissimilar processes. Since these entities are located across the world, the transactions often are subject to myriad tax treatments. If a company has multiple ERP systems, the risk of disconnected transaction settlements and out-of-balance positions material to the organization’s financial statements is significant. From a reporting standpoint, intercompany transactions are prone to human error, especially for businesses challenged by immense data volumes, non-standard procedures and/or inferior automation.
Performing complex exercises manually on spreadsheets not only absorbs an enormous amount of time, the work is repetitive and tedious. With a war on talent raging, is this any way to treat the skilled individuals peopling finance and accounting?
The tools and technologies are available for modern finance organizations to manage their core accounting and finance processes to the fullest degree of automation possible, especially when it comes to rote clerical tasks. At its core, modern finance embeds the automated analytics, risk mitigation, and deep reporting capabilities across all these processes.
Automation results in greater control and visibility of the data with reduced compliance risk, since employees are no longer using multi-line spreadsheets to complete their duties. But most of all, automating these processes will transform the finance and accounting function by freeing professionals from the enormous amount of time they spend collecting and verifying data, giving them the opportunity to redirect their efforts toward analyzing the data and being much more productive, strategic employees.
Therese Tucker is the founder and CEO of BlackLine.
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