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Automating Internal Controls Is a CFO's New Best Friend: 4 Ways It SAVES MONEY Revealed

July 5, 2023

by

Paul Dixon

#

SAPCompliance

Businesses worldwide collectively lose around $3.5 trillion annually to fraud - that's according to research from the Association of Certified Fraud Examiners (ACFE). For all internal controls professionals and CFOs, the ACFE report should be highly concerning. After all, your business or organization is likely contributing to that figure.

And one of the fundamental reasons for this astronomical figure is failing legacy manual internal controls processes that aren't fit for purpose in a world where digital transformation is accelerating.

But here is some welcoming news for you.

The incredible advancements in technology, such as artificial intelligence (AI), data analytics, and machine learning algorithms, mean internal controls is transforming. And the automation of internal controls is already proving to be a game-changer. Not only does it slash fraud - it also cuts overheads.

This VOQUZ Labs guide reveals four ways automating internal controls can quickly boost your company's bottom line.

But first, let's remind ourselves what internal controls automation is.

What Is Internal Controls Automation?

In layperson's terms, internal controls automation uses technology (increasingly AI) to automate processes that help prevent fraud, reduce errors, mitigate risks, and meet compliance obligations. And the primary benefit is that negligent or fraudulent activity is identified and dealt with fast - leading to significant cost-saving benefits for a company.

For example, in the case of VOQUZ Labs remQ product, which operates within SAP ERP and S/4HANA as an add-on, internal controls teams can move from ineffective manual processes to technologically advanced automated ones.

Recommended reading: The following guide, Internal Controls Automation 101: What It Is and How It Works, provides an in-depth and insightful explanation.

The next section reveals four ways automating internal controls boosts your company's bottom line.

Number 1: Internal Controls Automation Slashes Fraud Cases

The first way that internal controls automation saves companies money is by slashing fraud cases - leading to a potential 60% reduction in losses.

And let's dive into how these incredible savings are made possible.

For example, internal and occupational fraud, although slightly different, basically mean the same thing: Fraud committed by a person against the organization for which they work. Returning to the ACFE report, another worrying statistic from the study is that the median loss because of occupational fraud was $145,000. And it gets worse because 24 percent of the cases caused losses of at least $1 million.

One reason why these figures are so large is because employees acting illegally exploit weaknesses in manual control systems, such as inadequate segregation of duties, poor oversight and monitoring, and many more.

Let's make an example to illustrate this. Employees with nefarious intentions are likely aware of how long it takes their employers to notice anything is wrong and plan accordingly - companies take 18 months to discover fraud on average.

But by how much can internal controls automation cut this number? The answer: massively. Using automated technology, companies receive red flags in real-time. And the result is that finance teams discover fraud cases much sooner. They also have a far higher success rate recovering the stolen money.

Number 2: Internal Controls Automation Cuts Employee Mistakes That Cost Money

The next way that internal controls automation boosts a company's bottom line is by reducing the errors that employees - who are human - inevitably make without any malicious intent. These can include mistakes such as neglecting to reconcile bank statements, inaccurate inventory tracking, and many more - there are hundreds of other possibilities.

And here is another statistic that should concern CFOs worldwide: As with internal fraud cases, around 50% of employee errors are only discovered by chance. And a further nail in the coffin of antiquated manual internal control processes is that only 40% of the time does it even detect errors.

But now, let's transform these worrying facts into an opportunity.

By embracing the automation of internal controls, there is a tremendous money-saving possibility because companies can hit two birds with one stone:

  •  Reduce the errors that employees make
  • Discover in real-time when employees make errors (and take action)

These facts alone present a strong business case for switching to internal controls automation - it's a no-brainer. And it's one reason thousands of companies adopt internal controls automation year-on-year.

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BROCHURE – the benefits of our products!

remQ - Turn compliance into a cost saver!

Organizations are increasingly exposed to compliance requirements. Adopting innovative ways to assess and manage risk and enhance performance is critical. That’s where data analytics and continuous monitoring are helping to simplify and improve the internal control system, increase operational efficiencies, reduce costs, and detect fraud and errors earlier. Internal controls become a way for organizations to create value.

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Number 3: Internal Controls Automation Reduces External Auditing Fees

The third way that the automation of internal controls can result in hard savings for your business is by reducing external auditing costs.

And rising external auditing fees are giving headaches to CFOs from companies worldwide. This Gartner report is revealing as it discusses how in recent years, companies have been dealing with rising external auditing costs (many of you reading will have professional experience with this).

The report from Gartner, a world-leading technological research and consulting firm, also states this:

"With audit fees increasing significantly, finance leaders should take note that organizations with higher levels of internal control automation saw substantially lower external audit fees on average."

And let's get specific on the cost-saving numbers. Gartner's research showed that if only 25% of internal controls are automated, a company will save 27% on external auditing fees.

Number 4: Internal Controls Automation Decreases Compliance Costs

Another incredible benefit of internal controls automation is that it trims the costs of complying with regulatory requirements.

And the reality is this: Compliance costs are increasing yearly as jurisdictions continue to implement new laws and regulations. This trend began in 2002 - the Enron scandal and other corporate fraud cases at the time (like WorldCom and Tyco) resulted in society losing confidence in corporate governance and financial reporting.

An example of a recent financial law and regulation is the UK's looming Failure to Prevent Fraud Offence. You can read how companies with operations in the UK must prepare in a VOQUZ Labs blog post here.

Overall, internal controls teams have a significant task, ensuring the companies and organizations they work for comply with the Sarbanes-Oxley Act (SOX) and similar laws in jurisdictions worldwide - something that costs a lot of money to get right.

So how does internal controls automation decrease compliance costs?

One of the ways it does this is by streamlining compliance processes. Put simply, automation eliminates manual and repetitive tasks, reducing the time and effort (which costs money) required for compliance activities such as data gathering and reporting.

Also, internal controls automation enables real-time monitoring of crucial compliance metrics - again, saving time and money because expensive processes aren't now required. And there is another huge benefit: It helps avoid compliance breaches that could lead to massive fines.

Final Thoughts and How remQ Can Help

The automation of internal controls also results in another benefit for your business: internal controls fortification.

And what happens when processes that control financial transactions and data are automated and fortified? The company enjoys strengthened security, minimized errors, enhanced compliance, efficient auditing, and, of course: bottom-line boosting cost savings.

VOQUZ Labs' remQ software operates as a SAP add-on with a library of 100 pre-built shipped controls ready to run. To learn more about how remQ can assist your business with its goals to cut audit errors, reduce fraud, and stay compliant within your SAP environment, you can learn more here.

ABOUT THE AUTHOR

Paul Dixon

Paul is a RegTech content writer & strategist with extensive experience in digital marketing and journalism. His work has appeared in the Guardian newspaper. He also holds a degree in International Relations, where he studied global sanctions compliance and cross-border finance.

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