The dangers of using “traditional” tools for producing your financial statements

Producing your financial statement is a serious task. Smaller businesses often consult their accountants to complete it, but corporations frequently prefer to manage this work in-house.

The benefits are clear: you maintain better internal control, can apply your insights to the task, and may also save costs.

However, the danger lies in the hidden costs of using “traditional”, non-specialist solutions like spreadsheets.

Lost time, increased workload, and heightened risks – the issues with non-specialised software.

So, what can go wrong if you use spreadsheets like Excel or other applications like Word to prepare a financial statement? Unfortunately, the answer is “quite a lot”.

Spreadsheets, financial statements, and time lost

Recent studies suggest that month-end closing can take up to two weeks for finance teams. The lengthy duration is often due to the manual nature of tasks involved, from data compilation to error checking.

While commonly used, traditional tools like Excel and Word are not optimised for the complexities of financial accounting. You must tackle everything step by step, causing your finance teams to spend countless hours on data entry and adjustments.

The outcome? Any financial insights that could guide business decisions are delayed, putting a strain on management, irritating stakeholders, and stalling the decision-making process. Additionally, you might face penalties from Companies House.

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Error-prone tools

Traditional tools like spreadsheets and word processing programs are inherently error-prone.

They are not designed for preparing financial statements, leading to incorrect formulas, page numbering issues, and formatting inconsistencies.

These errors can result in significant repercussions, including inaccurate financial reporting and potential compliance issues.

Addressing these issues requires even more time. Finance departments can waste excessive hours double-checking and rectifying these mistakes, which could be better spent on more strategic tasks.

Compliance and regulatory challenges

Traditional tools struggle to keep up with evolving legislation, which increasingly grows more complex.

What does this mean for you? It means that you and your finance team must do the groundwork, ensuring that every meticulous detail aligns with current laws and standards.

Overlooking something can lead to compliance problems. At best, you may end up having your paperwork returned; worse, you could face fines or serious repercussions for the company’s leadership.

Complexity in consolidation

For corporations with multiple entities, consolidating financial statements presents a significant challenge. It is likely a hurdle you will face now or soon as your corporation expands.

Manually performing this task can quickly become problematic. Complexity arises rapidly; what seems like a simple task can swiftly turn into late nights and a chance for mistakes.

Intercompany transactions and currency conversions exacerbate the issues. When dealing with these, spreadsheets become impractical.

The need for modern solutions

Once you reach a certain size, utilising general consumer software like Excel and Word has limited effectiveness.

So, what should you seek in a dedicated accounts production solution?

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Automation and efficiency

Accounts production software is specifically designed to accelerate processes. You should notice the benefits shortly after implementation.

It automates repetitive and time-consuming tasks such as importing trial balances, mapping nominal codes, and generating reports, all crucial for preparing financial statements.

Compliance and accuracy

Fortunately, if you are concerned about navigating the latest legislation, accounts production software is regularly updated to reflect changes, ensuring that financial statements are consistently compliant and accurate.

The best software includes built-in error tracking and validation features that help identify and correct issues before finalising the financial statements, minimising the risk of non-compliance and its associated penalties.

Simplified consolidation

Accounts production software streamlines the consolidation process for companies with multiple entities. It enables easy data integration from different entities, performs intercompany adjustments, and manages currency conversions, ensuring consistency and accuracy in consolidated financial statements.

Custom templates and IXBRL tagging

Effective accounts production software provides powerful features like custom templates and automated IXBRL tagging. Custom templates standardise the reporting process, reducing the likelihood of errors, and saving time by allowing the reuse of templates for similar reports. Automated IXBRL tagging ensures that financial statements are correctly tagged for regulatory submissions, facilitating a smoother and more efficient process.

How IRIS can help you

Not all accounting software includes every necessary feature to address the challenges of traditional financial statement preparation.

However, solutions like IRIS Accounts Production provide a comprehensive suite of features that can significantly minimise the time and effort required to prepare financial statements.

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