Organizations are continuously adapting to manage the ongoing stream of data, implementing strategic business plans to ensure that the company remains on top of current trends. But data volume management can be an arduous undertaking, specifically in highly regulated industries such as the energy industry. Without implementing some sort of data volume management strategy, organizations leave themselves vulnerable to risk from retaining data beyond corporate policies or penalties incurred from not responding properly to an audit request. Audit requests from tax authorities and regulatory organizations can be challenging, and data volume management needs to be a priority for finance and IT departments so that the organization can remain compliant with data retention policies and then quickly and simply extract data to respond to these requests. While some organizations implement an archiving strategy to retain data after the fact, an increasing number or organizations are digitizing business processes such as accounts payable and journal entry approvals to ensure that information is being stored properly from the beginning.
Digitizing Manual Processes
Digitization of processes enables organizations to take what were once labor intensive manual processes and turn them into efficient, effective means of gaining control and oversight into the organization. Outdated processes limit potential growth, and manual data entry is not only inefficient and time consuming, but prone to error. This can be remedied by digitizing processes, offering the organization more insight and visibility across the systems of record and opening the door for the exploration of new, key metrics. Collecting these metrics will allow the organization to benchmark process performance, providing valuable business insight and impacting corporate decision making. Digitization of processes also provides employees with time formerly spent on manual processes, which can now be used on tasks that offer the organization more business value.
The most important value realized by energy industry organizations that digitize processes directly relates to their newfound ability to comply with stringent data retention requirements, and to properly and quickly comply with audit requests. Digitization makes it possible for departments to automate manual invoice processes, which reduces the average invoice cycle time. This helps with compliance, and does so in a manner that provides immediate financial and process driven benefits. Some of the tangible returns on investment realized through digitizing processes include cashing in on early payment discounts, significantly reducing document storage fees, and improving the accuracy of data for tax reporting. These early payment discounts can add to the finance department’s bottom line. Prior to digitizing processes, many organizations are not only failing to receive these discounts, but they are actually incurring penalties due to an inability to properly process invoices in a timely manner.
Accounts Payable
Accounts Payable Departments are typically in charge of invoices, and digitization can significantly help the department’s overall efficiency. Prior to digitization, the process involves manually entering invoice details into a system of record, and the invoice is then sent through the necessary approval channels within the AP Department, often recording approvals manually on the original paper document. The process is labor intensive straining industry resources and stressing the need for automation within the organization. Digitization offers enhanced controls by automating processes such as approval routing and exception handling, which significantly increases the speed with which invoices can be processed and offers transparency into real-time invoice data. The increased speed in processing is a key factor in helping the organization capture early payment discounts.
Some of the other tangible benefits of automation include ensuring corporate compliance, reducing missed accruals, which helps grow the organization’s bottom line, streamlining work centers and improving vendor relationships. Other savings due to increased automation come from reducing document storage fees and automating the processing of low-dollar, high-volume invoices.
Journal Entry Approvals
Another area that can benefit from undergoing digitization is an organization’s journal entry process. Processing journal entries manually, prior to digitization, can lead an organization to experience many of the same problems as the Accounts Payable Department, starting with manual errors and delays in closing financial statements. Journal entry processing can be complex, especially for companies with multiple divisions and legal entities, extensive intercompany transactions or disparate accounting systems. Any journal entries generated outside of the system of record can be manual and prone to error. The process also lacks transparency as multiple stakeholders cannot review and approve the entries in a timely manner prior to posting, and complex spreadsheets must be shared by email.
In addition to poor transparency leading to untimely approvals, organizations with outdated manual processing of journal entries are at risk of ensuring that appropriate approvals or reviews are completed and that all required supporting documentation is available.
Organizations experiencing these issues can benefit from digitizing journal entry approvals. Digitization will help bring process implementation into the future, and provide tangible, near-term benefits by helping to lower costs, increase operational efficiency and significantly improve controls. The reduction of paper-based processing costs lowers the cost of funding, streamlining and automating processes enables the organization to scale, and improved controls help improve compliance due to the newly implemented digital approval tracking. Some of the immediate benefits an organization will experience are the ability to promptly and accurately comply with strict audit requirements, which is particularly important for regulated industries, and a significant reduction of financial close.
The correct digitization approach that matures over time will help the lifecycle of the journal entry process, starting with support for standard journal entry and eventually offering enterprise-wide control over global and cross-company journal entry processes. One issue faced by organizations operating globally is that they must deal with different accounting and regulatory requirements. This necessitates insight into each global location’s requirements, and makes it crucial to facilitate local control. Digitization enables the requisite people to have visibility into each location’s unique requirements, facilitating the review and approval process. Accountants responsible for manually approving journal entries are now less burdened with the approval processes, and financial executives responsible for fiscal reporting are put at ease when considering the accuracy of the results.
Conclusion
Controlling data is something that many organizations need to address, and an increasing number of them are looking towards digitization of important business processes, such as accounts payable and journal entry approvals, as the most effective solution. Undergoing a digitization effort removes many of the issues that manual, labor intensive processes present to an organization, including slower approval times, manual data entry and approval errors, and the inability to capture significant cash flow benefits provided by early payment discounts. Digitization allows for the excess volume of data to be easily stored, securely in compliance with industry regulations, and recalled at a moment’s notice for use in tax and regulatory audits.
Furthermore, digitized processes provide full transparency into the audit trail, offering visibility into information as it moves throughout the organization. Auditors are increasingly making this a priority, and this also helps the finance department capture data points along the entire process lifecycle. This can be used by the organization to evaluate the processes in place, and to seek out other areas where process improvements may make the organization more efficient. On a large scale, digitizing processes gives important organizational decision makers two key things – control, and the ability to retain data – both of which are essential in highly regulated industries, and especially the energy industry.
About the Author
As Dolphin Enterprise Solutions Corporation’s Chief Strategy Officer, Mr. Shannon is focused on business processes and financial solutions to maximize return on investment. He has more than 20 years of SAP experience and his background includes thought leadership, knowledge management, project management, training and SAP consulting with extensive experience in the automotive and manufacturing sectors as well as oil and gas, retail and utility verticals. Mr. Shannon’s industry and finance experience includes positions as a National Credit Manager, International Finance Manager, Corporate Banking Credit Analyst and Financial Strategist. He earned a Bachelor of Arts degree in Political Science from the University of Manitoba, and an MBA in International Finance from the University of South Florida.
