Resolving financial reporting issues with technology
Most companies understand how critical the record-to-report process is to their business. However, lopsided attention and investment on the front side (recording, closing and consolidating) have left the financial analysis and reporting functions trailing behind in both efficiency and effectiveness — despite reporting being the most visible and scrutinized part of the process.
Thankfully, enterprises have potent tools to quickly improve their financial reporting and make it both faster and more accurate. Such tools, along with streamlined processes and a renewed commitment to the reporting function, can alleviate most of the issues plaguing financial reporting in organizations.
Enterprises too often take the reporting function for granted, where a general lack of initiative has caused it to lag behind other critical processes. This shortcoming is particularly apparent in companies' reluctance to embrace and invest in transformative technologies. Automated solutions can now drive the reporting function with speed and accuracy, eliminating the heavy dependence on word processing software, spreadsheets, and manual entry processes to generate critical reports.
Many organizations are quick to expand their accounting team to fill efficiency gaps in their reporting function created by a lack of automated processes. When an enterprise uses additional staffing to fill such roles, employee onboarding and ramp-up periods can significantly prolong the reporting process. By opting for a staffing solution rather than a technology-driven one, the company’s financial reporting function also becomes more susceptible to human error.
Turnover and transition documentation
Positions within the everyday operational functions of a company, like sales or invoicing, are usually well-documented to prevent skill or knowledge gaps in the face of turnover or transition. While this is understandable, since those functions impact everything from liquidity to customer relations, financial reporting teams typically don't enjoy that same thorough documentation.
Therefore, when reporting faces staff turnover or employee transitions between departments, new team members are either initially ill-equipped for the position or try to implement procedures from a previous employer or department. Either way, the void in adequate role documentation slows the entire financial reporting process, often leading to redundant work, duplicated reports and a general sense of inefficiency.
To exacerbate the previous reporting issues, many organizations also lack definitive report rationalization procedures. Consequently, unnecessary reports further strain an already cumbersome reporting function with tasks that executives and stakeholders don't need in the first place. Instead of generating numerous reports strictly out of habit rather than necessity, enterprises are better-served by having executives determine the information they need to make decisions, then creating the reports that provide them with the needed information.
A short hypothetical will help put the everyday impact of these financial reporting issues in context. Let’s assume a recent college graduate joins a prestigious company that uses M&A as an integral part of its growth strategy. The graduate, who we’ll call Chris, wants to use the knowledge and skills she developed during an internship at a large, global consulting firm to make positive change in their acquisitions results. At her previous firm, Chris advised clients on different strategies and tactics to employ within the finance function, so she feels well-equipped for this new challenge.
Chris soon realizes, however, that she is part of a new-hire group brought on board solely to help produce reports with analysis that executives could use to make decisions. Unfortunately, the entire group spends 95 percent of their time finding the data needed to create the reports and building new models for reports that already exist. Chris never gets the chance to provide thoughtful analysis and recommendations since she spends all day editing those countless reports, support schedules, and presentation decks thanks to a single number changing.
Although this is a hypothetical situation, the scenario isn't far from the truth. Talented people who can bring authentic, positive change to the finance function are buried beneath an endless stack of reports and decks. That stack will continually change as new data comes in, giving Chris intimate knowledge of the facts and figures. However, she never gets to opine on a strategy or reasons for variances as her days are nothing but tedium.
In this scenario, the financial reporting process wouldn’t be so ineffective if the company stopped relying on outdated tools and leveraged the efficiencies that automated solutions provide the reporting function. Indeed, today's technological advancements have a number of advantages that could take financial reporting from good to great.