It could be said that the insurance industry is more focused on reducing risk than many others. These companies handle the assessment of damages and costs every day. The front office is centralized around mitigating risk for its clients, so it is equally as important for the insurance’s back office to effectively reduce risk as well.
However, when insurance F&A teams rely on manual methods during the financial close, the financial close is not only delayed but it also further exposes insurance companies to the risk of misstatements or even compliance violations. By keeping these three strategies in mind, accounting teams can effectively decrease the overall financial risk while streamlining the overall process for all involved.
1. Migrate from Manual to Automated Reconciliations
When reconciling accounts with spreadsheets, accountants may find themselves dedicating a large portion of the financial close to matching and balancing those accounts. Focusing on repetitive tasks such as these means accountants are devoting their valuable time on reconciliations rather than value-adding and strategic activities.
Automating the reconciliation process highlights the discrepancies and pinpoints values that need to be investigated and corrected. Rather than scanning through endless documents and papers for miscalculations, accountants can reduce their risk profile by letting cloud-based software do the heavy lifting. This frees up a large amount of time for accountants to focus on decreasing risk in other areas and for more strategic activities, such as creating new and assessing existing finance controls.
2. Implement an Audit Trail
The insurance industry is subject to new and evolving regulatory requirements, and recent business disruptions have no doubt affected the performance of internal controls. Any errors that arise with internal controls can slip through when reconciling accounts with manual methods.
With cloud-based financial automation software, an activity log of all accompanying events allows you to track the progress of the financial close from start to finish. This activity log details all activities that took place within the task, meaning external auditors can easily follow an audit trail. Streamlining the auditing process creates a smoother workflow for everyone involved.
3. Stay Ahead of the Compliance Curve
Risk management is no doubt a high priority for all insurers. Calculating costs from claims and assessing risk for new accounts means finance teams are constantly reconciling balances. In an industry where compliance standards are ever-evolving, insurance F&A teams must stay on top of their workload, as well as ensure that the reporting is fully compliant with all regulatory reporting requirements.
Shifting away from manual methods of reconciliations ensures insurance finance teams stay ahead of the compliance curve. Remaining compliant with all regulations and standards during the auditing process is a must-have for insurance organizations.
With risk mitigation being an increasingly high priority, accounting teams can effectively reduce risk in their financial close processes with a shift to automated processes. Watch our on-demand webinar to explore how utilizing technology can further improve controls and mitigate audit risks.
Written by: Alex Clem