5 Benefits of Digitizing Month-End Close Processes
Digitizing month-end close processes offers several benefits that can significantly improve the efficiency and accuracy of financial reporting. By eliminating manual processes like data entry and paper-based transactions, digitization and automation can reduce the risk of human error and data loss.
The end of the month can be stressful for your financial team. Between calculating employee wages, paying bills, and balancing budgets, there is a lot of financial data to keep track of. And unfortunately, due to human error, that data can easily be lost. 78% of finance professionals believe that manual processes result in more mistakes, such as lost documents and compliance breaches.
But all of these issues associated with financial reporting can be avoided with digitized month-end accounting.
Digitized (and automated) month-end close processes reduce human error, improve account visibility, and boost cash flow. This approach to financial reporting saves your accounting team money and time—making room for high-level, strategic tasks.
Let's look at five ways digital payments can streamline your month-end close process and improve your clients' experience.
Digital-First Financial Records
Nowadays, digitizing financial records is commonplace, so you may think this point is standard. But, having those records created and managed digitally at all times is not commonplace.
Digital records are often derived from data entry. For example, your finance team generates invoices and receipts, crunches the numbers, and manually inputs essential data (like amounts due) into a system, creating the digital record.
Fully digital payments offer a different process. Instead of manually inputting that information at the end of every month, everything is automatically digitized from the start. Invoices, receipts, and other financial documents are sent via email. And if you no longer accept paper checks, you can receive payments digitally, too.
In other words. digital-first financial records ensure you don't waste any more time inputting financial data, and you decrease the chance of costly human errors. And when time and accuracy are of the essence during month-end accounting, your accounting team will be grateful for software that streamlines—or bypasses—data entry.
Payments Are Faster
Adopting digital payments allows companies to send invoices and receive payments much faster than analog options. One study estimates that by 2025, transaction volumes will increase by over 80 percent thanks to the accelerated transaction processing speed.
This advantage is directly related to digital-first accounts receivable processes. Since invoices are automatically processed into a digital format, these invoices can be sent out much faster. As a result, you can receive your payments quicker, dramatically reduce DSO, and foster healthier cash flow.
Certain digital payment technologies will also alert your customers to overdue payments. For example, a client's payment is six days past due. With a manual process, you would need to manually review outstanding invoices regularly, and if you notice a missed payment, you would also need to contact your customer. However, with a digitized and automated accounting system, your ERP can automatically alert the customer of the missed payment. This ensures that fewer payments slip through the cracks and you receive your payments as soon as possible—without creating extra work for your team.
Transactions Connect to Accounting Software More Easily
It's always easier to do things from a single location. When you use a digital payments platform (along with automation in your closing process), you can control and monitor all financial transactions in a single place.
If you use financial control/accounting software to manage your finances—like NetSuite or Sage Intacct—digital payments make integrating your transactions into those systems easy. So, while your accounting team uses that software to manage the rest of your general ledger, they can also quickly access data about your accounts receivable transactions.
Data Is Secure, Traceable, and Transparent
Accepting cash or check payments can make your month-end account prone to error. This goes back to the issue of manual data entry—any time your teams manually insert financial information from physical monetary assets, mistakes are more likely to happen. Additionally, physical payments can be lost (while it's rare, it does happen).
And the worst-case scenario, manual financial reporting can also encourage potential fraud. According to the Association of Certified Fraud Examiners (ACFE), organizations lose an average of 5% of their revenue because fraud and detection can take up to 12 months.
Digital payments and automated processes help you know, monitor, understand, and adjust the cash flow based on accurate financial data. Rich information accompanies every transaction, so you have an extensive report on the source of your client's purchasing history. This, in turn, allows your business to develop trust with clients and intuition within your own system.
These transactions, from invoicing to account reconciliation, are traceable by both you and your client. Each business can see the financial data associated with a transaction, which can lead to a more satisfactory and transparent business relationship.
More Opportunities for Automation
The benefits we've discussed so far only scratch the surface of what digital payments can do for your business. With the right technology, digital payments can help you automate even more processes, including:
- Cost management
- Security compliance
- Tax compliance
- Account reconciliation
- Invoice follow-ups
An automated accounting system is only possible with a digital foundation. Once implemented, it can reduce time spent on low-value but repetitive tasks, such as data entry and matching transactions from financial statements with outstanding invoices. Not only does automating processes save the finance team time and money, but it streamlines the month-end process.
How Can You Tap Into Automated Accounts Receivable?
These benefits are great to be aware of, but how can you actually implement digital payments in your current accounting system? Fortunately, it's easier than ever to tap into these advantages.
Paystand's eBook on streamlining the month-end close process goes in-depth on the five most critical month-end tasks, including accounts payable, accounts receivable, and tax compliance. We address the benefit of automating those tasks and even link you to accounting software solutions to help you implement that automation.
Download How to Make Month-End Accounting Stress-Free with Automation today to start putting digital payment advantages to work in your business.