Accounting software serves many functions, including ensuring regulatory compliance, projecting a company’s financial health and providing the information you need to execute your most important business strategies. But accounting systems should also provide full data transparency with a complete audit trail on every transaction.
The reasons you may need an audit trail range from the mundane (tracking approvals of certain financial decisions) to the severe (detecting fraud and embezzlement). Here’s a closer look at what small business accounting software with a complete audit trail is and some different scenarios where one might come in handy.
What is an audit trail in accounting?
In a broad sense, an audit trail is simply a record (or set of records) that documents all the transactions in your business financials and who performed them. An audit trail is important because it allows you to track and verify the accuracy of all your accounting data, acting as a control against culprits and misplaced information.
Depending on how you’ve organized your accounting department, audit trails can take many forms. However, companies looking for a competitive edge need accounting software that provides comprehensive data transparency with full audit trail capabilities.
Why are audit trails important?
When you're the sole accountant, CFO or small business owner, you may be the only person posting transactions. That doesn't mean you won't occasionally make mistakes you need to correct. Accounting software with a full audit trail ensures you have a record of every change you make, when you made it, and what the previous entry contained.
As your company expands to include multiple companies, it becomes even more critical to keep track of these changes.
Correcting mistakes within accounting transactions.
Audit trails track all changes any team member makes within your transactions. If a user makes a mistake and needs to correct it, an audit trail reverses the original transaction so the user can edit it and post it as a new transaction. there's also a complete audit log of every activity. When you open a record, you'll see all the information about who posted a transaction, when, and what the information was previously.
Preventing fraud or embezzlement
Fraud is a lot more common than you may think. A 2020 a PwC survey showed that 42% of companies experienced some type of fraud in the past 24 months. That's a jaw-dropping $42 billion of lost revenue. So, if you think fraud or embezzlement can’t happen to you, think again. While an audit trail can’t prevent fraud all on its own, it can be a useful tool should it occur. Having robust audit trail capabilities can not only act as a deterrent to fraud, but it can also help you identify culpable parties, assess losses and provide reliable documentation should the fraud result in legal proceedings.
Locating missing information
Whether you can’t find a record you’re looking for, or you experience a disaster like a fire or a complete system crash, an audit trail can help you recover important data quickly and easily. If you’re using spreadsheets or some other manual form of record keeping, records can get lost, deleted or copied to other files incorrectly. But an audit trail provides a roadmap for recovering that elusive data.
In the event of a disaster, you will essentially be able to recreate your transaction records, provided your audit trail is backed up on a redundant server or stored in the cloud. While it may not contain all the data you lost, an audit trail can help you resume operations more quickly and mitigate the damage.
Assisting auditors
If you’re following best practices and undergoing regular audits of your company’s financials, either for regulatory compliance or for internal purposes, an audit trail can be a huge asset. With a full accounting of your financial activity provided by an audit trail, auditors are able to verify the accuracy of account information more quickly, allowing them to complete the audit in less time. Audits often require your team to expend significant time and resources while disrupting your regular operations. So, if you want your accounting team to resume their normal activities faster, an audit trail can be an extremely useful tool.
Mitigate risks with better insights
Perhaps the most overlooked and useful application of an audit trail is in improving your internal business decisions. By using an audit trail to take a holistic view of your company’s financial processes, you can identify inefficiencies and opportunities across your enterprise. The best way to accomplish this is with cutting-edge accounting software.
How can you find the best audit trail software?
Gravity offers a full audit trail, allowing you to drill down into your most important financial data and uncover insights that move your business forward. Gravity allows you to track changes at the field level, analyze the history of a particular record or user action, and view a summary of all financial changes with all user entries accompanied by date and time stamps. Combined with Gravity’s multi-entity accounting software capabilities, you can easily access complete documentation of all your financial transactions across all your companies.
With Gravity, you can combine a full audit trail with the business intelligence (BI) capabilities of the Microsoft Power Platform. Microsoft BI helps bring your data to life and provides interactive reports that allow you to easily analyze complex financial information. Because the data is processed and visualized in real time, you’ll have the best possible data on which to base your business decisions.
An audit trail won’t solve all of your problems or instantly achieve your strategic aims. But as another tool in your accounting software toolkit, it can enable you to mitigate financial risk and empower the kinds of actions that drive your business forward.
Want to improve data transparency for your organization’s accounting practice? Schedule an online demo today to see how Gravity's cloud-based multi-entity accounting software can help grow your business more efficiently.
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