How technology helps to avert fiascos in financial reporting
• Companies cannot underestimate importance of embracing all technology aspects in business
With financial year-end looming for many SA businesses, corporate finance teams responsible for year-end consolidation and reporting are dreading what’s to come or moving forward confidently.
The difference between the two hinges in great part on how each business’s finance team spends its valuable time in the reporting process.
In environments that take a manual (spreadsheet-based) approach, finance teams are likely to be spending the bulk of their time collecting and consolidating data from multiple sources, instead of focusing on the analysis and presentation of an organisation’s results and forecasts.
On the other hand are those that have employed the appropriate software technology to not only automate these time-consuming processes but allow for the seamless consolidation of data to a group view.
Finance teams should be provided with extensive drilldown and analysis capabilities and the ability to design new reports in different formats for different stakeholders especially during the year-end financial reporting processes, when time is anything but on your side.
To better understand this concept and visualise how finance teams in many corporate environments are now spending their time vs how they should be operating for optimal efficiency, it’s necessary to first unpack and map out the four reporting phases.
Data collection is the first phase to tackle, which entails collating data, input and commentary from multiple systems, people or locations.
This is followed by the consolidation phase, in which intercompany transactions and balances are eliminated so that a group’s published results exclude the trade between the entities within the group, as required by relevant reporting standards.
Corporate finance teams would then analyse the consolidated results by drilling down into the financial data to better understand the numbers, input and commentary from various individuals in the business.
The final results would then need to be presented in the form of reports and presentations published in various formats for different stakeholders, such as board packs, budget presentations in PowerPoint, annual financial statements, ESG reports, and many more.
Of course, finance teams across different businesses will approach these four phases in different ways, depending on the nature of the business and its unique approach to managing financial data.
Finance teams in corporate environments where a manual approach to financial reporting the year round as well as year end is preferred (typically through the use of Microsoft Excel) spend the bulk of their time collecting and consolidating data.
Yet their time is valuable and could be better spent analysing financial data and reporting on these findings to the various stakeholders within and outside the company. This leaves little time to problem solve and contribute value to the decisionmaking process. What’s more, manual data collection and consolidation opens the way for human error to creep in, risking good governance in a business.
Similarly, businesses that implement reporting software would expect that the time and resources of its employed finance professionals are being used as efficiently as possible — that is, with greater emphasis on the analysis and presentation phases.
However, the challenge with some of these financial reporting system packages is that a great deal of the features paid for go unused as users take from the software what they need and ignore the rest.
That’s because no two companies will ever extract the same amount of benefit from implementing the same technology in the same way, and will never need the exact same functions and features a standardised, “uncustomisable” software package offers.
To tailor a solution to the specific people, processes, circumstances, skill sets and risks of an organisation, and include the line items, calculations, branding, colours and flow that stakeholders demand from the final output reports and presentations, the ability to customise financial reporting is a must.
That said, companies operating in the digital era cannot underestimate the importance of embracing technology in every aspect of their business, and this includes financial reporting procedures throughout the year to ensure year-end reporting goes off without a hitch.
When it comes to deploying technology to increase efficiency, the biggest challenge is striking the right balance between allowing for the customisation capabilities that Excel and other manual applications make possible and the automation efficiencies that many reporting software solutions say to bring to the table.
Employing technology is a sure-fire way to overcome the obstacles many finance teams face in terms of how to better use their time during year-end reporting. Implementing the Right software is key, not only to fully automate the entire data collection process but to seamlessly consolidate data to a group view.
Finance teams should be provided with extensive drilldown and analysis capabilities and the ability to design new reports in different formats for different stakeholders on an ongoing basis.
This will ensure that the finance professional’s time in a business is being used most efficiently.
Time is money, as they say, and the importance of how it is used within a business environment and by corporate finance teams cannot be understated.
Giving careful consideration to how time is allocated within the four reporting phases in any business environment and implementing the Right software to optimise and streamline these processes is crucial. In financial reporting throughout the year and at financial year end, it’s not a matter of saving time but what you do with the time you have that matters.
MANUAL DATA COLLECTION AND CONSOLIDATION OPENS THE WAY FOR HUMAN ERROR