How to dramatically simplify financial audits with automation (with 11 examples)

Sivan Peri
April 8, 2024

Sivan Peri

Sivan Peri is VP of Finance at Similarweb, a leading digital data platform specializing in web analytics. As the second finance hire at Similarweb, Sivan served as Controller for many years and was part of the company's IPO leading team in 2021. Prior to Similarweb, Sivan worked at Ernst & Young as a Senior Associate auditor.

Company name

About the company

In this article:

Get our best content in your inbox!

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
See Ledge in action

Audits are rough, no two ways about it, especially when you’re managing complex finance operations. 

While every business has its own unique set of challenges, finance teams usually confront the same core set of problems when it comes to audits:

  • Aggregating financial data across many different, fragmented sources
  • Preparing labor-intensive working papers and PBC documentation
  • Painstakingly piecing together transaction journeys for audit samples
  • Managing Excel files so big they take 10 minutes to load
  • Ensuring key internal stakeholders are aligned with your deadlines
  • Maintaining super clear lines of communication with your auditor

… all while continuing to juggle your day-to-day responsibilities and manage the year-end close, to boot.

But automating your finance processes can make it infinitely easier to both prepare for audits and manage the process once it’s underway. 

Here are 11 ways automation can change the game for your next audit.

1. Implement application controls – and reduce sampling! – with automated journal entry creation & posting

(Rather than investigating dozens of transaction flows one by one)

The challenge: If the thought of transaction sampling sends a shiver down your spine, you’re not alone. It’s extremely challenging when you’re manually managing finance operations and don’t have proper application controls in place.

The solution: An automated solution like Ledge supports automated journal entry creation and posting. This means that rather than relying on faulty manual processes, you’ve implemented robust internal controls that greatly mitigate the risk of error. 

It also means that the audit team can review the logic of the journal entry posting and a small number of samples to verify compliance rather than sampling a large number of manually generated journal entries one by one.

This is a win-win for everyone involved – it’s far less work on your end throughout the year when you’re approving journal entries and it makes sampling a breeze for both you and your auditor.

Important for: All finance teams that manage a high volume of payments and/or complex finance operations 

2. Achieve SOX compliance by automating the approval flow of journal entry posting and reconciliation review

(Rather than scrambling to manually document processes and controls throughout the year)

The challenge: Proving that you’ve implemented robust internal controls and documenting a detailed audit trail is tough when you’re manually approving journal entries and managing everything in Excel, which is prone to manipulation and errors. 

The solution: In an automated finance operations tool like Ledge, every action, whether it’s automatic or manual, is recorded and posted in an automated approval process with an audit log to support. Remember, application controls are always more efficient and trustworthy than manual controls.  

With all data and processes centralized in one platform, role-based permissions, and real-time collaboration and commenting, you can maximize data consistency and accuracy and proactively mitigate risk.

Easily manage an automated approval flow of journal entry postings and reconciliation review, demonstrate who created the logic and when, and whenever someone intervened to perform a manual match, easily show who did it, when, and why with a detailed comments log.

Important for: All businesses, and mission-critical for public companies or companies that intend to go public.

3. Show the full transaction journey from receiving customer funds to merchant payment

(Rather than piecing together data points like needles from different haystacks)

The challenge: If you work for a marketplace or fintech, then you know how hard it can be to track a transaction from customer collection all the way through to merchant payment. 

Only a small part of that journey is documented in detail in your ERP, leaving you to collect the additional supporting data points and show the entire transaction journey to your auditor. This is only exacerbated by the fact that you’re generally dealing with a high volume of transactions.

The solution: A solution like Ledge tracks payment flows from start to finish, making it easy to show an auditor the full loop of how the funds originated and were settled from start to finish.

For example, you can easily demonstrate that the customer paid from bank account A, the money flowed through multiple PSPs where fees and commissions were collected, and then it finally was transferred to the merchant’s bank account B where it was settled.

Important for: Fintechs, marketplaces, and other businesses with complex flows of funds

4. Easily support your PSP balance with automated reports

(Rather than manually building it out yourself in Excel)

The challenge: Most finance teams manually build out PSP balances with a breakdown of all activity, settlements, and fees in Excel. It’s laborious, error-prone work for your team and can make presenting and supporting your PSP balance of the cut-off dates to your auditors a total headache.

The solution: With automated finance operations software like Ledge, you can easily generate automated data investigation reports to determine the balance as of the cut-off date across all PSPs. 

The system consolidates the data across all accounts into one centralized location and enables you to drill down into individual mismatches and unreconciled activity.

This enables you to not only understand what the balance should be but also allows you to easily build out the supporting information to share with the auditors.

Important for: Businesses that collect customer payments via PSPs

5. Get total transparency into processing fees with automated reports

(Rather than manually calculating them yourself in spreadsheets)

The challenge: Many finance teams manage PSP, bank, and payment processor reconciliation manually in Excel, which can complicate reasonability checks during the audit, making it a real challenge for both you and your auditors to see how much fees you’ve paid and if they’ve been classified correctly.

The solution: With an automated financial reporting tool like Ledge, you can easily generate reports to show a detailed breakdown of processing fees associated with any transaction and which cost center it’s associated with.

This makes reasonability testing during audits – and maintaining control over fees throughout the rest of the year – a piece of cake.

Important for: All businesses, especially those collecting customer payments via PSPs  

6. Streamline AR post-cutoff procedures with centralized proof of all payments

(Rather than painstakingly tracking down individual statements)

The challenge: AR post-cutoff testing can be a challenging part of audits, especially if you’re managing a high volume of payments and the business’ customer balances aren’t managed in the ERP. 

The solution: An automated solution like Ledge serves as a centralized data center of proof of all payments from all customers. You can easily search for the invoice number or the customer name to quickly verify if and when the invoice was paid, all in one centralized place. 

Show the auditor exactly how the journal entry was posted and prove that it was actually written off against the correct account. Because this information is gathered via secure API integrations, the auditor has the reassurance that it’s a reliable source of information. 

Important for: All businesses, and especially high-volume companies like e-commerce, fintech, and marketplaces that don’t manage customer subledgers in the ERP.

7. Easily account for one invoice that’s attached to multiple payments (and vice versa)

(Rather than scrambling to explain why a payment amount doesn’t match the invoice)

The challenge: It’s fairly common for customers to pay for multiple invoices with one payment, or vice versa, have multiple payments correspond with one invoice, and it can be tough to clarify which payments correspond with which invoice when showing the auditor proof of payment.

The solution: Ledge makes it easy to show proof of payment even in complex one-to-many, many-to-one, and many-to-many scenarios, providing the auditor with a clear breakdown of the invoices and the payments they’re attached to.

Important for: Invoice-based companies and/or companies accepting bank payments.

8. Simplify sampling procedures of unrecorded liabilities with centralized multi-bank management

(Rather than logging in separately to each bank account and manually pulling the data)

The challenge: Auditing your unrecorded liabilities generally requires you to generate reports for each separate bank account and manually track down the information associated with each transaction and how you classified it, which can be a tedious and laborious process.

The solution: A tool like Ledge centralizes data from all your bank accounts and can easily generate automated reports that provide a centralized overview of all the transactions that have taken place since the cut-off date. 

This enables the auditor to easily sample from that list rather than forcing you to manually chase down data across different accounts. Not only can they easily ask you questions about it, but they can also see what you reconciled it against and how it was classified.

Important for: All finance teams

9. Streamline communication with your auditor 

(Rather than ping-ponging emails and attachments back and forth)

Challenge: It’s the auditors’ job to have questions, and it’s your job to provide the answers, which inevitably leads to a back-and-forth ping-pong of email and Excel attachments. 

Savvy finance leaders will make things more efficient by consolidating everything into a shared file on Google Drive, but the correspondence and ongoing communication can still be a lot to manage.

The solution: An automated tool like Ledge can give auditors read-only access to view all of your transactional data, which dramatically reduces the need for back-and-forth communication. 

Because everything is recorded in Ledge with a comprehensive audit log, documenting everything ranging from when a certain rule was created to who did a manual match and why, the auditor has total transparency into your operations and can review it all themselves.

Don’t want the auditor to see everything? It’s all customizable and permissions-based, so you can limit their views to specific reports or fields or whatever you’re most comfortable with.

Important for: All finance teams

10. Provide all teams involved in the audit with access to the data they need

(Without compromising sensitive financial information)

The challenge: In most businesses, only a limited number of users have permission to access the ERP. If and when the billing or payments operations teams are pulled into audits and asked to provide data that’s only in the ERP, it can set off a game of ping-pong where they have to ask the finance team to check for them.

The solution: A solution like Ledge protects the integrity of your ERP and sensitive financial data while providing other members of your organization with the visibility and transparency they need to handle audits nimbly and efficiently. 

It’s all customizable and permissions-based, so you can limit their views to specific reports or fields or whatever you’re most comfortable with.

Important for: Businesses where multiple teams get pulled into the audit – e.g. large companies and/or ones with dedicated payments ops and billing teams

11. Streamline your day-to-day operations to ensure continuous audit readiness

(Rather than struggling to close the books every month)

The challenge: The cleaner you keep your books day in and day out, addressing issues as they arise in real time and documenting everything as you go, the easier your audit will be. After all, the most critical part of audits is the planning and preparation.

The solution: Finance teams need tools that automate reconciliation and journal entry posting processes with easily customizable, flexible workflows. This ensures accuracy, even when you’re processing a large volume of payments, and allows you to catch exceptions and errors in real time.

A tool like Ledge enables finance tools to easily add new automated rules and logic on the fly to keep up with their ever-changing business needs – no engineering or IT required – and manually intervene whenever needed, maintaining total control over your finances.

Important for: All finance teams managing complex finance operations everywhere

Automating your finance operations doesn’t just make audits easier; it’s a key enabler of strategic finance

With the right supporting technology and automation, finance teams can aim to not just survive the audit process but to thrive within it, turning a notoriously stressful crunchtime into an opportunity to confidently demonstrate the robustness and integrity of your financial operations.

But it’s more than just a tactical move to ease audit burdens – using automated financial software is also a strategic decision that signals a forward-thinking approach to financial management that can significantly benefit businesses in the long run. 

By proactively automating critical financial operations, companies can ensure continuous audit readiness, reduce the risk of errors, and free up valuable resources to focus on growth and strategic planning. 

This is all part of a broader trend towards digital transformation in finance where efficiency, accuracy, and transparency have become the cornerstones of every successful business.

It’s within this context that financial automation software like Ledge can serve not only as a tool to simplify audits but also as a key enabler of strategic finance.

In this article:

We're on a mission to automate and simplify finance operations for teams working at scale.

New York

325 Hudson St, 4th Floor, New York, United States 10013

Tel Aviv

8 Shaul HaMelech St. Tel Aviv, Israel 6416202