Numbers don’t lie. Well, until they do!
Here is a reality…
More than a quarter of professionals—27.5 percent to be exact—reported that incorrect data had been manually input into an enterprise system at their firms.
Here is another reality...
- We can never work error free. It’s inevitable and natural.
- If we lower human error, we lower failure rates.
- Though human error is inevitable and natural, it’s usually not expected.
A process that relies on human accuracy, is prone to errors. And there is always a cost to an error. False data could cost organizations a wrong decision, or - in the worst form - it could cost a life.
In the accounting industry, a workflow that includes manual steps paired with multiple points of data access is not conducive of robust financial reporting. This is because an immense amount of time, resources and money are thrown into a regimen that relies on human accuracy.
And in the event of an audit? Quality expert W. Edwards Deming says, “without data, you're just another person with an opinion”. Auditors know, firsthand, that the inability to glean useful information from raw data is a missed opportunity to provide more value to your clients.
It’s all about the numbers. Period.
Financial figures drive many operating decisions, such as: budget, growth and cost initiatives. Inaccurate numbers may affect the expected outcomes of these plans.
A common challenge in the accounting industry is the wealth of data that is spread across multiple sources and stored in incompatible formats. Automation creates a single source of truth, where all documents and reports are up-to-date and consistent. This reduces the risks associated with erroneous information. When the source feeding all data points is accurate, the preparers of the financial statements are confident that as they add adjusting entries or round values, all figures throughout the reports are updated in tandem.
Automation of financial reporting also eliminates the clutter of mundane and time-consuming tasks associated with manual steps, which reduces errors, improves audit readiness and promotes reliable consolidation of financial statements.
The ripple effect
Though the uptake of technology and automation has increased, many of today’s accounting firms are still holding on to old processes and legacy systems, creating a hybrid operating procedure.
With some firms using legacy systems, some fully embracing technology and others using a mix of both, financial reporting has become an increasingly inconsistent and cumbersome process. This disconnect has created room for errors, causing a “ripple effect littered with fines and costs to a firm’s reputation”, as Workiva’s general manager Dermot Murray calls it in his article on human error and automation.
“In several accounting firms, I have worked with software which required leadsheets to be manually created in Excel and financial statements to be manually created in Word. I’d then make the staff accountants mark each account from the trial balance to the leadsheet, so I could manually review and make sure they have captured everything correctly in the financial statements document”, says Sarah Coulson, Caseware’s Industry Strategist.
Disconnected processes make it difficult for accounting teams to produce accurate financial reporting. Clients providing data through multiple channels, such as: Mail, Email, Courier, Fax, Web-based Forms, etc. increases the chances of error as accountants manually try to integrate them into one place.
“Any adjustments had to be made manually across multiple spreadsheets, which lead to staff and managers having to manually check every value multiple times to verify the numbers in the trial balance were correctly accumulated into the financial statements”, adds Coulson.
Real-time flow of data
Can we ever get it right? Well, the ability to get the numbers right at the outset and subsequently verify their accuracy has been vastly enhanced. Caseware’s cloud-based solutions provide real-time automated financial and accounting software that remedy data inconsistency and manual intervention by endorsing three key functions:
- Automation of trial balance and transactions import, which creates a single data source, where data automatically flows to the financial statements once successfully imported.
- Automation of formulas, which reduces the chances of error.
- Real-time update of leadsheets and financial statements once adjustments are posted, which ensures consistency and saves a tremendous amount of time - traditionally taken to manually reflect adjustments across areas of the reports.
Automation vs the Human Factor
For decades, people have been debating automation versus that value of the human factor.
There is no debate about the inherent beauty of the human nature. The value of the human touch that somehow pumps life and adds color. “There is a kind of beauty in imperfection”, says cinematographer, Conrad Hall.
Technology, on the other hand, has helped us be more productive, freeing up time for what really matters. There is a beauty in that, as well.
Both groups, however, aspire toward a common goal: reducing the margin of error - fully knowing that an error always comes with a cost.
Learn more about how real-time flow of data in Caseware ReviewCompTax, Caseware’s pure cloud solution for Review, Compilation and Tax engagements or contact us today.