As accounting leaders use technology to increase efficiency and reduce workloads, they are finding further benefits in the form of improved accuracy and quality. For example, while lease accounting presents many opportunities for errors — affecting both financial reporting accuracy and strategic decisions made by businesses — the role of technology in eliminating mistakes and enhancing quality has never been more pronounced.
A recent research study by Gartner highlights how the adoption of new technology significantly reduces error rates among accountants, with 18% of them acknowledging making financial errors daily and more than half experiencing multiple errors monthly. This study, which surveyed 497 professionals in controllership functions in July 2023, highlights a pressing challenge within the industry. These mistakes add to the rising pressures faced by accountants, including increased workloads due to evolving regulations, economic uncertainties and staffing shortages.
Mallory Barg Bulman, a senior director at Gartner, emphasizes how the uptick in workload exacerbates these challenges. Left unchecked, this situation could lead to heightened financial and regulatory strains, stretching accountants beyond their capacities and increasing error rates. In highlighting the severity of these mistakes, Bulman focuses on their impact on business decisions, cautioning against the potential consequences of relying on erroneous data or distributing inaccurate financial statements. This indicates the urgent need for accountants to utilize effective technology solutions.
The escalating workload-efficiency dilemma
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Recent accounting standard updates such as ASC 842 have significantly changed how companies report on leases. This prompts businesses to ask the question: "Does this apply to my lease?" The unequivocal answer is yes. Whether it involves vehicles, equipment or land, all agreements meeting the definition of a lease must be included on the balance sheet as assets and corresponding liabilities for future payments.
This paradigm shift underscores the importance of identifying embedded leases within contracts, a task often overlooked in year one of implementation. Contracts for services or outsourcing that necessitate the use of specific equipment dedicated to a company's operations could imply an embedded lease, requiring a thorough analysis and documentation of the contract's nature to determine its presence.
The lease standards present a significant ongoing challenge, often demanding triple the anticipated time and resources, particularly when relying on spreadsheets. This complexity directly correlates with the potential for errors and the inefficiency of manual processes.
Embracing the technological imperative
Using technology provides hope for reducing mistakes and increasing efficiency. A highlight of the Gartner survey is the finding that companies embracing digitization experience a 75% reduction in financial errors. However, the effectiveness hinges on software that is user-friendly and customizable and provides comprehensive insights in a single interface.
Instilling a culture of technological acceptance within accounting departments is crucial to unlocking the full potential of these advancements. A comprehensive strategy aimed at building a technology-friendly environment includes actively engaging staff in the process. By allowing for feedback during vendor testing and other technology initiatives, organizations can ensure the tools they adopt align with staff needs and are viewed as valuable assets rather than burdensome mandates. This approach empowers users, fostering a sense of ownership and facilitating smoother adoption of technology and software.
The call to action for accounting departments is clear: reevaluate current technology strategies and embrace innovative solutions built to meet the demands of today's accountants. This transition is about more than tool selection; it entails creating a team mindset that views technology as an indispensable ally to achieve accuracy and efficiency in financial reporting and an overall better work-life balance for your organization.
Venturing into the realm of software, especially in light of new standards, is a collaborative effort. It's about accountants joining together with technology partners to navigate today's complex financial landscape. Think of it as a partnership where together, we make sure every figure, every little detail — including every lease — is pinpoint-sharp and crystal clear. It's about refining technological capabilities and discovering tools that seamlessly align with requirements. Why? Because when we get the technology right, those errors start dwindling. The ultimate goal is not just achieving accuracy on our balance sheets but setting the gold standard for financial integrity.
