Digital Financial Reporting

Are the numbers right?  Well, actually, many times no.  In an AccountingToday article, Are the numbers right?, Ranica Arrowsmith points out:

• Finance execs blame human error for inaccuracies
• Lack of automation contributes to human error
• Clunky spreadsheets and outdated processes contribute to an inability to automate

Accounting and reporting processes tend to be outdated.  Manufacturing processes benefited from applying Lean Six Sigma philosophies and techniques. Further, the use of robotics in the manufacturing process improved processes.  The typical accounting department tends to not understand Lean Six Sigma philosophies and techniques and uses little to no real automation.

Don't think you can automate tasks and processesf?  Think again.  Read what Deloitte believes can be automated. Now, Deloitte does not tell you HOW to automate processes.  Also, I personally believe that Deloitte is over stating the opportunity.  Some tasks and processes can be automated.  Here are the basics as to how:

1. Put information into structured and therefore machine-readable form.  Computers cannot reliably process unstructured information or information structured for presentation, such as spreadsheets. (Don't understand?  Watch How XBRL Works.)
2. Create machine-readable rules.
3. Use software to compare the machine-readable structured information with the machine-readable rules to make sure the information is mathematically consistent, logically consistent, etc.

Automated processes are already being used.  Unfortunately, not by the creators of financial reports and not remotely as extensively as is possible. But, software vendors such as XBRLogic, XBRL Cloud, and heck, I can even verify information using my processes.

Ultimately, intelligent software agents are going to be doing a lot more checking of the easy mundane and repetitive review tasks.  That will cause two things to happen.  First, the mundane and repetitive tasks will automated thus free up accountants.  Then, accountants will have more time to focus on the tasks that cannot be automated.

With the volume of information seemingly increasing at increasing rates and the complexity of information increasing as well; reviewing work is not just a matter of throwing even more bodies at the problem.

You can download a study undertaken by Blackline, Mistrust in the Numbers. Here are two nice infographics provided by Blackline:

• Financial Reporting Errors Eroding Trust and Wasting Valuable Time
• Is There a Reality Riff?

Interesting stuff.