Digitization and automation are rapidly becoming the norm in finance departments. Many corporate automation projects are initiated by the CFO or Financial Manager. Despite this, finance departments still often work with Word and Excel files, or by manually connecting data from different systems. This not only applies to smaller organisations, but large companies too. Time for an overhaul of the myriad of separate tools, systems and files. But where to begin?
Start by assessing the following four processes. Do they sound familiar? If so, you are taking unnecessary risks and it’s better to roll up your sleeves and start the clean-up.
1. Reporting in Excel
Google’s auto fill function reveals that Excel is still frequently used in the financial process:
Spreadsheets are often used to make reports or for consolidation, which is a huge risk. One small typo in an Excel formula can lead to management receiving completely inaccurate figures.
British pension fund Mouchel knows all about this: the discovery of a calculation error in a spreadsheet caused the company to make a downward revision to the tune of GBP 8.6 million. The share price dropped by more than 30 percent after the revelation and the CEO was forced to step down.
And this isn’t an exception. Felienne Hermans from TU Delft researched 15,000 spreadsheets and concluded that more than 750 files (5%) contained more than 100 errors. The primary cause: spreadsheets are sent back and forth within companies and everyone can make whatever changes they want, without agreements on who is responsible for what.
Another risk is that these types of reporting spreadsheets are so complex that often only one person within an organisation knows how they are constructed (and therefore how they can be modified). If this spreadsheet master is unavailable, or even worse, leaves the company, you have a problem.
2. Invoicing in Word
This probably isn’t something you think about on a daily basis, but if there is one document within the finance department which has undergone a major transformation within the last few decades, it is the invoice.
In the past, you received your paper invoices by post, which had to be entered manually into the creditors purchase book. The first steps towards digitisation were made by scanning these paper invoices. The next step (most companies now do this routinely) is sending invoices as PDF files via e-mail. This already offers a cost saving: invoices no longer have to be printed or stamped. However, this way of working is still rather labour-intensive; invoices are still created manually (mostly in Word), the recipient then has to process the PDF, and sometimes even manually retype information. This also leads to the possibility of errors.
If you are in the process of overhauling your financial processes this summer anyway, why not take the next step and invoice fully electronically via UBL? UBL (Universal Business Language) is a standard format for electronic invoicing. A UBL invoice also makes it possible to send invoice data from accounting package A to accounting package B. This type of invoice can be directly read out, without any manual entry being required. This isn’t only more efficient, but you also get more control over your cashflow as your clients are paid more quickly.
3. Expense management
Submitting and processing expenses is another process often maintained in separate systems or spreadsheets. And let’s be honest - entering expenses isn’t exactly the favourite task of the average employee. The hassle of messing around with receipts (a few always seem to go missing), remembering which VAT rate applies to train tickets - the list goes on. It isn’t easy, aside from the fact that you have to submit your expenses in an Excel file.
Working with Excel spreadsheets for declarations is especially impractical for the finance department where the Tax Authority is concerned. Just try finding a receipt on demand!
While paper receipts will not be disappearing overnight, financial software has now made it far simpler to scan and automatically process receipts. This not only makes declarations less frustrating for employees, but also less prone to errors. An additional advantage is that all expense claims are kept in a central system – handy if the tax authorities decide to pay a visit.
4. Leave and absence
This might sound familiar; you are busy finalising the month end report, when the HR manager comes in at 5:30 p.m. to inform you of changes in the leave and absence administration. As the pending holiday days need to be incorporated into the balance sheet correctly, this also means a last-minute change to the month end report. This is only made worse when leave and absenteeism are registered in separate systems or Excel files, making the process extremely frustrating. And it often appears that this administration in larger organisations is still maintained in separate files, which means that an extensive amount of data has to be printed out manually and handed to finance by HR.
In short: using separate systems, Word files and Excel spreadsheets is a result of historical developments, but there will inevitably come a time when this way of working causes inefficiencies and even errors. The autumn months are highly suitable for assessing current systems and processes – even just to prepare for the clean-up before the new financial year.