How to Take Control Over Regulatory Compliance with Automation
By Toni Buffa Posted May 16, 2022
There are multiple advantages of workflow automation that will boost your finance department's compliance efforts.
- Do You Have a Culture of Compliance?
- Managing Regulatory Disclosure Processes
- Four Requirements of Internal Compliance (eBook)
Of all the hassles faced by finance teams, regulatory compliance is one of the standouts. Your finance department needs to ensure the company complies with government regulations — such as Sarbanes-Oxley, FINRA, and more — while also preparing for regulatory audits. There is an ever-present risk of noncompliance and potential fines, but the ongoing compliance efforts can also place an immense burden on your team. This is especially true if your finance operations still rely on manual processes.
Fortunately, automated workflows can take the pain out of regulatory compliance. There are multiple advantages of automation that will boost your finance department's compliance efforts. The following are some of the most significant benefits of automation in this area.
Transparency Helps with Ongoing Compliance
Manual processes in finance operations increase regulatory risks in numerous ways. Lack of transparency is one of the biggest culprits.
Complete visibility is almost impossible when finance workflows are based on spreadsheets, emails, and paper documents. Which activities have been completed, which are pending, the status of any specific action — the finance department is in the dark about all of these questions without a deep dive into manual records. This makes regulatory compliance even more difficult.
Automated processes provide the transparency that manual processes do not. An automated platform allows your team to continuously monitor finance operations, allowing you to see potential compliance pitfalls on the road ahead. Identifying compliance problems and taking corrective action is also faster and easier. Easing these burdens also allows the finance department to spend more time monitoring the regulatory landscape – a key function since regulations are in constant flux.
Internal Controls Can Be Enforced
Another key feature of automated systems is their ability to enforce internal controls — the finance department’s policies and procedures designed to protect against the risk of financial loss, damage, or other negative outcomes. Internal controls are critical tools for effective regulatory compliance, and automation makes these tools more effective.
There is a heightened risk of internal controls not being followed due to simple human error with manual processes. Furthermore, the internal controls may slow down the workflow so much that they do more harm than good.
On the other hand, automated systems simplify the enforcement of internal controls. Information can be collected with automated online forms, forcing the user to input all the necessary data. The approval workflow is also followed automatically. This means there are no oversights with approval requests that need to be escalated to higher levels, directed to alternate approvers, or sent along other contingency pathways. When the rules are consistently followed, internal controls can do their job in ensuring regulatory compliance.
Audit Trails Generated by Automated Platforms
Automated platforms also help with regulatory compliance by easily generating audit trails. By providing a chronological history of all the events that occurred in any workflow, audit trails act as a backbone of compliance. If a company needs to generate compliance reporting or pass an internal or external audit, the audit trails will serve as the roadmap.
If a company’s finance workflows are based on paper memos and spreadsheets, all sorts of problems arise. Those memos could lack the appropriate approvals, pose storage issues, and be challenging to locate.
On the other hand, an automated system can quickly generate audit trails with all the critical information. So if the finance department needs to find out how a capital expenditure was initiated and ultimately approved, the automated platform can provide that data. This data will include every user who took some action for that expenditure, the precise action, and a date and time stamp.
Automated audit trails can take a considerable burden off finance departments by providing detailed information in quickly-generated reports. Not only do they provide a defense for compliance purposes, but they also ensure user accountability. This accountability will ensure that future compliance efforts will be more effective.
Increase Speed and Accuracy with Automation
One of the most essential ways automation helps with regulatory compliance arises from one of the most basic benefits of automation — it increases speed and accuracy.
Speed and Accuracy Problems with Manual Processes
Manual processes provide many opportunities for human error. A paper memo or email can easily include mistakes or oversights. One simple error in a spreadsheet could carry over to many other calculations, reports, and spreadsheets without being caught. These errors and missing information will inevitably result in a higher risk of internal controls not being followed and non-compliant events occurring.
In addition, manual workflows slow down the compliance process. For example, a finance team using manual systems may need to complete reconciliations and risk management controls throughout the closing process. This creates considerable inefficiencies in the company, creating more risk of non-compliance. In effect, the manual systems create a downward spiral of increasing compliance dangers.
How Automated Workflows Improve Speed, Accuracy, and Compliance
Contrast the problems outlined above with the features of automated workflows. All forms and approval requests can come in standardized formats, which the user must follow. The system will not allow actions to be taken without the necessary information or supporting documentation. And an automated system can actually perform calculations and spot errors. No more dreading the inevitable spreadsheet error that results in a big miss on the quarterly report.
Then there are the twin aspects of speed and efficiency. Automated workflows can be conducted on a centralized portal, decreasing the risk of duplicate or inconsistent requests. Status inquiries can be made by viewing a dashboard. Approvals can be done with the click of a button, even on a mobile device, instead of with a signature on an easily misplaced paper memo.
The net effect? Automation results in fewer mistakes and faster processes, leading to better compliance with internal controls and regulatory requirements.
Implement Workflow Automation with Regulatory Compliance in Mind
If you are thinking of implementing workflow automation for your finance operations, keep regulatory compliance top of mind. When pitching the idea to a leadership structure focused on the bottom line, focus on the abilities to avoid regulatory fines and streamline audits. These make for strong selling points.
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