Whole ledger analytics insights help finance perform better
A revolution in technology used to perform financial statement audits is bringing unprecedented, game-changing value to audit clients, unlocking the potential for efficiencies and strategic opportunities that can radically improve the finance function at organizations large and small.
A data-driven technique such as whole ledger analytics helps audit clients discover manual tasks that could be automated, find anomalies that need further investigation and help finance personnel focus on higher-value duties.
"Auditors get all this data as part of your audit,” said John Howell, Principal, Transformation for Grant Thornton LLP. “It can be used to create real value and insights for clients — uncovering things that they would not have known otherwise thanks to the power of the audit technology and all the information it pulls in.”
Companies already are benefiting from whole ledger analytics in ways that would have been unthinkable just a few years ago. Whole ledger analytics techniques enable auditors to test entire data sets rather than sampling. A byproduct is that it also uncovers strategic opportunities and efficiencies.
“Auditors get all this data as part of your audit. It can be used to create real value and insights for clients.”
Auditors can use the information to set up Power BI dashboards with insights that were unavailable to finance leaders in the past. Ultimately, the dashboards help management identify data-driven opportunities to improve their finance and accounting processes.
The dashboards also can validate and quantify previously known pain points, and can allow companies to compare their own processes to best practice benchmarks.
The concept sounds great in the abstract. But it’s even better once you examine the real improvements that whole ledger analytics is permitting audit clients to make.
Scrutinizing manual journal entries
One significant source of wasted effort in finance departments is the performance of journal entries when systems are capable of entering them automatically. An audit client might know that, say, 60% of its journal entries are manual but it might need insight on which entries could be automated.
Whole ledger analytics provides the capability to identify which journal entries are done manually, which are automated, and how many manual journal entries each employee is performing.
“Accountants are great about wanting metrics, but they typically don’t have enough metrics about their own activity,” Howell said. “The key is giving them opportunities that they can work on in bite-sized chunks.”
For example, because fixed assets is a common module across most major enterprise resource planning systems, it would be reasonable to anticipate that the integration between the fixed asset module and the general ledger would result in all depreciation expenses being recorded in an automated fashion throughout the year. Whole ledger analytics can quickly show which of those entries are not automated, as well as who made the manual entries.
When audit clients can decrease their number of manual entries, they create opportunities to reduce headcount or provide staff opportunities to perform more valuable tasks. It may also increase satisfaction among staff who don’t enjoy the tedious job of booking manual entries.
“If you've got people that are being paid a high salary and they book 1,000 entries a year, is that really what you want them doing in today's work environment?” Howell asked. “How much longer are they going to tolerate the job, right? They want to be doing higher value-added things.”
Whole ledger analytics also can be used to:
Discover duplicate payments. In a large and complex organization, the risk of duplicate payments to vendors — even if inadvertent — is very real. Whole ledger analytics can help the organization discover duplicate payments. Duplicate payment tests can search for variations of the vendor number, invoice number, invoice date and invoice amount fields. While this is not a preventive control, it can lead to cost recovery, and sometimes the duplicate amounts can be substantial.
Reveal efficiencies that can shorten the close process. Whole ledger analytics can provide a detailed analysis of when entries were booked after a closing period. This analysis can be compared with the close calendar to see which functions were late booking entries and which entries were early or on time.
Identify unusual accounts or entries. One feature of whole ledger analytics enables auditors to gain a different perspective based on examining combinations of accounts.
“This extra value-add is actionable information,” Howell said. “These analytics provide audit clients with bite-sized chunks of issues they can work on and then track over time because dashboards can be built in so there’s no extra work involved for them.”
Analytics lead to savings
Grant Thornton auditors using the firm’s patented whole ledger analytics technology have identified numerous opportunities for savings. Here are just a few.
Separate, otherwise identical entries were found showing the vendor’s name with and without “LLP” at the end, leading to a $200,000 cost recovery.
Manual journal entries
Unnecessary manual entries can be automated, saving staff time; in one case, manual entries jumped from 600 to 2,500 in one year.
One audit revealed that a director of finance was among the leaders in manual journal entries, performing low-level tasks at a high salary.
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