Financial reporting automation has become increasingly popular in the finance industry as more and more companies reap the benefits of this new tech. Through automation, companies are improving productivity and reducing errors, saving both time and money.
Let's take a closer look at the benefits and best practices of financial reporting automation.
What is financial reporting automation?
Financial reporting automation uses software to generate financial reports—pure and simple—but this is only the beginning. Financial automation platforms can also streamline expense reporting, account reconciliation, monthly close, data entry, financial statements, and the preparation of management reports.
By automating these tasks, companies can improve the overall efficiency of their financial reporting process.
What financial reporting tasks can you automate?
Some of the common financial reports that can be automated include quarterly and annual financial statements, financial statement analysis, bank reconciliations, balance sheets, income statements, cash flow statements, shareholder equity statements, and much more.
Benefits of automating financial reports
By automating financial reporting processes, companies can save valuable time and reduce the risk of errors in their financial data. Here are six specific ways companies today are benefitting from financial automation in reporting and beyond.
1. Quick approvals
Automation allows for faster approvals throughout the reporting process. By adding rules, roles, steps, and approval processes, finance teams can make sure that the automation software matches it to the right workflow and directs it to the right people for approval automatically.
Because each employee has their own controlled access to the application, users can even approve invoices on their mobile phone.
If there's an issue, team members can ask or answer questions by adding messages to any transaction in the app. They can also send reminders to request timely approvals and meet payment cycles.
2. Higher efficiency
By reducing manual work, automation enables finance experts to spend more time on strategic work like analysis and forecasting, while spending less time on mundane, repetitive tasks.
Instead of hunting for missing invoices or digging through long email chains, teams can search for them digitally and find them in a snap. Because messaging is included with each transaction, it's all right there, saved in one convenient place.
Financial automation software helps finance and accounting teams automate invoice receiving, data entry, approval routing, payments—and, yes, financial reports—with a few clicks.
3. Reduced errors
Automation helps to ensure data integrity and minimizes the risk of human error in financial reporting. Today's AI and machine intelligence can read and enter invoice data for review, flag potential issues like duplicate purchase orders, and sync with popular accounting software options.
Finance teams should be wary of "automation" software that includes several manual steps along the way. Even copying and pasting data, when performed by hand, can lead to errors. True financial automation handles these steps automatically, without the need for human intervention.
4. More transparency
Financial automation software like BILL Accounts Payable can add transparency to financial reporting by providing detailed audit trails. Every transaction and change made within the system is recorded and can easily be traced back to its source.
Automation software can also generate customizable reports that provide a clear overview of a company's financial health. These reports can be tailored to specific requirements and shared with stakeholders, such as investors, board members, and regulatory authorities.
According to Cassidy Jakovickas, president and CEO of MBS Accountancy, "BILL’s automation capabilities provide much-needed transparency, acting like a third party by keeping an eye on things, sending reminders, and moving the approval process forward to the next reviewer. Each step is tracked and audit-ready as every payment is looked at before it leaves."
5. Fraud prevention
Manual accounts payable (AP) systems tend to have a high risk of fraud. Invoices and documents that are printed out on paper are relatively easy to forge or alter—including paper checks.
Using a financial reporting automation tool moves those processes into the digital realm, where automated approval systems, controls, and audit trails make fraud much more difficult. Automated financial reporting also limits the opportunity for human interference, further enhancing security.
6. Improved controls
Financial reporting software can help increase AP controls by implementing custom user roles and enhanced approval policies. Ideally, no one should approve their own payments. By automating the approval process and setting unique roles and permissions for each system user, financial automation software helps regulate separation of duties.
Automation software can:
- apply custom approval criteria
- route approvals by vendor, location, department, general ledger account, and more
- safeguard key actions by requiring a second admin approval
Best practices for implementing automated financial reporting
Here are some best practices to consider when implementing financial reporting automation in your organization.
- Key financial metrics: Take stock of your financial data needs and make sure your software includes the financial analytics you're looking for.
- General accounting standards: Ensure compliance with GAAP procedures and guidelines to maintain accurate and reliable financial information.
- Review financial data: Verify the accuracy of data fed into the automation software to make sure the generated reports are correct.
- Encourage collaboration: Involve all departments in the transition to automation to ensure that everyone is aligned on the team's financial goals.
- Clear presentation: Use data visualizations to make reports easy to understand and tailor them to suit different audiences.
How to choose the best tool for automating financial reporting
In evaluating financial reporting automation tools, finance teams sometimes forget to consider external stakeholders. As a result, they end up having to run reports over and over again, fulfilling requests for various members of the executive team. Make sure the software you choose will let you give multiple stakeholders the access they need—with the right permissions—so they can access reports themselves.
At Merchant e-Solutions, the team uses roles and permissions to offer easy view access for things like profit and loss (P&L) statements and expense reports. Better yet, because BILL syncs with their accounting software, feeding data to the general ledger, executives can track expenses in monthly reporting and ensure that those expenses agree with their budget and forecast.
For accounting teams with external clients, this ability to view reports can be even more important.
According to the team at Consultance Accounting, "We’ve found that BILL’s reporting capabilities are particularly helpful for our nonprofit clients, whose budgets and annual planning often require extensive board oversight and approval. These nonprofit leaders need data and numbers in order to effectively communicate their own ideas and visions to internal and external stakeholders who might not be in the weeds of daily operations. Ultimately, BILL’s easy real-time data and visualization provides our teams and our clients with the advice they need to make informed decisions."
Ready to implement automation for financial reporting?
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