Automation: Soon after the first quarter of 2020 was over, almost all companies, especially CFOs, were faced with an unprecedented challenge: Suddenly and entirely unexpectedly, both ongoing accounting and financial statements had to be done remotely.
The entire finance team, including everyone who had to transfer data and information from the departments to the finance department, was in the home office. COVID-19 had struck. Much of the local and global economy had to move very quickly in order to maintain at least part of the business in other ways.
Crisis Occured in Finance Department Due to the Pandemic
Above all, the bookkeeping, as this was tied to her accounts’ dates despite the virus. Thanks to flexible IT, many companies were able to relocate crucial tasks to the home office.
This was particularly successful when the systems were flexible enough. And the processes in the company were largely digital. Companies that had previously relied heavily on manual processes were hit much harder by COVID-19 because these could not be easily transferred to the home office. Suitable for those who have been using digital automation in accounting for a long time.
But the challenge for the finance departments wasn’t just about getting the day-to-day business on time. With the economy largely at a standstill, it was also necessary to develop forecasts and future scenarios that are essentially based on the changed market conditions and the anticipated developments and figures.
In traditionally organized finance departments with many manual postings and comparisons, personal exchange with other employees is always necessary. However, if this exchange is limited, as it was recently during the pandemic-related homework, the closing processes slow down dramatically.
In addition, the risk is much higher because not all data is immediately available and can even fall into the wrong hands via unsecured electronic communication channels. For example, the requirement of excel tables for manual processes with data that are not automatically booked and compared in the system.
Besides, there are insecure data transmission paths or collaboration platforms that do not meet compliance standards. But it severely delays the most critical point and potentially inaccurate bookkeeping – not to mention reliable forecasts.
Automation Doesn’t just Help Now
Automation in the finance department generally helps make postings and account reconciliations much faster, more transparent, reliable, and secure, as it largely eliminates the manual processes. For companies that invested in ERP accounting software before the pandemic, these are now paying off significantly. The automated or virtual monthly closing is about transferring the information relevant for the financial closing from the different accounting systems to an automated closing process.
The overall goal is to eliminate as much manual work as possible. The advantages are obvious: By automating the processes, they reduce the errors drastically, and saves a lot of time. Accurate financial results also provide the company with a valid basis for business decisions, especially in times of crisis. The information calls up automatically and digitally. It is also helpful if the virtual month-end closing is ideally cloud-based. The cloud creates the possibility to work from any location and thus even in home offices.
As more pressure is placed on the Manage your IT department efficiently, the need for highly efficient IT departments becomes greater than ever.
Security for Audits
For companies, especially for those who have to present their results not only to the Bafin but also to the stock exchange, accurate numbers are essential. The authorities or investors do not well receive subsequent corrections. Institutional investors, too, tend to shy away from investing in companies with dubious reporting histories. It is, therefore, essential to deliver correct results by the given deadlines. But this doesn’t always seem easy. A study from 2019 confirms this assumption:
While 71 percent of the C-Level respondents stated that they completely trust the accuracy of their financial data. And, with this it convinces only 38 percent of the financial experts. The study suggests that CEOs base their business decisions on numbers they trust. Whereas the people who prepare these statements and reports don’t trust them. This is not a good basis because it indicates an unnecessarily high risk for many companies and severely affects meticulously conducted audits.
Alternatively, an automated close is the best way to get an easy, quick, and thorough financial review. Auditors have complete transparency about the flow of documents. All necessary insights into the books are available and transparently comprehensible. Since many auditors are also switching to remote audits, companies with automated closing processes will complete the audit faster. More efficiently, and, above all, without problems – for the benefit of the company, the auditors, authorities, and investors.
Also Read: Clean Data: The Way to Optimize Data Quality for Adequate Data Protection
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