3 Reasons to Stop Creating Financial Reports Manually (and 3 Things to Do Instead) If you haven't automated this process, you're wasting precious time.
Opinions expressed by Entrepreneur contributors are their own.
Your finances are your business's lifeblood. They're not the kind of thing you should leave up to chance. Having a complete understanding enables you to make smarter decisions by better evaluating your risks and capabilities.
Amazingly, even in today's tech-driven world, many businesses continue to create their financial reports manually. While working with data in Google Sheets or Excel may seem like a step up from paper recording, it still isn't your best option.
Problem #1: Manual report-generation is surprisingly error-prone
While tools like Google Sheets and Excel can automate some aspects of tracking financial information, it is incredibly easy for this process to go wrong. There's a reason why Microsoft has a full support page dedicated to detecting errors in Excel formulas.
Issues such as transposition errors, formula breaks or problems with a source-data link could result in error values or final calculations that are wildly off-base.
While an error message is relatively easy to notice, a faulty manually developed formula could return numbers that look legitimate — even though they aren't. As a result, business leaders could gain an extremely inaccurate picture of what their company finances look like.
Problem #2: Manual reporting detracts from data analytics
Due to the increased probability for errors in the manual-reporting process, those involved in reporting are often required to spend much of their time validating the data and making sure that it is correct.
As a blog post from financial planning and analysis company DataRails explains, "There are many points of review that must take place when creating manual reports. First, it is important to review and validate the data going into the report. Then, after reports are created, a second review is required on the method of presentation. This means that manual reports place a higher value on reviewing information rather than analyzing information."
By taking away the opportunity to analyze financial information, businesses can miss out on crucial insights that would affect key decisions. The data may be correct, but without deeper analytics, it is not as useful as it could be.
Problem #3: Manual reporting takes up too much time and resources
Manual financial reporting places heavy demand on your team's time and resources. Staff members must source and input financial data from a variety of platforms, and then validate that information to ensure that it is actually correct.
Quite often, team members must use multiple software programs to gather, manipulate and present data, creating several touchpoints where errors could occur. As a result, validation must occur at each stage — from transferring data to an Excel spreadsheet to when it is uploaded as part of a presentation.
Needless to say, this can take up a significant amount of time that could be used for higher-level tasks, such as analyzing what the financial data actually means for the overall health of your company. In fact, according to research from SmartSheet, "Nearly 70% of workers say the biggest opportunity of automation lies in reducing time wasted on repetitive work," with 55% specifically citing data collection as a productivity killer.
What can you do instead?
Using an automated system can completely transform your financial reporting mechanisms. Not only does this let you eliminate the common issues associated with manual financial reporting, but it can also generate new opportunities that help your team gain deeper, more actionable insights.
The following are key ways you can benefit from automated financial reports:
- Automatic report generation at regularly scheduled intervals. Advanced financial-reporting systems can be set to automatically generate reports based on your company's data without additional manual input. Not only do automation tools source and validate data internally, but they can also present it in visually appealing reports that are easy for decision-makers to use. The ability to quickly produce financial reports on a quarterly, monthly or even ad-hoc basis makes it easier for leaders to analyze the financial strengths and weaknesses of the company. Instead of focusing on whether the data is correct, they can instead focus on what the numbers mean for their organization's financial health.
- Live interactive dashboards. Because financial-data automation tools source their information in real time, decision-makers can conduct their own queries through a live, interactive dashboard. This allows users to quickly get information that might not necessarily be included in a standard report. Individuals from non-finance departments can often conduct these queries themselves, reducing strain on the finance department and helping individuals in other sectors of the company understand the financial implications of different areas relevant to their own responsibilities.
- Integrate forecasts with real-time data. Cash-flow forecasting can be crucial for helping a business remain in good financial standing. Automated tools ensure that cash flow forecasts account for the latest real-time data and budgets. This helps make forecasting easier and more accurate so that business owners can make wiser decisions based on sound analytics.
A better way to manage financial reporting
As with so many other aspects of doing business, technology has allowed financial reporting to become more efficient than ever before. By taking advantage of automated tools and dashboards that incorporate real-time data, decision-makers can gain access to accurate, insightful information to guide the way they manage their finances.