The goal for businesses at the end of the fiscal year is to create financial statements that reflect their company’s financial performance accurately. These financial statements are not just for the benefit of the company but also for external stakeholders who have a vested interest in the company’s financial performance. 

Keeping these things in mind, it’s the responsibility of the company to ensure that their financial reporting is free from any sort of errors. This is where anomaly management in accounting comes into play. 

It is highly imperative that businesses these days have an effective anomaly management framework. Companies deal with a high volume of daily transactions nowadays, increasing the chances of error-prone reports. The best solution in such a scenario is to leverage an automated anomaly management system that is capable of identifying anomalies early on and giving accountants enough time to take corrective measures. 

Let’s understand in detail how businesses can create an effective anomaly management framework. 

How to Create an Anomaly Management Framework in Accounting

1. Understand the challenges

To build an anomaly management framework, businesses first need to understand the challenges they usually face when it comes to anomaly detection and resolution. Companies need to start by accessing the current measures they are undertaking for anomaly management and identify improvement opportunities. It’s important to do a thorough analysis to see where the current systems are lacking. 

Another thing to do would be to analyze the historical data and understand what kind of anomalies accountants have come across before or if there’s a pattern to recurring anomalies. 

2. Leverage advanced technologies

A key step when it comes to creating an efficient anomaly management framework is the implementation of relevant technologies. Just like any other industry in today’s day and age, the finance and accounting industry can’t suffice with basic automation and manual processes. 

The anomaly detection and resolution processes, along with other accounting processes, are time-consuming and complex. Add on to that the sheer volume of financial data that companies need to handle on a daily basis, and it’s practically impossible to track and check every transaction manually. Therefore, companies these days need to use AI/ML-based anomaly software that can proactively identify anomalies and provide timely resolutions. 

Ideally, companies need to have a complete fintech stack that enables seamless data integration across departments. This will ensure that the automated accounting systems have data available in real time for efficient anomaly management and financial close. 

3. Establish effective internal controls

Implementing strong internal controls is one of the key aspects that businesses can’t ignore these days. In order to adhere to accounting standards like GAAP and IFRS, companies must establish internal controls. Fraud and risk management is not only facilitated via the use of technology for identifying technical anomalies. Errors and omissions could also be an outcome of poor management of human resources or a person having too much control over anomaly management processes. 

Due to these reasons, it’s crucial that businesses implement internal controls to segregate duties effectively and establish internal review and approval workflows for anomaly management. In addition to this, companies also need to make sure that they run regular checks on the established internal controls to check their effectiveness and make improvements accordingly. 

4. Be audit and compliance-ready

The reason why anomaly management is an important part of accounting processes is because it ensures fraud and risk prevention. Inaccurate financial reporting could leave businesses open to more audits and even legal actions. This is why it’s important for businesses to have strong audit trails, meaning proper documentation for all financial transactions. 

Furthermore, adherence to accounting standards is non-negotiable for publicly traded companies. Not complying with such standards will again make companies liable for legal actions, and ineffective anomaly management could land companies in exactly the same situation. 

5. Train employees

Apart from leveraging automation technologies and implementing internal controls, a key investment companies need to make is to train their employees when it comes to security measures related to anomaly management. 

Companies could conduct regular sessions to train employees regarding the proper use of automation anomaly management software and the importance of following the established internal controls. 

Conclusion

Effective anomaly detection and resolution is driven by the use of automated anomaly management solutions, understanding internal processes and establishing internal controls, and ensuring that employees are up to date with security measures. Following these steps is absolutely necessary for businesses, as they can help businesses with risk management and fraud prevention.