Oracle NetSuite Empowers Accounting Processes, Reshapes Financial Value!

The accounting cycle is an eight-step process that defines how companies should manage financial records to ensure timely and accurate reporting and reduce the risk of financial fraud. Sometimes referred to as the "Record to Report" or R2R process, the concept of the accounting cycle is a convenient way to discuss accounting as a business function.

However, R2R does not provide the full picture of the process: there may be only eight steps, but accountants must perform hundreds of repetitive manual tasks to complete these steps.

Accounting Cycle Steps:

1. Identify transactions. The accounting cycle begins with identifying financially relevant business transactions, which means including any transactions involving the collection or payment of funds. Gathering this information requires collaboration with personnel from multiple departments and may require the accounting team to access multiple systems. The relevant data comes in many different formats, including supplier bill details, employee expense reports, bank statements, and other documents.

2. Record transactions in the journal. The next step is to record these transactions in the company's journal. Once, journal entries were handwritten, but today, most organizations use computerized journals, which may be as simple as spreadsheets. What hasn't changed is the workload required to record journal entries, especially when transaction details are stored in many different systems or only exist on paper. Entering information into the accounting system requires manual data entry, a tedious and time-consuming process that increases the risk of accounting errors.

3. Post transactions to the general ledger. Once approved, journal entries are posted to the general ledger, which can also be done manually, with accountants posting each entry individually. This laborious process is common in entry-level accounting software packages and can be very time-consuming when dealing with hundreds of transactions.

4. Generate an unadjusted trial balance. As the accounting period draws to a close, the finance team will perform a trial balance to see if all transactions have been recorded correctly and to ensure account balances. If a company wants to track costs, sales, and other transactions by department, location, or other categories, many accounting systems require the use of long and complex account codes, making this difficult.

5. Review the worksheet. When accounts are out of balance (which happens frequently in some companies), the accounting team must find the root of the problem. This is often completed at the end of the month, so there is pressure to complete the task quickly. It's easier said than done. The primary responsibility of accounting is to ensure accuracy, and manually reviewing thousands of accounts takes time.

6. Enter adjustments. In addition to correcting errors, accountants may also need to create adjusting entries to record non-cash expenses such as deferred, accrued expenses, and depreciation. These entries are usually recorded on a set schedule. For example, a company might pay its annual insurance premium at the beginning of the year and then record the expense in equal increments over twelve months. Since spreadsheets are often used to track these schedules, there is a significant risk of data entry errors and calculation errors.

7. Prepare financial statements. Once adjustments have been made and account balances have been corrected, financial statements can be finally generated. Companies sometimes go through multiple reporting iterations, with managers requesting minor changes before finalizing the numbers. Accounting software without flexible reporting options may find it difficult to format financial reports to meet the needs of all stakeholders.

8. Close the period, top companies can complete this work within three to four days after the period ends. However, research conducted by the American Productivity and Quality Center shows that more than half of organizations need more than four days to close their books. For companies with limited automation, closing may take six days or longer.

Oracle NetSuite

NetSuite provides a complete accounting solution for companies ready to migrate from entry-level accounting software and spreadsheets, a solution that eliminates error-prone manual data entry and minimizes the time and effort required to perform daily accounting tasks.

Using NetSuite to automate the accounting cycle can save valuable time and increase the efficiency of accountants by eliminating time-consuming and labor-intensive tasks. Features provided by NetSuite include:

- A centralized repository for financial and operational data, allowing accountants to understand every business transaction.

- Rule-based transaction matching and automatic posting of journal entries, minimizing the risk of errors by reducing the need for manual data entry.

- Automatic schedules to ensure consistent recording of depreciation, amortization, deferrals, and accrued expenses, and apply them to the appropriate cost centers.

- Simplified accounts payable through automatic invoice scanning and general ledger code assignment, three-way matching of invoices, and automatic payments.

- Flexible reporting tools that can easily develop custom layouts to meet the requirements of different stakeholders.