Dismantling the Challenges with Manual Journal Entry Processes

Journal entries are a necessary and critical part of the financial close process. For many accounting teams, the month-end close is marked by the hectic and sometimes herculean task of completing large volumes of journal entries.

In the current business landscape, efficiency and accuracy are key, and manual journal entry processes stand out as an unnecessary and risky bottleneck. However, they are easily avoidable.

Take it from Patrick Schmidt, a former financial accountant and external auditor who is now a Principal Solutions Consultant at BlackLine. In the video below, Patrick talks about manual journal entry processes and why it's time to move beyond them.

The traditional approach to journal entries is dominated by manual processes, spreadsheets, and paper binders—all managed by various teams that prepare, approve, post, and validate entries. This complex process disrupts finance and accounting (F&A) efficiency.

1) They are time-consuming and have control issues.

Manual journal entries demand time, precision, and coordination. This often translates into extended work hours for F&A team members, especially during month-end close. At many organizations, there is a rushed approval process because reviewers are focused on the sheer volume of entries rather than risk associated with reviewing them properly. Sometimes, there just isn't enough time to get through all of the journal entries. Because of this, sign-offs may take place after the due date or after the journal entries are posted, which, more often than not, is going to result in rework.

And because journal entry processes often exist amid a fragmented and non-standardized set of tasks required to close the books, manual journals can complicate and disrupt the closing process, further extending cycle time.

2) They are prone to mistakes.

Humans make mistakes, but simple mistakes in data entry can lead to significant inaccuracies in financial reporting. If one or several journal entries are booked incorrectly, that's going to result in more rework. With manual processes, you don't have validation rules, and this can lead to errors not being caught in the approval process. In addition, there will always be certain journal entries that aren't straightforward and require complex data manipulation and calculations, which introduces risk.

3) They make audits challenging.

Ensuring compliance and maintaining a clear audit trail is difficult with manual entries. It requires checking source documents, extra layers of verification and approvals, and gathering and storing audit evidence to support journals. Team members struggle with remembering where a document was saved on a computer or network drive or where a hard copy was filed. Inherently, there are version control issues associated with journal entries as well.

BlackLine recently conducted a survey of over 1,300 C-level executives and finance professionals, and 47% of those surveyed expressed concerns about making decisions based on outdated or inaccurate information. There’s a good possibility this inaccurate information started with a faulty and error-prone manual journal entry process.

It’s clear the problems with manual journal entries need to be addressed.

Many companies are turning to automation but have tried to plug the gap with disparate technologies. This creates a scattered landscape of systems and tools that teams must learn and interact with, adding complexity to an already complicated and pressure-filled process that spans across teams and geographies and can involve non-standard review processes.

This doesn’t sound like it’s simplifying the process, but instead, only making it more confusing!

Did you know that you can automate over 70% of your journal entries and slash your closing time by up to seven days? According to a recent report from EY, integrating journal automation into a smart closing and reporting process can work wonders for your finance team. It all starts with getting transactions right the first time, reducing manual work, and speeding up month-end processes.

BlackLine’s Journal Entry solution revolutionizes the entire journal entry process by leveraging automation where it matters most. By automating standard, data-driven journals and providing predefined templates and rules, BlackLine significantly reduces the volume of manual journals and the effort required to process them.

With real-time, flexible workflows and customizable templates, BlackLine ensures efficiency and consistency in journal entry processes. Plus, seamless data imports improve accuracy and reduce the risk of errors. By freeing up accountants from mundane data entry tasks, BlackLine allows them to focus on analysis, review, and strategic contributions that drive business growth.

BlackLine Journal Entry helps companies enhance controls and save time by transforming end-to-end journal entry processes. There are many ways to simplify your workflows with BlackLine Journal Entry, including:

1) Pre-validation tools know which entries are okay to post and which aren’t. Pre-posting validation catches entry and logic errors before the ledger can reject them.

2) Add custom fields to your journal template to fit your organization’s unique workflow, and in turn, streamline user assignments. Field customization simplifies tasks within your journal process.

3) Using bulk assignments, you can mass assign many transactions at once. This allows you to easily provide coverage if the original user is out. Bulk assignments saves time and adds efficiency.

Get 10 more tips and tricks here!

BlackLine has helped thousands of our customers modernize their financial close process, and they’ve seen results like:

• Automated up to 97% of their journal entries.

• Spent 50% less time on manual work.

• Eliminated 1,500 hours of manual journal entry work each year.

• Reduced the close by 50%.

When the next month-end comes around, think about what your team could accomplish if they spent less time on manual journal entries and repetitive tasks and more time on value-added activities. The possibilities are endless … and it all starts with BlackLine Journal Entry.

Hi everyone. My name is Patrick Schmidt and I'm an accountant by trade. I spent eight years in finance and accounting as both an external auditor as well as a financial accountant out in the industry. I also happen to be a BlackLine user for over five years as well. Today in this video we're going to talk about manual journal entry processes and why it's time to move beyond them and also how are we going to do it successfully. So we know that manual journal entries are a critical part of the financial close process. They're necessary for every accounting organization. And companies book hundreds, thousands, or even tens of thousands of journal entries each month, often in BlackLine's journal entry solution. Now, there's three primary challenges or costs associated with manual or traditional journal entry processes. Number one, they are time-consuming and they have control issues.

In many cases, we see that there is a rushed approval process simply because reviewers are focused on volume rather than risk. There just isn't enough time in the day to wade through all of the journal entries and sign-offs take place after the due date or after the journal entries are posted, which more often than not is going to result in quite a bit of rework. And overall, humans just make mistakes. Journal entries can be booked incorrectly, and again, that's going to result in more rework that needs to happen for those journals. It's also tough because you don't have validation rules, and this is another thing that's going to lead to errors getting missed in that approval process. And there's also going to be certain journal entries that aren't as straightforward. There's complex data manipulation and calculations, and this is all just going to introduce unnecessary risk.

Audits are also another challenging aspect of journal entries because documentation is going to be hard to find when the audit comes around. You ask yourself, where did I save that file? If you guys printed them out, they're going to be somewhere in a filing cabinet blocked away, or you're going to have to dig through the network drive and hopefully find that support and sign off that you were looking for. And inherently, there's going to be version control issues associated with journal entries as well. And there's certain reasons to change. We are constantly being asked to do more with less from an accuracy standpoint.

BlackLine recently conducted a survey of over 1300 C-level executives and finance professionals, and 47% of those surveys expressed concerns about making decisions based on outdated or inaccurate information. And finance and accounting leaders have taken steps to address these challenges, but they've come up short. They've tried to plug the gap with disparate technologies, and that just creates a scattered landscape of systems and tools that you have to interact with, right? Just again, adding to that complexity. And the processes are typically non-standard. So that could be across teams, across geographies, and non-standard means the review process is going to be disparate as well.

And journal entries remain a month end close activity as opposed to something that's done continuously throughout the period. So what's a different approach here? Reducing manual work in increasing speed and accuracy requires a more holistic approach. And finance and accounting leaders need to replace manual journal entries with specific targeted automation, and they also need to centralize this information for easy access to audit supporting documentation. And we also want to future-proof your process with a closed loop process that can work with any ERP, not just the ERP that you have today, but the future ERP that you might move to upgrade or even inherit as a part of M&A activity. And let's think about the perfect world scenario. And in this case, that's going to be BlackLine's journal entry solution. This is something that is integrated with our other financial close solutions, allowing for a true end-to-end process as far as automation goes.

And BlackLine has helped thousands of our customers modernize their financial close process. In fact, we have certain customers that have increased efficiency so much that they have automated 97% of their journal entries. We've even seen 50% less time spent on manual work. And layered on top of all of that is the ability into these different processes and journal entries that leadership desperately needs. So BlackLine's journal entry solution is comprehensive in that it integrates with your ERPs and your other BlackLine financial close solutions. And we're going to centralize the automation creation review and posting of journal entries. So when next month end comes around, think about what you would do if you could spend less time on manual journal entries and repetitive tasks and more time on value-added activities for your organization. We also want to provide complete and accurate actuals to our decision makers faster. Now, if you like this video, please feel free to drop a subscribe to the channel or add a comment if you want to talk about different topics you'd like us to cover in a future video. Thank you.