Financial reports are extremely important for internal decision-making and from a compliance perspective. Reports help teams make informed decisions about business opportunities, evaluate financial performance and chart a course forward. Yet the financial reporting process is generally thought of as complex and time-consuming. If you are wondering how to improve financial reporting processes, discover how automated financial reporting not only saves time, but also optimizes the reporting process.
In a typical scenario, finance team members spend up to 75% of their time obtaining and organizing finance data, so they can run reports. As little as 25% of time is spent analyzing the data, drawing conclusions about financial health and making informed decisions.
Automating financial reports streamlines the process, saving your finance team time and effort. It also improves the accuracy of key reports by eliminating the potential for human error. More accurate reports give a better picture of the overall financial health of a company.
Let's look at a few of the major benefits of automating the reporting process.
Benefits of Automating Financial Reporting
Automating financial reporting does require an initial investment of time to set everything up. Once the reporting system is running, benefits start to accrue.
Major benefits of automating these processes include:
- Improved data accuracy: Automating data collecting and processing using AI ensures that no key piece of financial data falls through the cracks when preparing a financial statement. Automated workflows ensure that every relevant piece of information is collected, organized and ready for financial analysis. This is an important step in making sure that financial information conforms to standards, such as the international financial reporting standard.
- Fewer errors: Accurate financial reporting is a common concern of many executives. Because AI follows predefined rules and processes, it eliminates the potential for human error. This can lead to reports that have greater accuracy. Built-in error checks in the system add a fail-safe.
- Time saved: Automating workflows saves everyone time when preparing income statements and financial statements.
- Less last-minute work: Companies must juggle multiple reporting deadlines and different types of financial statements. Financial automation can reduce the workload, leading to less last-minute work. This can also help avoid late filing and the fines and penalties associated with missed deadlines.
Choosing the Best Software for Financial Reporting
There are clear benefits to implementing the right financial reporting software — but what criteria should be considered when making that choice? Start by identifying the main software used within your industry, then comparing key features, such as:
- Security and encryption
- Collaborative features
- User account permissions, like access control
Once you understand the basic features of commonly used tools, it's time to see which software solutions stand out for financial reporting automation.
Which software integrates with apps and programs you use? What type of validation or error checking is included?
DFIN’s financial reporting software integrates with commonly used programs like Excel. It includes built-in validation and error checking, backed by AI. From the user experience perspective, navigation is intuitive. Taken together, these features work to ensure efficiency and save time.
Ensuring Compliance with Financial Reporting Standards
With finance automation, it is critical to make sure that software complies with automation standards and industry regulations.
With AI-powered software, the AI can be trained on the regulations used within the industry, such as SEC regulations.
Because the AI assistant is trained in existing regulations, it is always up to date with regulations.
This makes sure that every income statement and cash flow statement meets compliance standards.
Internal policies and safeguards can complement the right software and ensure compliance. Within your organization:
- Hold a compliance audit to understand where your organization currently excels and where improvements can be made
- Based on the results of the audit, overhaul workflows and policies with an eye toward improving compliance
- Train all employees in the new procedures, explaining why these are necessary from a regulatory perspective
- Adopt strong language in employee handbooks related to internal controls, ethics and regulatory compliance
- Keep up to date with regulations and accounting standards impacting your industry, such as SEC and FINRA regulations within the US
- Set up a compliance committee who can address any potential issues and model the corporate culture
- Develop internal calendars or milestones, so no important filing dates are missed
Implementing Internal Controls in Finance
Internal controls in finance don't just ensure accuracy of a financial report, they provide peace of mind for individuals and companies. With these important aspects in mind, let's take a closer look at some of the key internal controls in finance and their role in the financial reporting process.
Internal controls to implement in your organization include:
- Hold an internal review or audit of processes — As mentioned earlier, internal reviews show potential vulnerabilities or weaknesses that could impact financial reporting. By addressing these weaknesses before something goes wrong, companies can keep their financial reporting process compliant.
- Segregate jobs/roles — Segregating duties by employee job or role helps to ensure that no one person has control over the entire reporting process. Not only does this reduce the risk of errors, but also it decreases the likelihood of unfinished reporting backing up because only one person has the responsibility to run them.
- Use access controls for roles — Access controls make sure that employees only have access to the tools and features they need to fulfill key tasks associated with their role. This helps to prevent intentional misuse of reporting software as well as unintentional misuse, such as errors.
- Use internal monitoring to deter — Fraud prevention mechanisms, like internal monitoring and access controls, prevent team members from manipulating or distorting data. These measures protect the integrity of the data and ensure compliance with all applicable regulations and laws.
- Use AI for internal controls, analysis and error checking — Software with AI capabilities can take a pass at all reports, checking for omissions, highlighting potential errors, and making suggestions. This ensures completeness and provides that all-important peace of mind.
Leveraging Real-Time Financial Reporting
To accurately assess financial performance and make decisions, companies need access to real-time financial data. Yet many companies still run their financial analysis using outdated information.
Real-time information helps stakeholders understand what the current situation is, so they can make the right decision in real-time, rather than relying on old numbers.
Real-time data also helps companies make better predictions about future growth or retraction. For example, if a seasonal campaign is under performing vis-à-vis expectations, stakeholders can explore new strategies in a just-in-time manner, rather than well after the fact. If the campaign is doing better than hoped for, companies can leverage that success to make inventory or staffing decisions that support future growth.
How can organizations implement real-time data integration for financial reporting?
Rather than collect data manually, set up automation workflows that ensure information proceeds to the next step in the process without waiting for an email or needing a signature. As data comes in, AI can validate it and check for issues using a set of rules or standards the company creates.
For example, AI can flag discrepancies between invoices and payments or alert team members to an unexpectedly high expense that may need approval. From a cash flow perspective, the AI tool can make sure everything is in line before payments are cut to suppliers.
Financial Reporting for Small Businesses
From a regulatory perspective, financial reporting is necessary for all businesses, including small businesses.
From a business health perspective, financial reporting helps businesses understand their current market position and draw smart insights from this data to better their performance.
Small businesses that wish to improve their financial reporting processes should start with an internal audit to understand current performance.
After the audit provides a holistic picture, they can set clear performance objectives for improvement. From there, it's a matter of implementing software solutions that automate real-time data collection and analysis and installing internal concerns that protect accuracy and integrity. The final step is generating reports and mining them for insights that propel growth.
Automation can help businesses of all sizes streamline their financial reporting processes, keep up to date with changes to regulations and reduce the time, cost and workflow associated with financial reporting.
Best practices such as auditing and internal controls can be adapted to businesses of all sizes, from small businesses to global enterprises. Financial reporting software with automation simplifies the data collecting, review and reporting processes while validating data for accuracy and completeness.
Reduce the stress and high cost associated with financial reports by investing in financial reporting software with automation features and industry-leading security features. DFIN's ActiveDisclosure software includes collaborative features, a streamlined workflow, and an education component, so team members at all levels can efficiently navigate the software to prepare accurate, detailed and visually elegant financial reports. Discover what sets DFIN apart when it comes to financial reporting.
