Financial Reporting Automation: Benefits & Best Practices

financial reporting automation

Financial reporting is crucial for any company to track, analyze and report their income — but doing it manually can take a lot of time and resources. Automation can save you valuable time and reduce the resources needed to take care of financial reporting, both of which will save you money in the long run.

If you’re considering making the switch to financial reporting automation, read on to learn about the benefits it has and some of our suggestions for best practices.

What Is Financial Reporting Automation?

Financial reporting automation uses software to generate financial reports for your company. Solutions are available that offer automated account reconciliation, monthly close and data entry, as well as the preparation of financial statements and management reports. 

Automation is becoming common across all industries, with 70 percent of businesses at least piloting automation projects, according to McKinsey. But it has become extremely popular amongst those who work in finance. In fact, respondents in financial services were the most likely to note that their organizations are scaling automation technology across the company.

So, let’s look at why so many financial players are turning to automation. 

What Are the Benefits of Automating Financial Reporting?

Automating financial reporting can improve productivity, reduce errors and save your company time and money. Plus, according to Deloitte, financial reporting automation can perform in-depth analyses, speed up the process and simplify financial analytics. 

Here are some more of the benefits of automating financial reporting.

Quick Approvals

Approvals are necessary at many levels throughout the reporting process, but can often create bottlenecks if the person who needs to sign off is unavailable or if a message is missed. Look for software that has approval workflows incorporated into the reporting process. In certain instances, you may be able to set up a system that automatically approves certain steps or at least sends a push notification to those who need to give approval. This speeds up the process, avoiding back-and-forth emails, phone calls or physically finding a finance manager to ask for their approval.

Higher Efficiency

Automation cuts out a lot of manual work, leaving more time for your company’s finance experts to perform duties like analysis and forecasting. Automated reporting can pull information in from multiple data sources (i.e. Excel or your ERP), saving time on flipping between programs and manually compiling data from multiple places.

Reduced Errors

Financial reporting automation ensures the integrity of your data by eliminating the risk of human error. When members of your finance department are staring at a screen doing data entry for hours, mistakes are inevitably going to happen — and they can be tricky to find and correct.

More Transparency

When your company manages their finance across multiple platforms, it’s crucial to be able to see all data from all sources clearly. Automation makes it easier to aggregate, contrast and compare all data to ensure that reporting is accurate and the best business decisions are made.

Fraud Prevention

Financial reporting automation keeps findings objective and limits the opportunity for human interference. This protects your company’s financial reports from being tampered with by bad actors internally or externally.

Clear Audit Trails

Finally, automation provides a clear audit trail of your financial reporting process. Because everything is tracked and stored within the system, it’s easy to go back and find specific payments or previous reports that can help sort out discrepancies. It also keeps all data on-hand in case it is needed to prove that your company is meeting regulatory requirements.

Key Features for Financial Reporting Automation

Let’s take a look at some of the available features to consider when switching to automated financial reporting.

Easy to Understand

The structure of the reports should be immediately understandable, laying out data clearly. Navigating the software itself should also be as easy as possible to decipher. A dashboard view that allows users to emphasize what is most important to them is also useful — every business focuses on different metrics, so being able to customize what gets highlighted in reports can save lots of time and confusion. Plus, those outside the finance department (like executives) can get a good understanding of the company’s financial health at a glance.

Interactive Interface

Choosing software that is functional, easy-to-use and visually appealing is important in order to ensure that everyone in the finance department not only adopts the new system, but becomes experts at it. A platform that runs smoothly and works intuitively can go a long way in helping your team transition to automation. 

Actionable Insights

The software you select should have advanced analytic features to assist you in turning data into actionable insights — whether that means cutting back spend in certain areas or further investing in growth.

Support

While you should opt for a software solution that is easily implemented and adopted by employees, you do want to have access to support when needed. Reading online reviews can be helpful to determine how responsive, available and knowledgeable a particular software’s support team is.

Implementing Tools for Automation of Financial Reporting

Before launching the new system, you’ll need to take a few steps to prepare and make the most out of your financial reporting automation tool.

First, meet with your finance team and determine what is currently working well, what needs to be improved and exactly which manual functions need to be automated. Gather input from everyone involved in the financial reporting process, as well as those who will be expected to use the new automated system.

Then, draft a workflow that meets your team’s needs. Where are approvals needed throughout the process? Where is human collaboration beneficial? Once you’ve worked out an outline for a workflow, test it out in practice and iron out any kinks along the way.

Finally, consider what integrations you require, as well as any that would be nice to have. You will definitely want to ensure that your new software integrates smoothly with your accounting software or ERP (i.e. NetSuite, Sage Intacct, QuickBooks). Then, you can look at options such as integrating financial automation with your team’s existing productivity and communication apps.

What Financial Reporting Can You Automate?

Finance teams know how many different reports need to be prepared throughout a month, quarter or year. To take the load off of your finance experts, software is available that automates a wide range of reports and tasks.

Here are a few of the most common types of financial reports that are automated:

  • Quarterly and annual financial statements
  • Financial statement analysis
  • Bank reconciliations
  • Balance sheet
  • Income statements
  • Cash flow statements
  • Shareholder equity statements

Keep in mind that many of these statements work in conjunction with others. For example, by automating income statements and shareholder equity statements, your balance sheet is already nearly completely automated. Similarly, if you start by automating smaller processes like expense reports, the income statement becomes largely automated.

Best Practices for Automation of Financial Reporting

Now, let’s look at some of the best practices for automating financial reporting to ensure that your company meets all regulatory and industry standards.

General Accounting Standards

It’s important to maintain the appropriate accounting standards even when automating financial reporting. U.S. companies should comply with GAAP (Generally Accepted Accounting Principles) procedures and guidelines, which are outlined by the Financial Accounting Standards Board  (FASB). These principles are in place to help ensure that financial information reported to investors and regulators is accurate, reliable and consistent.

Review Data

While automation eliminates lots of manual data entry work, it’s important that the data being collected is accurate. This means ensuring that information fed into financial reporting automation software (i.e. transactions, receipts, invoices) is verified before reports are generated.

Encourage Collaboration

Overhauling the finances of any company involved efforts from every department. Whether that’s training employees on new software or ensuring that everyone is familiar with expense policies, all parts of the business should be working towards a common financial goal.

Engaging Presentation

Automating financial reporting serves little purpose if the end results are difficult to understand or interpret. So, take advantage of data visualizations like charts and graphs to make findings and trends immediately clear. Tailor reports to the audience, as well — investors may be focused on different information than executives, employees or potential customers.

Final Thoughts

Finance departments at companies across all industries are moving towards automation if not already actively engaging with it. 

Financial reporting automation allows teams to increase productivity, reduce errors and save valuable time — leaving finance experts available to focus on important work like analysis and forecasting.

By preparing appropriately and following best practices, finance teams at any company should find financial reporting automation to be an indispensable tool.

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