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The Compliance Risk of Spreadsheet-Based Financial Processes
Recently here on the NextProcess blog, we’ve been discussing the prevalence of spreadsheet issues and steps your organization can take to correct those issues. “About 94% of the spreadsheets in use contained faults,” according to an analysis of several different spreadsheet studies (Poon et al., Frontiers of Computer Science, 2024, p. 1). If you’re a large organization using spreadsheets extensively, having most of them contain errors can be a huge issue for your company.
Compliance risk is one of the big ways that spreadsheet errors can damage your company. Spreadsheets aren’t a reliable tool for meeting the regulatory requirements for financial data management. Manual documentation and data entry can result in errors and messy data that are difficult to audit, use, or regulate.
Transferring most or all of your financial processes from spreadsheets to business process automation (BPA) software makes it much easier to mitigate the risk of error and comply with financial regulations.
Complying with Regulatory Requirements
Local, state, and federal agencies set and enforce regulatory requirements that companies must follow for financial data management. Failure to comply with these sorts of regulations can result in fines, damaged reputation, and other penalties.
Regulations change and increase every year in the midst of changing technology. The move from paper-based business processes to digital ones necessitated updated regulations to keep data secure. The rise of AI and other new technologies continues to give rise to new regulations, and your company will need to comply with those as they come out.
Protecting data online, particularly sensitive data, is one of the biggest challenges. Everyone that your company works with from customers to vendors to employees has the right to expect that their personal and financial information is secure and private. For example, anyone in the healthcare industry must comply with HIPAA regulations to protect patients’ data.
There are also regulations on data governance, reporting, and monitoring, some of which will vary depending on your industry. For example, financial institutions must comply with the Financial Crimes Enforcement (FinCEN) anti-money laundering rules. Organizations are expected to comply with policies related to data quality, access controls, audits, accurate reporting to regulatory bodies, and other such regulations specific to their industry and location. This type of reporting is much easier if you’re not relying on spreadsheets.
How BPA Can Help
Business process automation (BPA) software provides an innovative and robust alternative to spreadsheet-based financial processes. Software-as-a-Service (SaaS) providers like NextProcess make implementing new BPA software simple. With a SaaS company, the software provider takes the burden off your IT department and builds regulatory tools into the software that you can customize based on your company’s exact needs.
Comprehensive Audit Trails
With spreadsheets, errors are often present from the creation of the document. Issues can also arise from human error in manual documentation. If multiple people work with different versions of the same spreadsheet, you can also have problems with miscommunication and possibly conflicting file versions.
BPA software automatically produces comprehensive audit trails, replacing manual documentation with easily accessed digital databases. The software logs every aspect of the financial processes, recording all important documents as well as transaction information including processing times, internal comments, date stamps, and similar data. The information is accurate and easy to search, making audits simple and ensuring reliable data to comply with regulations.
OCR Technology
Another issue with spreadsheets is that human error can easily generate costly mistakes. When entering data manually, it’s easy for people to leave out or move a decimal point, add or delete a zero, or mistype a number without meaning to. These simple mistakes can cost a company thousands, though, if they’re in a critical spreadsheet.
Optical Character Recognition (OCR) technology allows you to scan a printed image and generate a digital equivalent. It’s not just an image of the document; it’s a usable digital version. This type of technology virtually eliminates manual data entry errors. Combine OCR with image indexing technology, as we do with NextProcess software, and your BPA system creates a searchable index for every aspect of the document (text, barcodes, etc.) as well as metadata (date received, user who submitted, etc.).
Timestamp Logging
As BPA software works, it automatically logs data. This data includes timestamps, giving your company a record of exactly when something happens. It assigns a timestamp to documents and data entering the system, modifications to that data, etc. It also logs any employees associated with the process. Timestamps are critical for ensuring data integrity and it’s required in many industries, including much of the data managed in healthcare, education, insurance, and finance.
Automatic timestamp logging helps your company meet compliance standards and maintain data integrity by keeping a record of modifications to every document, data set, and financial process. You’ll have a reliable timeline and a record of every modification. For example, if your procurement department negotiates a contract with a vendor, the system automatically logs timestamps for document creation, any modifications, and signatures.
The NextProcess Difference
NextProcess enables your company to take control of financial processes, no matter how complicated they are. Our software modules provide a true end-to-end solution that covers budgeting, project management, purchasing, accounts payable, and payments. They also integrate seamlessly with your editing ERP software. Data regulation and security technology keeps your data safe and helps your company comply with regulations, including industry-specific regulations like HIPAA. We also regularly update our software to maintain cutting-edge data security.
If you’re ready to mitigate, and possibly eliminate, the compliance risk associated with spreadsheet-based financial processes, contact NextProcess today. We’ll be happy to answer any questions you have and set up a free, no-strings-attached software demo so you can see first-hand how our BPA software can help your company.
