Worst-case scenario Accounting Error for Businesses

Process automation today is seen as a way to help businesses steer through changing and complex regulatory requirements as well as bolster transparency and trust in the financial results of the company.

Process automation of course is more complex than one might think. It requires skilled people, streamlined processes, and a company culture that encourages stakeholders in the process to admit mistakes and own up to them.

There are several aspects of accounting that can be automated although certain aspects tend to benefit a lot more from process automation such as automating journal entry, automating the reconciliation process, and automating variances.

One of the many benefits of process automation in finance is that it lets you standardize the application of rules across the organization. This means that if there are exceptions to company-wide rules, they can be explained because they were consciously thought out.

You remove the old ways of certain departments being exempted without truly knowing why except a vague explanation of ”it has always been this way”.

The problem of many businesses today is that most still perform manual reconciliations or that their internal culture punishes mistakes done by people that it makes stakeholders think twice about admitting mistakes.

In the ideal world, a company´s financial close process should detect certain problems so they can be immediately fixed. This is why it is crucial to close books fast and on time because a few days of delay because of a need to correct identified errors can erode the trust of the management team especially the CFO.

CFOs and finance managers must have enough time to analyze the results, communicate it publicly, and then reforecast.

However, the reality is that sometimes a company´s close process is not very efficient that they miss out on certain errors. This is then where the auditors come in. If they are good, they should be able to spot these errors and question the process.

When auditors question the process, it will cost the business time and money because backtracking needs to happen and more questions need to be answered.

However, the worst-case scenario for any business would be a case of having a substantive error that manages to get passed the finance department without being detected, through the board, and through the auditors. Then you have a scenario where the market cannot trust your business´ financial results. This will open the floodgates to more problems for the business.

This is why an effective process automation and an effective financial close process must never be taken lightly by any business. It not only has an effect on time and monetary costs for the business, you also put the business reputation on the line.

If you want to learn more about where and how to start an effective process automation for your finance department, read about Epicor Financial Planner on www.dsp.se or email info@dspanel.com to see a free online walk through of Cloud EFP.

 

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