Financial reporting provides financial teams the ability to track, analyze, and report their income. But, when this is done manually, it consumes a whole lot of resources and time. Financial reporting automation can save companies a lot of time and minimize the resources needed, both of which will save you money in the long run. If you plan to automate financial reporting, then this blog is for you. Explore financial reporting automation in detail, understand the need for automated financial reporting, and the benefits of automating financial reporting.
Table of Contents
What is Financial Reporting Automation?
What is financial reporting automation? A simple definition of financial reporting automation goes like this – The use of technology to automate tasks involved in preparing and analyzing financial reports. Financial reporting includes tasks like data entry, data validation, report generation, and compliance checking. Financial reporting automation eliminates the need for manual data entry and manipulation, significantly reducing the risk of errors and enhancing accuracy.
An automated financial reporting system uses software to generate financial reports for your company. Tasks like account reconciliation, monthly close, data entry, preparation of financial statements and management reports, can be automated effectively. Analysis of financial data is key to gaining deeper insights into business performance and enables you to pull together financial reports for forecasting and making informed business decisions.
Common challenges faced by companies with financial reporting include –
- Verifying the financial data
- Gathering and preparing data from disparate systems
- High costs of technology and resources required
- Handling new regulations and external audits
With financial data being key to business analysis and performance, ensuring all reports are fully accurate and streamlined can be overwhelming with manual reporting. As the business grows, the financial reporting process only gets more complex. This is the reason why it is important to improve your financial reporting process early on to avoid any issues further down the line. Financial data is key to getting deeper insights into business performance and enables you to pull together financial reports that help you make informed decisions. However, as companies gather more data, financial reporting can quickly become a headache without the right financial reporting system.
Need to Automate Financial Reporting
Why do you need to automate financial reporting? For starters, automation of financial reporting accelerates the reporting process. Automation of the reporting process enables teams to process huge volumes of data accurately and quickly. Here are other reasons why you need to automate a company’s financial statements –
Standardizes information collection
Manual financial reporting is ridden with inconsistencies due to involvement of human resources. It is difficult to bring about standardization in processing and reporting of finance data in a manual process. Financial reporting automation brings consistency and accuracy into financial reporting. The manner in which information is gathered and reported is standardized by automation. Automated financial reporting software provides templates that enable different sets of financial data to be stored in a consistent structure.
Keeps information and data organized
Having financial data organized is what safeguards the business against inaccurate data or struggling to find the information you need. When you automate reporting, you can build data sets that can be managed through tagging, filters, and other metadata to make it easy to navigate what you need. Automation software also provides reporting templates that can be used across the business. When you automate reporting, you can preserve data integrity by applying permissions to limit who can view or edit sensitive documents.
Automates time consuming tasks
There are several time-consuming tasks in the financial reporting process that are candidates for automation. Data can be automatically consolidated into various groups. Moreover, reporting can be produced at the click of a button with automation.
Collaborates across departments
Financial reporting automation tools help teams across departments to collaborate. When you automate reporting process, you cultivate a shared financial reporting environment that allows users to work simultaneously. A single shared live document created by the automated reporting system, eliminates the need for multiple versions and prevents any miscommunication.
Centralizes final reports
Streamlining the reporting processes is important to avoid wasted time or an overwhelming amount of data. Automation of financial reporting creates a centralized repository for all financial reports. Automation enables teams to store final reports for certain periods in easy-to-find folders, so that teams can easily go and find them when they need a source of information.
Tasks to Automate in Financial Reporting
Financial automation includes various aspects of financial reporting – starting from preparing financial data to enabling decision-making to planning and budgeting. Financial reporting software can handle various types of cash flow and income statements, balance sheets, company performance, and equity statements for shareholders. Here are a few tasks that a company can automate –
Financial statement preparation
This is one of the most time consuming steps in the financial reporting process. It involves gathering financial data from various sources for preparing the financial statement. Preparing financial statements requires the team to gather all relevant financial data. The data is then categorized and organized into a preliminary statement. The draft is reviewed and all data is reconciled before the report is finalized.
Data consolidation
Financial consolidation simply means putting things together. Financial data consolidation involves several complexities and accounting principles. Collecting trial balance, consolidating the data according to specific rules and guidelines, and reporting the results to internal and external stakeholders, are tasks in the data consolidation process.
Regulatory reporting
The task of regulatory reporting involves analysis, management, and submission of regulatory data to relevant authorities to demonstrate compliance with regulatory rules. Efficient regulatory reporting helps financial institutions in identifying and managing risks more efficiently. Automating regulatory reporting makes it easier and effective in identifying risks and managing them efficiently.
Management reporting
Financial reporting is focused on gathering information for external purposes, while management reporting gathers information for internal purposes. Financial management reporting is the process of communicating financial information about the company’s performance. The data presented in the management report helps stakeholders make informed decisions on the financial health of the organization. Automating management reporting saves a lot of time for the finance and accounts team.
Budgeting and forecasting
Budgeting is a detailed, static financial plan that lays out expectations in advance. Forecasting is a dynamic, flexible process for assessing current performance and predicting future potential. Forecasting lets you predict future trends and changes in KPIs. Automating these processes saves a lot of time for the finance team, and also improves the accuracy and consistency of reporting.
Reconciliation
The reconciliation process in finance reporting compares transactions and activity to support documentation. The aim of reconciliation is to resolve any discrepancies that are discovered. Reconciliation in accounting compares two sets of records to check figures that are correct and are in agreement. This could be a labor-intensive process when done manually. Automation accelerates the matching process, and also increases the accuracy of financial reporting.
Benefits of Automating Financial Reporting
With accounting and financial reporting being a key area of focus for organizations, they stand to gain several benefits by automating the finance reporting process. It does not come as a surprise that having a streamlined financial reporting process helps organizations remain competitive in a fast-evolving, increasingly digital business landscape. Let us glance through some of the benefits of finance reporting automation.
Saves time and business costs
One of the main advantages of automating the finance reporting process is reduction of the manual, time-consuming tasks in the reporting process. Automating the repetitive tasks in the finance reporting workflow helps organizations save time and allocate resources more efficiently, which leads to significant cost savings in the long run.
Improves accuracy
Automating the finance reporting process minimizes the risk of human errors and biases. By automating the data intensive steps in financial reporting, you ensure consistency and accuracy of the data across finance reports. Finance reporting automation eliminates human error, which improves reliability of financial data.
Improves process efficiency
Automation of repetitive and data-intensive tasks in the finance reporting workflow allows teams to work more efficiently. When you automate finance reporting, you free up time that was previously spent on manual data entry and reconciliations. This time can be used by professionals to focus on value-added activities such as, data analysis, strategising, and providing insights for business growth.
Enhances data integrity
The risk of data inconsistencies in finance and accounting is very high when manual reporting is followed. With automated processes, this risk is mitigated by data validation checks that are performed in real-time. Financial reporting automation improves the accuracy and integrity of financial information, which helps the finance team maintain high data quality and make data-driven decisions.
Improves compliance
Financial reporting automation helps organizations enforce standardized processes and internal controls, which in turn ensures adherence to regulatory compliance. Automation of the financial reporting process ensures consistency, accuracy, and transparency of financial data. Standardization of financial data is vital for meeting regulatory requirements and practicing stringent governance practices.
Accelerates decision making
Organization heads and managers require faster and deeper insights into the financial health of the organization for making important business decisions. Automated financial reporting can provide real-time insights and analytics into financial data by gathering data from disparate sources and consolidating it into a central database. Key stakeholders are presented with real-time financial information in a format that helps spot trends or patterns easily. Automated financial reports provide insights that impact strategic planning and business outcomes.
Choosing the Right Tool for Reporting Automation
How to choose the right tool for reporting automation? You need to consider the following point before you choose the tool for automating your financial reporting process.
Ease of use
Creating the automated reporting workflow must be easy and quick with the automation tool. A tool that involves lengthy and complex coding is only going to complicate the workflow creation process. A no code workflow automation tool like Cflow simplifies financial reporting automation by enabling even citizen developers to create workflows with the visual workflow builder.
Reports and analytics
The tool must provide reporting and analytics features that provide real-time insights into financial data. The built-in analytics and visualization capabilities provide users insights from financial data in a visually appealing format.
Data integration
The automation tool must provide data integration capabilities that enable teams to gather and integrate data from multiple sources such as, ERP systems, spreadsheets, and databases. The gathered data must be presented in an easily accessible and readable format.
Standardization of data
The data gathered by the financial reporting system must be automatically transformed and standardized to ensure consistency across different systems and formats.
Report generation
The tool must help in the creation of customized, actionable financial reports, based on predefined templates and formats.
Data security and compliance
The automation tool must provide robust security measures for protection of sensitive financial data and compliance with data privacy regulations.
In addition to the above features, the pricing of the tool must also be considered while making the choice. The features provided by the tool must be worth the investment.
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Best Practices in Financial Reporting Automation
Adoption of financial reporting automation can be made easier by following these best practices.
Plan for the workflow before implementation
The mark of good automation software is that it should be customizable and scalable. This enables companies to evaluate its automation requirements and decide whether the software should be used to completely revamp its accounting workflow or automate a part of the workflow. Having a clear plan of how to go about the automation is important for successful automation.
Clarify the technical requirements
IT staff and accounting employees play a crucial role in the implementation of the automation solution. Their availability must be ascertained beforehand so that they assist on technical aspects of the implementation and ensure full compatibility and accuracy.
Plan a test run
Financial reports are essential for stakeholders in making decisions and for ensuring compliance with regulations and policies. Doing a test run with the automation software is necessary to ensure that everything is working properly before switching from the previous reporting method.
Maintain general accounting standards
Finance and accounting teams need to adhere to accounting standards even when automating financial reporting. These standards vary according to the size and location of the company. Companies in the US need to adhere to GAAP (Generally Accepted Accounting Principles) procedures and guidelines that are outlined by the FASB (Financial Accounting Standards Board). These standards ensure that financial information reported to regulators and investors is reliable, accurate, and consistent.
Verify data
Although automation eliminates the majority of the manual entry work, it is important to ensure that the data being collected is accurate. The data fed into the automated system needs to be verified to get accurate reports.
Foster collaboration
Overhauling the finances of any company is the responsibility of multiple departments. Tasks like training employees on the new software or ensuring that everyone is familiar with expense policies, require collaboration across 2 or more departments. When teams work collaboratively, then they work towards a common financial goal.
Create engaging presentation
The end product of financial reporting automation must be an easy-to-understand or interpret report from which stakeholders can derive useful insights. Including visual elements in the presentation and tailoring the report as per the target audience is a good way to create an engaging presentation.
How Cflow helps Automate Financial Reporting Automation
The success of financial reporting automation relies heavily on the financial reporting system you adopt. No code workflow automation tools like Cflow give businesses the advantage of customizing workflows as per their unique business requirements. Here are the features of Cflow that make it the best automation tool for the financial reporting process.
Visual workflow creation
Creating workflows is a breeze with the visual workflow builder in Cflow. The drag-and-drop form builder lets you create automated workflows for just about any business process.
Alerts and notifications
Tasks and requests are automatically routed to the right person. Alerts and notifications are automatically sent to the reviewers/approvers so that they are aware of the tasks pending at their end, and attend to them in a timely manner.
Reports and analytics
All the data relating to the workflow is presented in an easily readable and understandable format in the form of real-time reports and analytics.
Secure data
Sensitive financial information is safe with best-in-class encryption for your data.
Conclusion
Financial reporting automation helps you derive useful, real-time insights from your finance data. Choose the right tool to automate your financial reporting process. Sign up for a free demo of Cflow to see why it is the right solution for your business.
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The post Understanding the What, Why, and How of Financial Reporting Automation appeared first on Cflow.