There's little doubt that financial reporting is one of the most critical aspects of operations a business must contend with, and the larger the enterprise, the more complex reporting becomes. Finance teams are under immense pressure to deliver not only accurate data, but reports that don't become outdated as soon as they are produced.
Traditionally, the tools required for effective financial reporting have been cumbersome and complex. Without the best solutions available, finance teams can quickly lose sight of their objective and lose control of their reporting.
Why effective financial reporting matters
The fallout from poor financial reporting can cause real problems for enterprises. Inaccurate figures and misinterpreted data can hamper an organisation's ability to diagnose and address existing issues and inefficiencies, while making effective forecasting and planning dangerously inaccurate.
According to author and KPI and Performance Management specialist, David Parmenter, organisations that fail to look closely at their reporting structures run the risk of spending millions of dollars devising plans that are out of date almost immediately. Previously effective means of preparing financial reports no longer have the flexibility required to accurately reflect the speed at which organisations must move.
The impact of improved financial reporting is felt in a number of ways across the organisation, but few are as acute as the following:
- Risk management and error mitigation: Even organisations with the most effective and robust financial reporting solutions rely on some level of human input, and completely eradicating errors is unlikely. The ability to detect those errors sooner with tools and processes that can more easily remedy them, helps to ensure greater control.
- Better decision-making: Being able to make decisions quickly and confidently makes a huge difference for businesses. Accurate, timely financial reporting gives leaders the information they need to effectively plan and pivot where necessary.
- Improved trust from stakeholders: An organisation that lacks control over its financial reporting is unlikely to receive support and funding from key stakeholders. Accuracy and timeliness from the finance team promotes trust from board members and investors, not to mention internal management.
The value of modernising financial reporting practices
For over 30 years Excel has been the go-to tool for the finance team when it comes to reporting. It's done its job well in many cases, but with the level of complexity and collaboration most enterprises now require from their financial reporting, it's simply no longer capable.
David identifies two key problems common to organisations using Excel to manage their enterprise planning and financial reporting:
- Data vanishes as soon as changes are made: On any software you're reporting out of, you have to be able to account for any change you've ever made. In Excel however, his is difficult, as the data being changed simply replaces what was there before, leaving no trace. Moving to a modern Corporate Performance Management (CPM) software solution such as Host Analytics, allows users to keep an accurate track record of everything that is being done, providing an essential chain of accountability.
- Errors are all but unavoidable: According to Mr Parmenter, leading accounting firm KPMG have stated that there is a 90% chance of an error in every 150 rows of Excel. For larger businesses, depending on excel for financial reporting information is bordering on irresponsible, given the propensity for mistake and inaccuracies in data entry.
By modernising financial reporting practices, organisations will not only gain access to more collaborative and intuitive tools, but potentially protect themselves from issues down the line when pursuing corporate activities such as mergers and acquisitions.
Preparing for pending corporate activity with Cloud CPM software
As David Parmenter suggests, it's only a matter of time before a major investigation into reporting figures of a company will happen. A revelation of the shortcomings of Excel - in a highly public manner - could potentially having serious implications for reporting going forward. The high chance of errors has likely already caused problems for a number of businesses on a smaller, internal scale, but for any organisation involved in upcoming corporate activities, mistakes can be catastrophic.
Mr Parmenter argues the responsible thing to do is to transition to a solution capable of handling a modern reporting process with less risk. Moving away from Excel in favour of an industry-leading CPM solution such as Host Analytics provides your organisation with the tools, processes and usability to bring your financial reporting under control.
Host Analytics enables organisations to streamline financial close and reporting processes, helping you ensure the necessary compliance ahead of initiatives such as mergers and acquisitions. Watch our 3 min interview video above with David Parmenter, and get in touch with Inside Info to take control of your reporting.