If your finance team is still chained to spreadsheets and manual processes for accrual accounting, you‘re not alone. But manual accruals come at a high cost. Errors, inefficiency, and lack of insights are preventing companies from realizing the full benefits of accrual accounting.
In this comprehensive guide, we‘ll explore how accrual automation technology is fundamentally improving the accrual process. You‘ll understand:
- The pitfalls of manual accruals
- How accrual automation works to drive efficiency and accuracy
- Key features and capabilities of top solutions
- Implementation best practices for a smooth rollout
- Emerging innovations like AI for smarter accruals
Today‘s guide will equip you to successfully transition to automated accruals – reducing costs, risks, and headaches while providing invaluable visibility into financial performance. Let‘s get started.
The True Cost of Manual Accruals
First, let‘s examine the common problems plaguing manual accrual processes:
Error-Prone Data Entry
With poor visibility, missed invoices, and manual calculations in spreadsheets, human errors are inevitable. One study found a staggering 88% error rate in accounts manually processed for accruals.
AP and AR teams waste hours chasing down invoices, confirming accrual amounts with suppliers, and creating complex journal entries. This repetitive manual work leads to 50% higher processing costs compared to automated accruals.
Disjointed manual processes prevent finance leaders from gaining a consolidated view into accrual positions. This leads to inaccurate forecasts and sub-optimal decision making.
Tedious manual processes lack controls and audit trails needed for SOX and external audits. Nearly one-third of audit findings relate to poor accrual processes, putting companies at risk of material weaknesses.
The costs and risks of manual accruals add up quickly:
Typical costs associated with manual accrual processes
Without automation, organizations forfeit the benefits of accrual accounting. Fortunately, technology provides a solution.
Accrual Automation to the Rescue
Accrual automation eliminates the drudgery while enabling the advantages of accrual accounting, including:
- Matching revenues and expenses to show true performance
- Compliance with accounting standards like ASC 606 and IFRS 15
- Smooth period closes through standardized roll-forward processes
- Early insight into expected future cash flows
By harnessing automation, top enterprises have reduced accrual processing costs by 50-80%. Let‘s examine how accrual automation achieves these dramatic gains.
First, accrual automation aggregates relevant data from contracts, purchase orders, invoices, ERPs, and other systems into a single platform. No more chasing down inputs across fragmented systems.
Analyzing and Calculating
Next, built-in intelligence reviews the consolidated data and systematically identifies accrual amounts based on configured rules and policies. Automated algorithms crunch the numbers, eliminating manual errors.
Posting Accrual Entries
The system automatically generates corresponding journal entries and posts them to update the General Ledger. No more manual re-keying.
Providing Real-Time Reporting
Rich dashboards offer real-time visibility into accrual positions at any level – by business unit, department, account, or project. Finance leaders gain actionable insights.
Supporting Period Closes
As actual invoices arrive, accrual estimates are automatically adjusted through seamless roll-forward processing. Reversals and replacements happen in the background.
Robust controls, exception reporting, and audit trails satisfy external auditors and significantly reduce material weakness risks from substandard accrual processes.
This streamlined, automated approach unlocks huge benefits compared to error-prone, fragmented manual processes.
Key Features of Leading Accrual Automation Solutions
Now that we‘ve seen the value accrual automation delivers, let‘s explore key capabilities to look for when evaluating solutions:
Smart algorithms analyze contracts, invoices, budgets, and other data to reliably forecast expected accrual amounts where actuals are unavailable.
3-Way Invoice Matching
Automated matching of invoices, purchase orders, and receipts maintains accuracy through the accrual process.
Accruals can be enriched with multiple attributes like business entity, department, location, project, and more.
Targeted Accrual Campaigns
Users can initiate focused accrual campaigns for specific suppliers or periods to drive the accrual process.
The system handles reversals of previous period accrual entries and replacement with actual invoices automatically.
Complete audit trails and iron-clad controls enable accrual automation solutions to pass external audits.
Comparing Top Vendors
Here is an overview of leading accrual automation solutions on the market and their capabilities:
This comparison highlights key differences to consider when selecting your ideal automation platform. Work with experienced specialists to determine the best fit for your specific requirements.
Change Management Tips for Adoption
Implementing a new accrual automation system represents a major change. Following best practices can smooth the transition:
- Get executive sponsorship – Gain leadership buy-in on objectives, resources, and timelines for the project.
- Train thoroughly – Provide in-depth training to users on how the new system works and their updated responsibilities.
- Clean data – Take time upfront to clean up data issues and optimize data flows to the new platform.
- Define metrics – Track quantitative metrics like time savings and error reduction to showcase benefits.
- Celebrate wins – Communicate quick wins and encourage user feedback to build support.
- Refine over time – Continuously gather user feedback to improve processes, reporting, and adoption.
With a thoughtful change management approach, you can maximize adoption and realize the full potential of automated accruals.
Emerging Innovations to Watch
Leading accrual solutions are harnessing emerging technologies to further enhance automation:
- AI for accrual insights – Machine learning algorithms can forecast expected accrual amounts with greater accuracy.
- Natural language processing – Systems can automatically parse unstructured invoice data rather than requiring manual data entry.
- Predictive analytics – Data-driven models help determine optimal times and suppliers to target for accrual campaigns.
- Blockchain – Shared distributed ledgers bring new levels of transparency, traceability, and trust to supply chain accruals.
As technology continues advancing, finance teams can look forward to smarter and simpler automated accrual processes.
Are You Ready to Transform?
Manual accruals have no place in the modern digitized enterprise. By harnessing automation, companies can realize the intended benefits of accrual accounting. Leading solutions deliver dramatic efficiency gains, sharper insights, and reduced risk.
Now is the time to envision how accrual automation can transform your finance function. Contact our specialists at www.AcctTechAdvisors.com for a free consultation on finding the right solution for your organization‘s needs. Invest in automation and unlock the full potential of accrual accounting.