The Top 5 Benefits of Journal Entry Automation
Transitioning from tedious and error-prone manual journal entries to automated processes provides major benefits: saving time, reducing errors, enabling real-time accounting, streamlining approvals, and strengthening controls. As accounting teams look to modernize their operations, automating journal entries should be a top priority.
Eliminating the Waste of Manual Journaling
Let‘s start with the basics – what are manual journal entries? In short, they involve accounting staff entering transactions into the general ledger based on paper documents like invoices and bank statements. It‘s a manual, repetitive process largely unchanged since the early days of bookkeeping.
While simple in theory, manual journaling becomes enormously complex and time-consuming for mid-size and large businesses. Even a moderate volume of 5,000 journal entries per month requires 1,250 hours for an accountant working at typical speeds – that‘s nearly 6 months of effort annually!
Just as concerning, APQC finds even efficient companies take 7 full days each month to close their books, with journal entries consuming 50% of that time.1
With such a massive time investment required, it‘s no surprise businesses seek to modernize journaling processes. Transitioning from manual data entry to automated capture and posting of transactions can reduce journal processing time by 50-80%. Those dramatic time savings translate into freeing up your accounting team for more strategic initiatives.
Eliminating Errors that Distort Financial Reporting
While journal entries may seem trivial, their accuracy and integrity are critical, as they form the foundation of your organization‘s financial statements and reporting. Unfortunately, manually entering thousands of transactions per month inevitably leads to errors.
In fact, research shows the average employee makes around 118 errors per year2 – a startling number. In accounting and finance roles, mistakes take on added significance, as they distort the accuracy of financial statements used both within your company and by external stakeholders.
Common sources of errors from manual journaling include:
- Incorrect amounts being entered
- Posting to wrong accounts
- Duplicating entries
- Omitting required approvals
- Transposing numbers
- Misclassifying transactions
By removing manual data entry and instead pulling information straight from source systems, automation solutions can reduce journal errors from over 100 per month to nearly zero, as one organization experienced.3 That‘s the difference between reporting that‘s distorted versus an accurate picture of company finances.
| Errors Per Month | Manual Journaling | Automated Journaling |
|---|---|---|
| Example | ~120 | 0-2 |
Table: Automation can virtually eliminate errors from manual journaling.
Enabling Real-Time Accounting Processes
Traditionally, journal entries are done in batches, with accounting staff entering transactions periodically after the fact. This results in latency between when business events occur and when they are reflected in reports.
Automation enables real-time capture of transactions from source systems. Rather than waiting to enter a batch of invoices or expenses, each is flowed instantly into the appropriate journal entry.
This real-time view allows you to make decisions based on up-to-date financial data rather than outdated snapshots. Automation also speeds up crucial processes like account reconciliation by avoiding lags in posting transactions.
Streamlining Approval Workflows
Most companies require additional approval and review for certain journal entries based on characteristics like transaction size, type, accounts impacted, etc. While prudent for accuracy and control, manually managing these approval workflows creates bottlenecks.
Entries queue up waiting for reviewer sign-off, delaying posting. Tracking down the right approver for each transaction adds to the time burden. There‘s also potential for entries getting lost or stuck indefinitely in someone‘s inbox.
Automation streamlines approvals by automatically routing each entry to the right reviewers based on rules and data attributes. Email reminders and escalation ensure no entries get stranded. According to research by the American Institute of CPAs, 85% of organizations rate automating approvals as very impactful.4
Strengthening Controls and Transparency
Unfortunately, manual processes also leave the door open for accidental or intentional errors and omissions in journal entries. In fact, the Association of Certified Fraud Examiners found that over 75% of accounting frauds originate with cooked books and bogus journal entries.5
Automating journaling fortifies controls and transparency. Detailed audit trails capture who entered and approved each transaction. The software applies validation checks and flags any suspicious activity. And the reduction of manual work decreases opportunities for errors or workarounds.
Together, these safeguards strengthen regulatory compliance and reduce organizational risk.
Realizing the Benefits of Journal Automation
Finance teams who transition from manual processes to automated journal entry solutions realize major impact across key metrics:
- 50-80% less time spent on journaling
- Up to 100% reduction in errors
- Real-time posting vs. batch processing
- 85% agree automated approvals are hugely impactful
- 75% of frauds mitigated with automated controls
Market trends highlight increasing adoption of automation. According to Ardent Partners, 73% of organizations now use some form of journal entry automation, with many more implementing solutions each year.6
Are You Ready to Automate?
If your organization is still manually processing journal entries, the business case for automation is compelling. Modern solutions can capture transactions in real time, improve accuracy, accelerate workflows, strengthen controls, and enable your accounting team to focus on more impactful work.
To learn more about automating journal entries, contact our team of experts. We‘re happy to provide guidance on selecting the right journal entry automation solution for your organization‘s needs. Our priority is helping you modernize your accounting processes and close your books faster.
