Of the 7 steps you can take to reduce compliance cost and minimize financial loss, technology is the first to consider. The right application of technology can convert your risk management framework from project-based control testing approach into an ongoing and continuous process.
While manual controls are generally detective in nature and prone to error, automated controls are preventive, accurate and require less time to test. In addition, certain controls will not provide any assurance when subjected to manual sample testing due to the high volume of transactions involved. Consider these two examples from the revenue and purchasing cycle:
- Revenue Recognition – Telecom and electricity distribution companies generate millions of invoices every month. Inaccuracies may creep in due to multiple reasons. It is virtually impossible to manually check each invoice and sample testing of even a few hundred transactions will not provide any assurance. By deploying an automated technology solution, it’s easy to compare critical fields from multiple applications and databases. This includes customer master data like bill plan and customer categorization as well as actual utilization such as call time in the case of a telecom company or electricity consumption in electricity distribution companies. This will reveal potential cases for investigation (a manageable volume as compared to the total number of transactions) where there are billing errors that need to be manually reviewed and finalized.
- Duplicate Invoice / Payments analysis – In the process of checking an invoice to prevent duplicate payments, it is extremely difficult to make accurate and timely payments by manually comparing each invoice against thousands of records with multiple combinations of fields (vendor code, invoice date, invoice number, amount etc.) Automation not only improves the speed and accuracy of checking invoices, regardless of the number of combinations, but can also dive into another level of detail such as removing special characters or space bars in the invoice number field which is difficult to check manually. The list of potential duplicate invoices or payments generated through automation can then be manually reviewed and resolved.
Testing the entire universe of transactions through automation provides greater assurance at lightning speed. Manual intervention is required but can be minimized with automation, leading to cost benefits for the organization and efficiency in control testing.
This article was written by Ajay Gupta from CapGemini: BPO Thought Process and was legally licensed through the NewsCred publisher network.