Leveraging Technology for Advanced Financial Reporting

8 min read

December 4th, 2024

The role of technology in financial reporting is increasing exponentially. Thanks to new tools for streamlining and enhancing processes business functions like data collection, financial reporting, and analysis have changed drastically and are continuing to evolve along with the dawn of new tech like machine learning, artificial intelligence, and blockchain systems.

For small business owners and nonprofits, advanced technology might seem out of reach, overly advanced, or too expensive. The reality, however, is that these new technologies are beginning to permeate accounting software and financial management tools at all levels. Plus, many of these innovative tools are being developed specifically for smaller and mid-sized organizations, as these tools make it possible for growing businesses and nonprofits with tighter budgets to access top-notch data for improved decision-making and leadership.

The Role of Technology in Financial Reporting: How Technology Improves Financial Reporting

Financial management tools implement new technology to accomplish several goals, including:

Automated Data Collection and Report Generation

Advanced technology is increasingly automating data collection, eliminating the need for manual entry systems. Automating data collection benefits businesses in several ways:

• Back-office employees are not bogged down by repetitive tasks and can, instead, focus on value-adding work.
• Automated data collection increases accuracy by reducing human error.
• Lower error rates mean more accurate data and more reliable reports.

Additionally, paired with artificial intelligence technology, automated data collection can be used to detect irregularities that can indicate errors or other concerns, thereby improving consistency across reporting periods.

Read More: The Pros & Cons of Outsourced Accounting Services

Shored Up Security

Despite the cybersecurity risks introduced, technology has vastly improved financial security. With continuous improvements, technology provides new ways to strengthen financial data through superior encryption, strengthened communication, and blockchain-based systems. It also provides businesses with real ways to limit employee access, separate duties, and ensure an adequate distribution of power within their bookkeeping and accounting systems.

Additionally, cloud-based financial management software and tools undergo automatic updates, ensuring that every user is always operating within the most recent and most secure version of a program.

Consistent Standardization

Consistency in financial reporting is essential to producing compliant reports. It's also essential for producing financial reports that can be understood. Without consistency in data collection and reporting processes, there is no way to compare this period's reports to the prior period's reports and understand whether or not your business has improved or worsened or how effectively you are meeting benchmarks and achieving goals.

Technology helps to provide a framework and system for defining reporting standards and implementing the processes that are necessary to following the standards.

Data Visualization

Financial management technology not only automate data collection and reporting, but they can also provide ready-to-view charts and graphs that allow users to easily identify patterns and trends. Plus, many software suites and tools provide users with customizable dashboards that automatically include the metrics and visual data that are most important to you.

Real-Time Information

Automated transaction processing, categorization, and general data collection translate to continuously updating financial records. While you can also go back in history to view the previous period's numbers, advanced technology has made it possible to view numbers that are accurate down to the minute. So, you can track performance on a day-to-day basis, compare performance at different times of the day, and know that you're always basing your decisions off of the most up-to-date information available.

Simplified Collaboration

Cloud-based financial management technology has revolutionized the way businesses can collaborate in financial management. In order to have help with your back office, you used to need someone to physically visit your business to access your records. Now, you can quickly share, message, update, edit, and collaborate - no matter where you or your bookkeeper, accountant, CFO, or outsourced advisor is located.

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Integrated Artificial Intelligence (AI) and Machine Learning (ML)

As machine learning and AI technologies continue growing and improving, they are becoming increasingly present in financial management technology. Software using AI and ML are being used to improve a variety of aspects of financial management including:

• Automated expense categorization
• Continuous transaction processing, categorization, and real-time data updates
• Automated anomaly detection
• Automated fraud detection
• Streamlined transactional risk assessment
• Instantaneous scalability in financial management systems

In addition to this plethora of automated and streamlined tasks, AI and ML are also revolutionizing financial management with predictive analytics. AI and ML are trained to recognize patterns, and can be used to strengthen financial models and budgets in addition to forecasting cash flow, revenue, and expenses based on historical data. AI and ML can also help business leaders look at "what-if" scenarios through financial simulations and modeling. This enables leaders to assess different paths and potential outcomes based on statistical analysis and real data.

Actionable Insights and Better Decision-Making

All of these improvements - automation, standardization, security, collaboration, and AI-powered assistance - come together to help business and nonprofit leaders improve their operations through better data-driven decision making. When you understand your organization's numbers, you understand how it functions, how it can be more successful, where challenges exist, and where opportunities can be found. With reliable, accurate, and timely financial data, you can increase efficiency, strengthen employee satisfaction and productivity, and maximize your profits or your impact.

Read More: The Pros and Cons of Outsourced CFO Services

How to Leverage Financial Reporting Technology in Your Business or Nonprofit

When implementing new technology and changing back-office systems, it's important to proceed with caution. Consider the following advice:

• Understand your business's needs before you purchase software and tools. Knowing your needs and goals will ensure you select software that includes the features and capabilities you need. You'll use the tools you pay for and not waste money on superfluous features that are not yet relevant to you.
• Implement changes in stages. Don't overhaul your system overnight and expect your team to hit the ground running the very next day. Implement changes at a pace that allows for adequate training, data migration, and employee buy-in.
• Choose software that integrates seamlessly with the tools you want to use. Trying to work with an accounting software that is not compatible with your other business applications (human resources, payroll, time tracking, etc.) can lead to siloed information and will create additional work by getting in the way of process automation.

Combine Team, Tools, and Technology for a Winning Financial Management Strategy

Small and medium-sized businesses and non-profits can leverage technology in their back offices to streamline and enhance processes to accomplish the above-listed goals. By pairing technology with the right tools for your business and a team that can help you get the most out of them, you can optimize efficiency, rely on actionable insights for data-driven decision making, strengthen your leadership, and maximize profits.

If your business or nonprofit is falling behind in financial management, then you can jump-start your strategy by teaming up with an outsourced accounting service provider like GrowthForce. We can help you choose the tools that are right for your business and work with you to understand how to use your new reporting capabilities to take your organization to the next level.