A financial reporting automation system helps businesses streamline and accelerate their financial reporting processes. In many organizations, financial planning and analysis (FP&A) teams implement the use of automated financial reporting tools to gather, structure, and assess financial data more accurately. This reduces human involvement in repetitive tasks, errors, and money by maintaining accuracy and compliance with rules and regulations. With the support of such automations, finance experts can now focus more on strategic planning and data-driven decision-making rather than data entry. This article explains how the FP&A teams enhance their performance with the support of automated financial reporting.

What is Financial Reporting Automation?

Financial reporting automation refers to the implementation of advanced software and technology to simplify the process of creating, combining, and distributing financial reports with very little human involvement.

Just like traditional reporting methods that are based on spreadsheets and manual data entry, financial reporting automation is also based on advanced systems to perform financial work efficiently. Thai supports intelligent or advanced systems to manage repetitive tasks while ensuring accuracy and compliance with regulations and allows finance teams to focus more on analytical and decision-making tasks instead of handling data manually.

Advanced financial reporting automation tools perform the following functions –

• Data Collection & Integration: The system collects financial data automatically from different sources such as ERP systems, accounting software, CRM platforms, payment processors, and even older systems. Financial reporting automation advanced tools, such as Optical Character Recognition (OCR), retrieve the data from invoices, receipts, and bank statements.

• Account Reconciliation: It automatically performs the account reconciliation process by matching the inflows and outflows of funds from different systems and ensuring they are aligned accurately. If any mismatch or error is identified, the financial reporting automation system highlights them to give them more attention.

• Report Generation: Financial reporting automation system software develops detailed financial reports, such as balance sheets, income statements, cash flow reports, and report management, with the help of ready-to-use templates or customized formats.

• Validation & Error Detection: The financial reporting automation system validates all financial data in real time to find mistakes and inconsistencies. It also ensures that the system follows business rules before presenting the final reports.

• Workflow Management: This platform manages the financial reports through an approval process by sending them to the correct organizational hierarchy and following compliance rules. Its main task is to monitor the company’s performance under every circumstance.

• Audit Trail Creation: Automation tools help to record the financial transactions, alterations, and every approval automatically. Then it creates a complete audit trail that can be used for audits and compliance checks before the final audit takes place.

What are the Financial Reporting Automation Tools?

Let’s understand some of the financial reporting automation tools that simplify financial reporting and improve decision-making.

FP&A tools: 

FP&A tools refer to financial planning and analysis tools that support the FP&A teams to perform the main financial processes, such as data collection, combining and validation, planning, forecasting, budgeting, performance tracking, and financial reporting and analytics.

It also helps finance teams to create financial models and forecasts, provides data analysis to give clear insights, tracks the financial status of the business, examines financial health and investments, determines risk, and seeks new opportunities that support business development.

The following are the FP&A tools used to automate financial reporting –

1. Cube: It is a cloud-based financial planning and analysis platform that helps businesses in managing their numbers easily without losing spreadsheet data. It helps the finance team to work from anywhere by directly integrating it with Excel and Google Sheets.

These tools allow you to automate financial reporting and dashboards more efficiently and also ensure that everyone stays updated with the same information.

2. Datarails: It is a financial planning and analysis tool that allows you to automate the data collection process from various departments of a company. It helps in preparing the financial reports and makes the monthly closing process easier and faster.

3. Anaplan: It is a tool developed to support the finance team with various financial planning tasks, such as revenue generation, expenditures, headcount/workforce, capital planning, and budgeting from zero or zero-based budgeting.

4. Vena: Vena Solution provides tools for financial planning and analysis, financial reporting, regulatory compliance reporting, and managing the financial close process, all on the same platform.

Financial planning and analysis tools like Cube perform both functions, such as planning and reporting. These platforms can be combined with the other solutions that businesses use, such as ERP (Enterprise Resource Planning), CRM (Customer Relationship Management), HRIS (Human Resource Information System), and business intelligence software. It allows you to transfer data easily and helps your business team perform tasks more efficiently across different platforms.

EPRP Systems:

In every business organization, the finance team makes use of ERP systems to manage day-to-day activities such as accounting, purchasing, risk management, and compliance. These systems help company finance teams plan budgets, make financial forecasts, and track the overall financial health of the company.

Models of ERP systems include:

1. Microsoft Dynamics 365:

Microsoft Dynamics 365 is an expanded form of two software programs: ERP (Enterprise Resource Planning) and CRM (Customer Relationship Management); both are presented by Microsoft. The main tasks are to manage business operations, sales, and customer relationship functions all on one platform.

2. QuickBooks Enterprise:

QuickBooks is complete finance and accounting software that performs functions like managing accounts receivable, accounts payable, sales, and order processing activities. The main purpose of software is to report the current status and a detailed overview to help understand how the business is performing.

3. Sage 300:

Sage 300 is a comprehensive business management tool that helps with the automatic recognition of missed transactions, errors, and differences. It also allows the user to reconcile financial records with the bank statements.

Payment Platforms:

Payment platforms simplify the processing of financial transactions and allow businesses to manage their payments efficiently. These payment platforms accept various payment options, such as credit cards, bank transfers, and digital wallets. It is also linked with the accounting systems to simplify financial reporting and make it easy to cross-check the transactions during reconciliation processes.

Examples of payment platforms include:

1. Stripe:

Stripe provides a complete set of tools for managing financial and other related payment activities. It allows businesses to set up and manage multiparty payments, send payouts, and accept payments from customers on an international level. It also creates financial reports and enhances its payment process with the help of its Application Programming Interface (APIs).

2. PayPal:

PayPal helps businesses to accept payments both online and offline/in person. It allows users to monitor all types of transactions, which include monthly sales activity and other payment options used. With the help of this, the business can also generate a financial report to gain deep insight into its financial performance.

3. Square:

Square is a digital payment platform that allows businesses to perform the transaction process and manage customer payments with the help of tools. It accepts various payment options like credit cards and mobile payments.  Also, it includes other characteristics, such as stock management, POS systems, and data analytics to monitor and track business performance.

Expense Management Tools:

Expense management tools allow finance teams to manage various financial expenses, such as expense claims and tracking of expense statements. This tool helps users by automating the submission, approval, and reimbursement process while ensuring that all the expenses are aligned with the company’s policies. It speeds up the process due to less manual work and high accuracy.

Examples of expense management tools include:

1. Concur Expense:

Concur Expense automates the business expenditure reporting procedures and provides users with a clear overview of their company’s spending habits. It pulls data from all expenses into a single platform, allowing users to record receipts and reports.

2. Expensify:

Expensify is an expense management application that manages business expenses, employee reimbursement processes, expense report preparation and sends invoices.

3. Zoho Expense:

Zoho Expense allows users to prepare complete expense reports, arrange them by expense types, and download such reports for keeping track of records on a computer.

What is the Process of Financial Reporting Automation?

The financial reporting automation process transforms the basic financial data into a simpler and more useful format. The step-by-step process is as follows:

1. Automated Data Capture

The financial reporting automation platforms automatically collect financial data from the connected sources, such as accounting software, bank feeds, expense management tools, other financial platforms, and expense reports.

Rather than entering data by hand, automate financial reporting software to gather it in the current time or at regular intervals while ensuring that the financial reports are up-to-date and accurate, representing the company’s current financial status.

2. Data Consolidation & Transformation

After completing the data collection process, financial reporting automation tools place the data collected from different sources into one unified format. It streamlines and displays data in a more standardized format as per the company’s chart of accounts and reporting structure. It also converts currencies when needed.

After combining and organizing all data in a structured format, financial teams can gain a complete overview of the business’s financial and operational performance. It helps them to make better data-driven decisions.

3. Calculation & Analysis

With the help of automated reporting software, the financial team is capable of performing complex calculations like analyzing fluctuations, ratios, patterns, and projections. Additionally, it manages the detailed financial structures that include the most complex financial reporting needed by the organization.

Financial reporting automation systems can also perform comparisons between different periods, budget versus actual analysis, and KPI (key performance indicators) without manually updating or managing the spreadsheets.

4. Report Assembly & Customization

Financial reporting automation systems make use of tailored templates for the stakeholders and enable users to automatically generate customized reports, such as balance sheets and income statements, with just a few clicks. Also, professionals can create financial reports quickly by avoiding the wastage of time in manual formatting.

When financial executives are instructed to prepare a high-level board summary, a detailed report on each department, or reports on regulatory compliance, an automated financial reporting system helps them in preparing all such reports, also with the right information in the right format.

5. Distribution and Access Control

After completing the data collection process, financial reporting automation tools place the data collected from different sources into one unified format. It streamlines and displays data in a more standardized format as per the company’s chart of accounts and reporting structure. It also converts currencies when needed.

Once the data is integrated and organized in an appropriate format, the financial team is enabled to gain a complete overview of the business’s financial and operational performance. It provides them with an opportunity to make better data-driven decisions.

6. Continuous Monitoring & Updates

During this process of automated financial reporting, users have real-time access to financial data. Therefore, the finance teams and executives can validate the status of any financial activity, observe the updated figures, and access interactive dashboards at any time that clearly indicate the company’s overall performance.

This complete financial reporting automation process removes the time spent on manual searches for finding different information through different systems or paperwork. Therefore, rather than concentrating on data collection and its formatting, the workforce can focus on analyzing the results and valuable insights that help them in making data-driven decisions.

What are the Advantages of Automating Financial Reports?

Let’s understand the benefits of automated financial reporting for financial planning and analysis teams:

• Higher Productivity and Faster Approvals

When users automate financial reporting, business accountants do not need to spend long hours on entering data manually, creating reports, or reconciling records. This saves their time and effort and offers an opportunity to the FP&A teams to focus more on valuable insights, such as studying results, identifying patterns, and developing strategies to generate more income.

Financial reporting automation also makes the reports and invoice approval process faster. Then these are shared with the appropriate people based on the predefined set of rules or workflows. With such encryption access, finance teams can check and approve reports and invoices directly from their smartphones and quickly update issues directly within the applications. This ensures faster approvals and smoother payment cycles.

• Enhances Accuracy and Reduces Mistakes

The financial reporting automation process collects the data directly from the originating sources, such as Excel sheets or the ERP system. Many industries have adopted this approach, which avoids wastage of time by bypassing the continuous shifting between tools or manually integrated data.

If the finance team spends more time entering data manually, human errors are much expected, and finding and fixing such errors is a challenging task. Therefore, with the help of an automated financial reporting system, a user can ensure that the gathered data is accurate and retrieved directly from systems. The reliability of information impacts the accuracy of reports, budgets, and forecasting.

• Greater Transparency and Effective Fraud Prevention

The financial reporting automation system keeps a comprehensive record of each transaction and change made within the system, so it allows users to track where each change came from and who made it.

Financial planning and analysis teams can use this insight to identify any unusual activity prior to, and help them in solving such potential problems before they turn into serious issues.

These automated financial reporting systems also help in creating reports that provide a clear insight into the company’s overall financial health. Such reports are shared by the FP&A team with the investors, management teams, and regulatory authorities to retain transparency and trust.

As the financial reporting automation systems reduce human involvement, it is much harder for anyone to modify or duplicate a financial report. This supports companies in staying away from fraud and ensures that all the financial data is accurate and reliable.

Conclusion –

Financial reporting automation is a smart system that boosts financial operations and makes them more reliable and efficient. By reducing the error and human involvement, it supports the financial planning and analysis teams to concentrate more on cash flow management planning and make effective business decisions. With real-time understandings, automation enhances the financial health of the company and long-term performance. Partnering with The Algebra Group can improve and help you in achieving automation efficiently, and will take your financial reporting to the next level.

Frequently Asked Questions (FAQs) –

1. What are the challenges in implementing financial reporting automation?

• Resistance to change:

Opposition to transformation is one of the biggest challenges faced by CEOs while implementing automation initiatives. This concept of automation makes employees feel unsafe.

To overpower this fear, businesses should provide advanced training to their workforce to work more smartly, rather than performing repetitive tasks, and focus on decision-making instead of thinking about redundancy.

• Data Security Concerns:

Financial data is valuable no matter what its size or type of business. Data maintenance and protection are the main concerns for businesses. 

To manage these concerns, businesses should implement automation tools that involve strong encryption methods and globally recognized regulatory standards.

2. How is financial reporting automation secure?

The Algebra Group offers secure financial reporting automation tools, as they are built with strong security functions, data encryption, role-based access control, and regulatory standards. This feature ensures that the financial data is secure and also meets regulatory standards.

3. What types of financial reports can be automated?

The following are the types of financial reports that can be automated.

• Annual Financial Reports
• Quarterly Financial Reports
• Consolidation Goals
• Financial Statement Assessment
• Management Reports
• Post Audit Adjustments
• Year-End Close

4. What is automated financial reporting?

Automated financial reporting is a process that involves technology to reduce human involvement, lessen the time required for data collection, validate data, and create reports. With the help of automation, workflows are streamlined and financial close cycles are speed-up, which gives the financial planning and analysis team more time to focus on strategic business decisions.

5. Why is AI not reliable for performing automated financial reporting?

Organizations are mostly dependent on AI to perform their automated financial reporting activities in order to save time and money, but artificial intelligence (AI) raises concerns for the credibility and accountability of reports when the FP&A team shares them with investors and regulatory bodies.