Financial reporting can be evaluated quantitatively and qualitatively. If you need hard numbers, you can look at how long reports have been overdue or how old the data is. These kinds of metrics show you if your reporting process is inefficient or ineffective and to what extent, but they still don’t tell the full story. For that, you need to look at the reporting process qualitatively as well, adding up the soft costs that are hard to track, but impossible to ignore. Here are a few of the biggest soft costs.
Effective financial reporting and manual data inputs are natural enemies. Building insightful, actionable reports requires significant amounts of data that has been carefully organized and analyzed. Automation can handle this work systematically, speeding through the process. When humans are doing it, however, it takes hours or days of tedious work from accountants whose time is better spent on other things. The soft cost is whatever those professionals could add to the organization if they weren’t occupied with data entry.
When humans enter reporting data by hand, errors are guaranteed. They may come in the form of keystroke errors, omitted information, or broken context. Mistakes are inevitable when people try to arrange oceans of facts and figures by hand. The best outcome is that these errors get overlooked and prove to be irrelevant. More often, however, errors can multiply until they start to distort metrics, sometimes substantially. The soft cost is that work put into reporting ends up wasted because of undetected error propagation that produces unreliable insights.
Reporting routines that utilize manual inputs and, as a consequence, include data errors ultimately result in incomplete, unreliable insights. And sometimes accountants retrieve incomplete or out-of-date data. Great reports need to include broad and deep swaths of enterprise data. Unfortunately, the amount of work required means that reports are either deep (but slow) or fast (but shallow). The soft cost is that decision-makers who rely on reports to carefully steer the company may be using performance metrics that are incomplete or inaccurate. The results of those decisions may not become apparent for quite some time.
A bad reporting process is one that is heavy on boring manual work. It creates all kinds of obvious and invisible errors, and finally produces a document of little value. Going through this process once would be hard on anyone. Now imagine going through it quarterly or even monthly while getting regular requests for new and revised reports.
Accountants are used to being detail-oriented, but that doesn’t mean they have endless patience for inefficient workflows that waste their time and talent. Eventually, bad financial reporting can leave people disengaged from their jobs (which only makes reporting worse) or even burned out, leading to employee turnover. The soft cost is an accounting department that feels overwhelmed with busy work instead of empowered with insights.
Soft Costs Add Up
There’s a difference between a process that requires time and attention and one that’s fundamentally broken. Reporting often falls into the latter category because when you add up all the soft costs, it becomes clear that companies lose more than they gain from much of the data they collect. It’s an unsustainable situation and a waste of the digital assets that are the lifeblood of enterprise performance.
Ultimately, soft costs due to bad financial reporting processes accumulate until they’re hard to ignore. Relying on automation to collect, organize, analyze, and visualize reporting data eliminates those problems, all while using real-time data. That way, finance teams can focus their efforts on creating new, insightful reports, customizing existing reports, and applying the insights through smarter decisions.
Hubble solves bad reporting and the soft costs that go with it by using advanced automation combined with intuitive, accessible tools. Explore how it works in action. Download our Whitepaper: A Better Way to Conduct Month End.