Auditing financial processes in businesses has come a long way from its first establishment in the Roman Empire, which served to ensure that local provinces handled treasury assets and expenditures correctly. Fast forward a few thousand years to the industrial revolution, auditing enabled private individual investors to become part of the business process for the first time. Their job was to ensure that information provided by management was accurate and that funds were spent wisely and with transparency.
Enter the age of digital transformation.
Auditing financial processes in today’s world
Since the late nineties, the world of auditing financial processes has changed dramatically. Where previously, teams of technical accounting expertise were required to sift through reams of financial information, now automation has taken over the bulk of routine bookkeeping tasks and clerical accounting is no more. Nowadays, with the ever-increasing complexity of business and the explosion of data in today’s digital world, it is critical that businesses evolve their accounting processes and embrace advanced technology tools.
While digital accounting is fast becoming the norm in the industry, many small businesses still follow a more traditional route of manual accounting. With the arrival of newer, faster techniques and accounting software upgrades, business owners often undervalue the significance of digitising their operations.
Not only does digital accounting decrease the burden of having to deal with managing taxation, expenses, receipts and payments, which normally require a hired specialist, but it also saves you time and money and gives you the ability to prioritise running the business, rather than focussing on the operations of business recording. One of the disadvantages of manual accounting is the difficulty around storing the information. With manual accounting, information is generally stored in a variety of places and while recording the information or managing the books may not be challenging, gathering the information and using it to create a report or summary is.
Not only do digital accounting systems streamline operations, but it makes life easier for the owners. It makes it possible to store all the information in one specific place and owners are able to get real-time access to essential details and information, such as critical financial data, from cash flow to balance sheets, with a few clicks. With digital accounting systems, important financial information is readily accessible. This plays a major role in the operations for a small business. In a market where instability is dominant, the timing of decisions and their turnaround times is crucial. The time it takes a company to achieve a decision is indicative of the business’s inability to adapt and react to changes in the financial environment. With paper-based accounting systems, the turnaround time of processing information and making decisions is considerably longer and in a modern-day market, this could cost a business quite a fortune.
One of the main aims of the changes to technology is the ease of use. Accounting software applications provide users with convenience, comfort and are easy to use in comparison to the manual methods. A digital format means that previously manual tasks are now fully automated. This gives you the freedom to run multiple financial tests on readily available data in minutes, it increases the efficiency and productivity of your team and can reduce costs.
Accounting applications also ensure increased data security. While you may have a filing system in-store, there always lies the threat that records may go missing or get stolen. With digital accounting, you have the ability to back up your data and secure it safely in a server. Now you have the ability to obtain the information even if things go wrong.
While humans are naturally prone to making mistakes and errors, digital account software is considerably more reliable and scalable. Human error is almost inevitable when a person in compiling data. In order to combat this, a small business will often hire additional staff to make sure mistakes don’t go unnoticed. While this may lower the chances of errors creeping into your system, it will also increase your costs. With a digital accounting system in place, you will have reliable data on hand and it will save yourself the cost of additional inspection.
Apart from the reliability, accounting software is simple in nature. For small businesses who are currently in their growth phase, a manual accounting system is fine temporarily. However, a major reshuffle will need to take place as the business grows and the scale of operations increases. This process can be strenuous and costly. With a digital accounting system in place, such as Sage, businesses are able to adjust the system to the growing needs of the company.
While we understand that adopting a new operating system is daunting, successfully auditing financial processes can benefit your company immeasurably. Get in touch with us today.