Journal Entry Process Automation

By Padmaja Alavarthi

In most of the organisations, it is common even today that journal entry postings are done by entering the data manually. This is the most time-consuming process in accounting and impacts every finance department's productivity. It is a norm that just before the month-end closing, most of the journal entries are created. This makes accountants task stressful, leads to overtime work, rush in getting the required approvals, thus makes companies cut corners with audit and control.

These are still manageable in small organisations where only a few people are involved. As the organization grows, more and more people get involved, more the legal entities, and in several locations, things get more complicated, and the number of journal entries for recording will rise as well. We can imagine the complexity when the organization operated in multiple ERP systems.

The following are the indications for companies to benefit from journal process automation the most.

It is a clear indication that if you are entering more than 500 entries on an average per month or dealing with the GL document with multiple lines and you are processing many such documents, then it’s time to think on how to automate the process. You will be saving more than 50% of the time that you are spending on journal entry recording and instead focus on accurate management reporting. Investment to cut the time required for each journal will have a strong ROI.

It is a legal requirement in many countries to keep the hard copy and to be produced when required during the audit. Filing the hard copies for future reference is still fine and is a legal requirement. However, collecting the support documents and getting the approvals after compiling all the required documents based on paper documents is no longer required—this needs to be digitised and hard copies to be referred only when needed.

The entry that you need to record is from the previous month's excel file, and you are not sure if the values are still valid. You will know this only when trying to enter or upload the file into your ERP system.

It is a clear sign that you need to optimise your process even before you think of automating the process in case if you are still relying on manual approvals and then followed by posting the entry in the ERP system. This is a time-consuming approach and error-prone. After receiving all the approvals, excel upload might end up with validation errors, redo the entire checks, and in the worst case, you may need to send the file back to the creator, which is again manual.

Most of the time is spent on identifying from which system these entries are, validating the data, checking the format and segments even before proceeding with the posting. In the case of multiple ERP systems or with multiple instances of ERP system, you can imagine the total processing time if the entry is not valid and need to route it back to the creator.

If you are receiving journals from various channels like emails, scan copy, fax, or any other, then it is tedious to keep track of the overall journal process.

The above challenges signals you on when is the right time to automate the process. Now let us see the features required before you decide to proceed with any automation tool.

When you decide to deploy the JE automation tool, the first and foremost is to check if it is guiding you in the best practice approach. All the validations to be in place as soon as you receive the file and upload it immediately even before it is routed for approvals. Document to be approved once all the checks are performed, data is validated, and is ready to be posted in the ERP system.

Accountants will no longer spend their time performing manual tasks but instead will spend more time on management reporting. It should provide efficient, real-time, and easy to use reporting features that can be used for tracking and monitoring the journals in the system.

The system should be able to keep track of each document right the start till the document is posted. Log functionality to be available to verify compliance with corporate policies. Routing of the documents based on the delegation of authority set as per company policies and procedures. Flexible to update the routing rules in case of organisational changes.

Detailed audit log to be available at any point of time to check on the information right from the date received till the document gets posted along with the approver's details, levels of approvals, comments, and the supporting documents, if any added during the process.

It is very important to have all the documents stored and archived digitally and can be retrieved at any point of time.

It will be convenient if an approver is notified to his/her email address if there are any documents received and is waiting for their action. The approver should have the functionality of web or mobile or mail approval and should be able to view or upload the supporting documents if any, while approving the document.

With more powerful automation, greater process management capabilities, centralised compliance tools, and seamless financial close integration, it is possible to get the process under control. Last but not least, it is not required to automate everything in one go. You can strategise to find a solution that solves the problems highlighted at every step of the way in the course of optimising and automating the journal entry management.