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Automate to Reduce Risk (and Costs)

Someone said something in one of the news lists which I subscribe to which is an incredibly succinct, insightful statement.  Here it is:

Automate to cut risk.

This is where I heard that statement. I prefer the term "reduce" to "cut". One could imply that "cut" could mean that risk could become zero and I don't believe risk can ever be zero, we just want to strive for zero risk.

Automation can also contribute to reducing costs.

In my reference implementation of an SEC XBRL financial filing I am up to 146 business rules which I use to make sure the XBRL is working correctly and therefore the financial report is correct.

Figuring out these rules and adding them manually using notepad is a lot of work.  To create these rules I had to work very, very hard to understand XBRL Formula.  If you add these business rules the way I had to, you will get to a high quality SEC XBRL financial report; however I understand people's reluctance to go through the effort because it is a rather daunting task given today's software applications for creating an SEC XBRL financial filings.

But, it will not always be this way.  Eventually, software vendors will get their act together and give accountants to software they need to create their SEC XBRL financial filings correctly.  Accountants will be able to prove to themselves that they did a good job and will be able to support their work.  It may seem very hard to believe today, but these business rules are a really good thing.

There are two ways you can check your work to be sure you did a good job: manually and using automated processes.  Doing these things manually is both expensive and so detailed that it really is impossible to get all the details correct.  Automation will turn this daunting task which is endured today into the solution pretty much everyone needs to get the quality of SEC XBRL financial filings where they need to be.

There are thousands and thousands of details which go into making a financial report the true and fair representation of a reporting entity's financial information that it needs to be.  Software is great at managing these details and performing repetitive, non-value added tasks.

Manual tasks will never go away.  But, the expensive and increased probability of errors caused by human involvement in this work can be reduced using automation.  Humans should do what only a human can do.  There is no way a computer will ever replace the judgment of a highly-skilled accountant. But computers can enhance the output and quality of an accountant's work.

Cars which are being created today could never be created without the robots which do much of the work to make sure all the pieces are there, put together correctly, and your complex automobile serves your needs reliably.  If you remember the lemon laws of the 70's and 80's, the reason that those laws existed were because so many mistakes were being made in the process of creating a car.

Software vendors will eventually deliver software which turns the complex process of creating an SEC XBRL financial report we experience today into a process accountants will prefer over the current processes of creating the legacy document formats of today.  Quality of the financial reports will be higher, both the accounting and financial reporting piece and the XBRL piece.

I know this his hard to believe and I am not asking anyone to take my word for this, it is a prediction.

Automation will make this prediction a reality.

Posted on Sunday, November 18, 2012 at 09:17AM by Registered CommenterCharlie in | CommentsPost a Comment

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