Financial Reporting Automation: The Top 5 Benefits of Modernizing
How It Works: Financial reporting automation streamlines the process of generating reports, freeing up time for businesses to focus on strategic growth and decision-making.
Automation = Faster Decision-Making: With automated reporting, businesses can quickly access insights, empowering them to make informed decisions that drive growth and enhance overall performance.
Integration Is Easy: Integrating financial reporting automation into your business can be straightforward, helping you harness its benefits efficiently and effectively for a more productive team.
The Morale Effect: Shifting the focus from compiling data to analyzing insights transforms finance work into a more enjoyable and impactful experience for teams.
Financial reporting automation is like having a finance superhero on your team (minus the cape and tights). It lets you automate those time-consuming finance reports so you can focus on the fun stuff — using the insights to grow your business.
In this article, I’ll explain the meaning of financial reporting automation, its benefits, and how you can successfully integrate a real-world superhero into your business.
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What is Financial Reporting Automation?
Financial reporting automation is the use of technology to simplify financial analysis, by automating tasks like data entry, data validation, report generation, and compliance checking.
It can’t eliminate spreadsheets entirely — at least, not yet — but automating these tasks reduces costs, improves efficiency, and maximizes productivity.
The Best Financial Reporting Automation Software
Our team has analyzed the options on the market and ranked them, according to how well they make your life easier. Here are our top picks:
Which Financial Reporting Tasks Can Be Automated?
You can automate common financial reporting tasks like:
- Financial statement preparation: This includes quarterly and annual financial statements, income statements, cash flow statements, balance sheets, etc.
- Data consolidation: It can automatically compile, combine, and store data from different sources in a single location.
- Regulatory reporting: It can automate the collection and submission of financial data to regulatory authorities like the Internal Revenue Service (IRS).
- Management reporting: It can generate financial reports that management can use to drive strategic decision-making and monitor KPIs in real time.
- Bank reconciliations: It can automatically match transactions from multiple bank accounts with accounting records.
- Budgeting and forecasting: It can offer insights into preparing your budgets and predict revenue based on historical and real-time data.
- Currency translations: It allows businesses with international operations to reconcile all their transactions in a single currency type (usually the local one).
Top 5 Benefits of Financial Reporting Automation
Let’s get more granular; here are the top 5 benefits of investing in financial automation software:
1. Better Data Integrity
In 2017, Gartner reported poor data quality costs companies around $15 million yearly. It leads to inaccurate data analysis, bad decision-making, and data migration issues. Unfortunately for us, human error is the leading cause of inaccurate data.
Financial reporting automation automatically consolidates data from multiple data sources, verifying inconsistencies in real-time, while taking human error out of the equation.
2. Faster Decision-Making
Financial reporting automation helps speed up your decision-making workflows and, fun fact, organizations with effective decision-making processes are twice as likely to deliver better financial results. It can:
- Generate financial reports and balance sheets, leaving financial experts more time for analysis and forecasting.
- Give you real-time access to the data.
- Identify trends and patterns.
3. Reduced Operating Expenses
75% of organizations spend $1 creating financial reports, for every $1,000 in revenue. So, if your business is earning $1,000,000 in revenue, you’re looking at $1,000 spent just on reports — a significant amount for small businesses. It includes the cost of personnel, overhead, and software used to create these reports.
Automating financial report generation allows businesses to cut down on reporting costs significantly by:
- Redeploying employees to important revenue-generating tasks.
- Streamlining report generation, creating more efficient reporting processes.
These small measures can eventually save you a ton on operational costs, especially if you’re regularly generating financial reports.
4. Transparency Between Departments
Most businesses have multiple verticals and departments — each one carrying out independent transactions that align with their function. To get a complete picture of your business’s financial health, you’ll need to compile all this information in a single location, regularly.
Automation makes it easier to aggregate the data in one place, giving you a holistic view of your business’s financial health and each department’s contribution. This way, managers get access to accurate insights, helping them make informed business decisions (and brag about being the best).
5. Audit Trails
The IRS has strict regulations when it comes to maintaining financial data. Not adhering to these can result in heavy fines and legal repercussions, and ironically, business audits. Financial reporting automation creates clear audit trails, making it easier to trace transactions.
Auditors can easily go back and find specific transactions to sort out discrepancies. It also organizes your financial documents in the event that you need to prove your company is meeting regulatory requirements.
How Financial Reporting Automation Works
Now that we’ve looked at why you should invest in financial automation, let’s understand how the magic happens:
1. Choosing the Software
The best financial reporting software should offer basic reports like balance sheets, P&L statements, cash flow statements, etc. Additionally, it should also offer industry- and business-specific reports that align with your business.
For example, ecommerce businesses should be aware of costs related to their website, inventory, and customer acquisition, while realtors measure brokerage fees, commissions, and average home prices.
To find the right financial automation software that aligns with your business goals and budget, start by:
- Identifying key reports needed (as well as any other specific industry requirements).
- Using that information to define your selection criteria, like required reporting formats, budget, data security, visualization options, and customer service capabilities.
- Create a list of contenders, then sign up for a product demo or trial to see the software in action.
2. Install the Software
I know I’m being Captain Obvious here. But it’s worth mentioning; 70% of software projects fail because of poor planning during implementation. Having an established implementation plan ensures the project is completed within budget by minimizing mistakes and delays during installation.
The software provider will usually provide documentation detailing how to install and use the financial automation software, but they can also give you an estimate of resource allocation needs and timelines (plus, a customer support rep to help).
3. Conduct a Pilot Test
Before moving to the new system completely, run it alongside your existing systems and processes. This will help you identify any potential problems without disrupting regular operations. You’ll need to gather data at two levels:
- Technical: You can gather information on system performance to ensure data accuracy, understand server load requirements, and calculate bandwidth costs.
- Operational: You can collect feedback from your employees on the software’s impact on operational efficiency, productivity, and quality of insights.
Use the data and feedback from the pilot test to optimize your financial reporting operations, and don’t be afraid to change things up to suit your new system — remember, some change is good.
Best Practices When Implementing Financial Reporting Automation
Here are a few things to keep in mind to get the most out of your financial reporting system:
Involve Key Stakeholders
This includes everyone benefitting from the software. You can divide them into three groups:
- Project implementation team: This includes your IT team, software providers, and any other technical staff involved in implementing the software.
- Management team: This includes your CEOs, CFOs, board members, and managers who can enlighten you on the business’s need for financial reporting automation.
- End users: This includes people using the software daily like your financial team, employees, etc.
Use High-Quality Financial Information
Your financial automation software needs high-quality data to provide accurate and reliable reports. It’s a good idea to audit your data before implementing the software. This way, you can ensure consistent data quality during migration and reporting.
Introduce the Software at the Right Time
The best time to introduce financial reporting automation is at the start of the financial year. This way, you can migrate all your historical data to the new system. If you start using the software from the middle of the financial year, you risk inaccurate insights, data migration issues, and system downtimes.
Check Native Integrations
Ensure the software integrates seamlessly with your existing financial tools (i.e. accounting software, POS system, ERP, etc.). This way, you can guarantee seamless data transfer between systems and departments.
Train Your Employees
Training sessions educate your employees on the automated financial reporting software. It’ll make the change less intimidating, while ensuring employee productivity and satisfaction don’t drop. During training, cover all key aspects (including data security and compliance).
Subscribe For More Financial System Insights
Automated financial reporting is a superpower that helps the entire business. Finance teams can generate accurate and reliable reports within minutes, while management gets to make faster decisions with better data.
If you’re already using financial reporting automation, you may want to explore how natural language processing can take your reports to the next level.
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