As companies continue to work in a virtual or hybrid setting, this type of environment creates challenges and risk when it comes to the audit process. Spreadsheets and other manual processes used as a primary financial close tool create inefficiencies and increase risk, leading to problems cropping up in audits.
According to a Forrester study, 53% of companies using spreadsheets as part of their financial close processes expressed concern about financial risk, but only 19% are working to address these concerns.¹ To create more efficiency and better collaborate with auditors, companies need to standardize processes and improve process visibility with audit trails.
Creating Detailed Documentation Processes
Having accurate and reliable data is essential when coordinating with auditors. The finance team needs to be able to address questions such as what controls changed or what software was used for the close process.
A centralized close process — such as one stored in the cloud — is critical to providing the type of documentation needed for an efficient close. This enables finance teams to thoroughly document their processes so that auditors are provided with reliable and detailed audit trails. This is especially important when documenting the issue resolution processes, since auditors will be looking for this specific documentation. Companies who primarily use spreadsheets will find the documentation process to be time-consuming and complicated.
Centralized Data Storage
Even if your workplace isn't doing virtual close processes or audits anymore, having a centralized storage system enables teams to better communicate with each other. Tools like spreadsheets don’t have the features that encourage centralized storage such as comments, attachments, or notes.
To enhance visibility, companies need to implement relevant solutions so that data can be stored in a centralized and secure location. Control dashboards and data analytics tools will also help to alleviate risk and enable communication within the organization so that all required documents can be handed off to auditors easily.
Trust in the Accuracy of Your Data
If your company is still primarily using spreadsheets, it's time to consider another solution, as studies have shown that 90% of spreadsheets have errors in them. Even if the error rate of your spreadsheets is 1%, it's an extremely expensive price to pay for an unnecessary risk.
Compounding this issue, the risk of human error significantly increases the chance of inaccurate data. While you can track changes to find the source of errors, spreadsheets create workflow issues, such as rework, when team members have to redo parts of the close process due to data being added or changed without proper communication. There's also the fact that a simple number omission or copy and paste error creates a "snowball" effect that has a bigger impact down the line and is rarely caught before close.
If multiple team members have edit-access to the spreadsheet this increases the chance of version control issues that can wreak havoc on your data. The simplest of mistakes can have a disastrous effect, causing wasted time and severely impacting the financial close process.
Your organization needs to be able to trust in the accuracy of its data, especially in the numbers reporting to internal and external stakeholders, as well as auditors.
Audit preparation is often pushed to the backburner, leading to an increased risk of error and inefficiencies. To improve processes, companies have typically hired additional headcount and turned to micromanagement to ensure tasks are complete — neither solution is ideal.
Instead, embracing automation allows companies to remove manual processes that create communication roadblocks and increase data inaccuracy. It helps finance teams to be more efficient in close tasks and frees up time to work on value-adding tasks and simplify future audits.
Automation can also reduce audit expenses and risk when it comes to non-compliance with stakeholders. While investing in automation may seem expensive on paper, the high ROI far outweighs the cost. With Cadency® by Trintech, companies have reduced up to 62% of write-offs and reduced 14% risk of revenue impact due to misstatements.
Solutions like Cadency® by Trintech create automated audit trails throughout the financial close so that auditors can easily access information without the need for a team member to do so. Features such as e-binders help teams become more efficient, as auditors will be able to gather all the activities and documents needed to construct a timeline for audibility and tracking of issue resolution processes.
Implementing a proven automation solution allows companies to ensure finance teams can create detailed and accurate documentation and improve communication. Maintaining a high level of visibility enables companies to complete shorter close deadlines and ensure they're prepared for audits.
To learn more about how you can proactively use automation to ensure you're well prepared for audits, check out what the experts from DHG and Trintech have to say about how the combination of the right processes and technology will result in increased accuracy of financial reporting, resulting in less audit expenses overall. Click here to access the on-demand webinar: Utilizing Technology to Improve Controls and Mitigate Audit Risk.
¹Incisive. The Importance of Data Accuracy in Spreadsheet Management. https://incisive.com/the-importance-of-data-accuracy-in-spreadsheet-management/