This is an excerpt of a blog post from our partner, BlackLine.
In the pursuit of modernizing accounting processes, one critical area often overlooked is the time-consuming task of manual journal entries. Despite significant advancements in other aspects of the financial close, journal entries remain a labor-intensive process filled with potential errors and fraud risks.
The Challenges of Manual Journal Entries
Why do manual journal entries continue to present challenges for finance and accounting (F&A) teams? The answer lies in the sheer volume of manual processing work involved and the ever-evolving regulatory landscape. Manual journal entries not only prolong reporting cycles but also increase complexity, leaving organizations vulnerable to errors and compliance issues.
Furthermore, in today’s fast-paced business environment, finance teams are under increasing pressure to provide financial information faster to drive business decisions.
However, according to a recent survey by BlackLine, over half of finance professionals are not entirely confident they can identify financial errors before reporting results. This lack of confidence underscores the need for improved timeliness and accuracy in financial data and journal entries.
Embracing Modern Journal Entry Management
Modernizing journal entry processes presents a significant opportunity for organizations to transform the foundation of their financial reporting processes. By automating repetitive tasks and leveraging intelligent controls, finance teams can reduce the risk of errors in the general ledger and free up valuable time for strategic analysis and decision-making.
According to EY, top-performing companies with modernized journal entry processes have significantly fewer manual entries and lower personnel costs. The potential for automation is staggering, with over 70% of journal entries ripe for automation.
By embracing automation, organizations can not only save time and labor but also significantly reduce fraud risk.
Four Ways to Embark on Your Journal Automation Journey
1. Targeted Automation:
Identify specific repetitive tasks within the journal entry process and automate them using standard business rules and logic. Start by examining areas such as system-to-system processing, allocations, cash settlements, and intercompany transactions.
2. Intelligent Controls:
Implement segregation of duties and approval routing to eliminate fraud risks and ensure compliance. Embedding control attributes within standard journal templates can enable a more compliant process, while SaaS-based financial close management tools provide a structured preparation, review, and approval process with a robust audit trail.
3. Centralized Information:
Store all documentation and policies within centralized templates for easy access and auditability. Role-centric auditor permissions provide visibility into reviewed items, enabling a self-service model for obtaining supporting documentation and testing controls.
4. Continuous Accounting:
Shift from a traditional record-to-report approach to continuous accounting, allowing for more balanced processing throughout the period. This approach frees up finance and accounting professionals to focus on high-value tasks, such as open item analysis and balance sheet reviews, rather than being bogged down by manual data entry.
This blog post was originally published on the BlackLine blog.
Read more about Accounting & Accounts Receivable:
Is the Accounting Cycle a Trade-off Between a Fast Close and Accuracy?
Financial Close and Consolidation Solutions Report
Driving Effective Change Management in Digital Finance Transformation
