The month-end close is often marked by the hectic pace of completing journal entries. In the current landscape, where efficiency and accuracy are key, manual journal entries still stand out as a cumbersome challenge.
Challenges of manual journal entries
The traditional approach to journal entries in the financial close process is dominated by manual processes, spreadsheets such as Excel and point solutions, which often involve different teams in preparing, approving, posting and validating entries. These manual processes are laden with challenges, are error-prone and disrupt the finance department’s efficiency. Here are a few examples of the issues:
Time-consuming and inefficient: Manual journal entries demand considerable time, precision, and coordination. This often translates into extended work hours, especially during month-end.
Prone to human error: Manual journal entry processes are inherently prone to errors. Simple mistakes in data entry can lead to significant inaccuracies in financial reporting and further effort to correct errors once discovered.
Difficult to scale: As organizations grow, so do their transaction volumes. Manual journal processes, however, do not scale effectively, leading to backlogs and added pressure on finance and journal processing teams.
Compliance and audit issues: Ensuring compliance and maintaining a clear audit trail is cumbersome with manual entries, demanding checking source documents, extra layers of verification and approvals, along with the gathering and storage of audit evidence to support journals.
Delayed strategic insights: The slow pace of manual processing hinders timely access to crucial financial data, delaying strategic decision-making and missed business opportunities.
Manual vs automated transformation through technology
Introducing real-time automation solutions into the journal entry process can streamline accounting processes and significantly improve the month-end close. Despite current ERP and accounting software solutions from SAP, Oracle and others, journal entry automation software can significantly improve the efficiency and the effectiveness of the record to report process.
Swift data entry preparation and validation: Modern tools can process large volumes of data quickly and accurately, significantly reducing the time required to prepare, post, manage and control journal entries.
Error reduction: Automation minimizes the common pitfalls of manual data entry, such as calculation errors, confusion between debits and credits or omission of reversals in the following period, thereby enhancing the accuracy of journal entries.
Efficient identification and control: Advanced tools facilitate the rapid identification of journals required, including the validation, preparation and posting of automated journal entries.
Adaptable scalability: Technological solutions can handle increasing volumes of transactions, scaling up as the business grows without increasing operational strain or the need for additional human resources.
Audit and compliance efficiency: Digital solutions provide a clear, traceable audit trail and the storage of audit evidence, such as supporting documentation and approvals, making compliance and audit processes more straightforward.
Timely financial reporting: The efficiency of technology-driven processes enables quicker financial reporting, providing timely insights for strategic decision-making.
The real-world impact of automation
The shift to automated journal entries brings notable benefits. For instance, a global company that adopted automated journal processing significantly reduced its month-end closing time and enhanced its financial statement accuracy, allowing its team to focus more on analysis and business strategy.
In another example, a growing medium-sized business faced difficulties managing an increasing transaction volume due to business growth. After implementing an automated journal system, they not only streamlined their month-end process but also gained more precise financial insights, facilitating better-informed and more timely business decisions.
Conclusion: Stepping into a more efficient futureAutomating journal entries marks a shift towards greater efficiency and precision for finance teams. It alleviates the manual processing burden, freeing finance professionals to focus on strategic aspects of their roles. Embracing automation in journal entries is not just a trend – it’s an essential step for any finance department aiming to optimize its operations and make a more significant contribution to the organization’s success. As we adopt these technological advancements, the era of manual journal processing is ending, heralding a future of more streamlined and insightful financial closes.
