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Improving the Manual Journal Voucher Process

Introduction

While there are many benefits to implementing integrated software systems and bolt-on technologies, significant performance improvements are often possible from a direct inspection and redesign of underlying work processes.  While it’s never a good idea to automate a bad process, it’s always a good idea to formally review process steps on a regular basis to capture quick wins by eliminating costly work steps and bottlenecks.

The accounting close is a work process that happens frequently (typically every month), requiring significant resources.  It is also a work process that is difficult to benchmark because of industry and company-to-company differences.  No matter how diligent you are it’s hard not to end up comparing apples with oranges.  Rather than completing a complex benchmarking exercise that yields questionable results, at Peeriosity members can explore discrete differences in design using both Peercasts and iPollingTM, which support members’ efforts to explore specific topics in-depth, allowing them to quickly canvas leading companies to create a clear picture of design alternatives, and make informed decisions for a path forward, that is right for them.  All without any influence or bias from vendors or consultants who might have a financial interest in the choices that are selected.

One area that often has unnecessary complexity in the accounting close is processes related to the creation of manual journal entries (also known as journal vouchers), where controlling the frequency and use of manual journal entries continues to be a challenge for most companies.  However, with a focused initiative to utilize process design and technology to simplify this area, companies can make significant headway in minimizing the number of entries that are required.      

Company Experience

A PeercastTM discussion in our General Accounting research area featured a large global manufacturing company with over $50B in annual revenue discussing their approach to improving the efficiency and business controls for their manual journal entry process over a 3-year period. At the start of the improvement project, they were processing 15,000 manual journal entries per quarter with more than 500 employees creating journal entries.  The manual journal entry process was heavily decentralized across geographies and organizations with little governance or oversight. 

In the first year, their focus was to analyze and understand the landscape for manual journals and begin to lay out a foundation for governance with defined policies and with support from senior management.  Initial results were a reduction in the number of entries by over 20% with a reduction in the number of employees creating manual journal entries by more than 10%.  During the next two years, they centralized much of the manual journal entry process and automated where possible, allowing them to achieve additional decreases in the volume of entries and a dramatic reduction in the number of manual journal entry preparers by more than 35%. 

iPollingTM Results Review

Peeriosity’s iPollingTM was used to provide supporting data for the Peercast, by asking members to comment on how recently their companies made a formal attempt to reduce manual journal entries, with a follow-up question to explore which approach had the greatest impact. 

To the question about timing, 83% of member companies indicated they have projects that are currently underway, with the balance of 17% who had journal entry reduction projects that took place within the past two years.  Obviously, this is an issue that continues to receive focus and attention across virtually all large global companies. 

poll on reduction of manual journal entries in the company

When considering what has had the most significant impact on reducing the number of manual journal entries, the top pick, at 55%, was to implement technology to automate journal entries.  The next most popular selection at 27%, was to implement a threshold or increase existing thresholds.  Other techniques commonly used but not cited as the most significant included targeted training to reduce errors that lead to manual journal entries, moving certain journal entries to a less frequent cycle, and limiting which employees can create manual journal entries.

poll on the most significant factor reducing the number of manual journal entries

Closing Summary

As demonstrated by our feature company, taking a formal project approach to understanding the manual journal entry process can yield significant results to both improve efficiency and increase business controls.  Many companies are actively making the effort to reduce the number of manual journal entries and achieve impressive results from their efforts.

How recently has your company made a formal attempt to reduce the number of manual journal entries?  Which approaches have had the greatest impact?

Who are your peers and how are you collaborating with them?

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“PeercastsTM” are private, professionally facilitated webcasts that feature leading member company experiences on specific topics as a catalyst for broader discussion.  Access is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from attending or accessing discussion content.  Members can see who is registered to attend in advance, with discussion recordings, supporting polls, and presentation materials online and available whenever convenient for the member.  Using Peeriosity’s integrated email system, Peer MailTM, attendees can easily communicate at any time with other attending peers by selecting them from the list of registered attendees. 

“iPollingTM” is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from participating or accessing content. Members have full visibility to all respondents and their comments. Using Peeriosity’s integrated email system, Peer MailTM, members can easily communicate at any time with others who participated in iPolling.

Peeriosity members are invited to log into www.peeriosity.com to join the discussion and connect with Peers.   Membership is for practitioners only, with no consultants or vendors permitted.  To learn more about Peeriosity, click here.

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