A Guide to Automated Financial Reports

Financial reporting automation relies on software to automatically find, organise, and analyse financial data from a company’s transactions and operations. These programs can not only source data but also use artificial intelligence to fill out ledgers, create financial statements, and meet compliance requirements for financial reporting and tax filing. 

According to McKinsey, most businesses can automate one-quarter of their processes within the next five years. Accounting and financial reporting are common targets for this type of automation for several reasons. First, automation lowers firms’ costs. Also, the software reduces data entry or calculation errors, helping accountants meet the AUASB’s reporting requirements. 

Finally, human intervention is unnecessary for accurate bookkeeping since most payments are processed digitally. 

Here is a look at the benefits, requirements and potential issues when automating financial reporting processes. 

The benefits of automated financial reports

Automating financial reports brings several advantages to companies and accounting firms, including:

• Reduced human error: Manual data entry has a one-percent error rate. If accountants or auditors rely on this incorrect data to make calculations, their reports will not be accurate. Automated financial reports populate documents without human intervention, eliminating the impacts caused by human error. 
• Increased productivity: Automated financial reporting software will not replace accountants. However, it will save them from the time-consuming manual task of building reports, providing relief and freeing them to work on higher-level budgeting, analysis and advisory work. 
• Lower overhead: Firms won’t have to spend money compiling reports after investing in the software. They may be able to reduce bookkeeping staff or pay contractors for fewer hours of work. 
• Transparency and streamlined auditing: Automated reporting software stores data within the system. This feature allows you to trace the sources of the final figures in the report and streamlines the auditing process. 

Also, automated financial report software always meets reporting deadlines. Because a computer runs the process, reports are completed on time, reducing dependencies on staff availability.

How does automation differ from traditional methods of financial reporting?

Traditional methods for building financial reports rely on data from different sources, which the bookkeeper or accountant uses to make manual or computer-based calculations necessary to produce the figures for the report. 

Even if computer-based ledgers are involved in the process, traditional methods rely on human intervention to choose which data to collect and manually add to the report or software that performs the necessary financial calculations. 

Automated software is connected to the systems that handle all the transactions for the company, so the data gets recorded automatically and added to the report immediately. For example, the software connects to the invoicing and payment processing systems and automatically records data when a transaction occurs. 

In other words, the data collection and calculations happen instantly. 

Challenges to implementation

The advantages make automated financial reporting software attractive for many small and mid-sized businesses. However, a few challenges can make implementation difficult. 

• Integration with existing systems: New technology must often be integrated with existing systems and workflows, which can be complex and costly. Compatibility issues, data migration challenges, and the need for custom solutions can create significant barriers to seamless implementation.
• User adoption: Adopting new technology can be a significant challenge for users, often hindered by factors such as resistance to change, a steep learning curve and data privacy and security concerns.
• Training and support: Adequate training and ongoing support are crucial for successful technology adoption. Without proper training, users may not effectively use new tools, leading to frustration, decreased productivity, and underutilisation of the technology. Providing sufficient resources for training and support can be both time-consuming and expensive.

Adopting new technology requires clear communication, robust training, and active change management. Organisations should clearly outline the benefits and address concerns to align stakeholders with business goals. Providing tailored training and ongoing support helps users feel confident in using the new tools. A phased implementation and continuous feedback ensures smooth integration with existing systems. Regular monitoring and incentives for early adopters can further drive engagement and ensure long-term success.

Best practices for automating financial reports

Here’s a look at the essential steps to make adopting automated financial reporting easier. 

• Plan for the new workflow before implementation: Since good automated software is customisable and scalable, the company can decide whether to completely revamp its accounting workflow or automate the system based on its current design. 
• Iron out technical details: IT staff members, accounting employees, or contractors should be consulted to ensure full compatibility and accuracy during the implementation process. 
• Take a test run: Financial reports are essential for stakeholders and, depending on the size and location of the company, compliance. Therefore, a test run is important to verify everything works perfectly before completely switching from the previous reporting method. 

The company should also consider accessibility. For example, cloud-based software allows people in different locations, including contractors and remote workers, to access the reports and upload necessary data. 

What financial reporting tasks can be automated?

Financial reporting software can handle various types of cash flow and income statements, balance sheets, company performance, and equity statements for shareholders. 

Here are some of the tasks that a company can target for automation. 

• Data entry: As long as the invoicing, banking, sales, payroll and payment processing systems are compatible with the software, the software can collect and enter data automatically, ensuring an efficient data entry process. 
• Basic calculations: Software typically uses algorithms to perform basic calculations for entries on the final report. These can happen automatically and update in real-time.
• Data analysis: Companies can use data analysis tools to glean insights about performance, compliance and other vital subjects. Such software can also deliver business intelligence insights, empowering them to make informed decisions for process improvements and strategic planning. 

Any other reporting-related tasks prone to human error or requiring excessive tedious work are perfect candidates for automation. For instance, tasks like reconciling accounts, preparing tax returns, and generating financial statements can all be automated, saving time and reducing the risk of errors. 

What does financial reporting automation look like?

Here are examples of how automation can streamline financial reporting. 

To create a cash flow statement, the accounting software would draw data from connected accounts payable and accounts receivable records, accounts covering other operating expenses, profits from any investment activities or shareholder dividend payments and other fees or income. The software can create a complete report by simply adding and subtracting data.

Meanwhile, an income statement compiled using automation would draw data revenue and expense data from business accounts, tax information, operating costs and materials spending. It then performs basic calculations to arrive at gross and net income figures. 

Helpful tools and resources 

Here are tools that can help support financial reporting automation. 

• Cloud-based software improves accessibility because users can access it from anywhere, and they have the flexibility to connect different data sources without manually uploading or entering the information. 
• Working papers show the different steps and data used in an audit. Recording this data can help with documentation and evidence supporting the final report. 
• Visualisation applications help accountants create graphs and other elements that can help explain the figures compiled automatically by the reporting software. 

With automated financial reporting software, companies, agencies, and accounting firms can streamline document and statement creation processes and limit errors. 

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