South African organisations' lack of investment in proper software and over-reliance on spreadsheets and e-mails is leading to increased costs as well as ineffectual financial reporting and missed key deadlines.
This is one of the key findings of a study conducted by Oracle and Accenture, which also noted that inefficient financial reporting leads to loss of confidence and high costs, and also hinders decision-making.
According to the research, businesses in SA, however, recognise the need to invest in new financial reporting systems to address efficiency challenges.
Some 79% of surveyed companies have made changes over the past three years to their close, filing and reporting processes. Meanwhile, only 29% have invested substantially in at least one of these three areas over the past 12 months.
In an interview with ITWeb, Nigel Youell, director of Oracle enterprise performance management for EMEA, said: “We were rather surprised how few companies had any idea of the cost. Given the low response, we cannot give a reliable statement as to the relationship between cost and the use of spreadsheets.
He believes that key to a faster and more accurate close is integration of the extended close process and management using a close management application.
“Boundaries in the overall process create the opportunity for delay and error, and not having an integrated close management application means organisations have to rely on e-mail, phone and other forms of communication, which again leads to delays and accuracy issues,” Youell explains.
“One example of the consequences of not having adequate integration is in how late changes create issues in processing them.”
The study also discovered that companies in SA are following the global trend of investing in financial reporting systems intended to improve their close, reporting and filing processes. However, Youell explains that many of these investments are carried out on an ad hoc basis, suggesting a lack of clear planning from some companies. This leaves businesses with ineffective solutions and a lack of visibility, quality and confidence in their financial data, he adds.
The study also highlights that South African businesses are closer to fully understanding the cost of their financial reporting, with only 21% of finance professionals unable to identify the total cost. This is remarkably lower than the global average of 60%.
Youell points out that driving trends are similar globally, including regulation, stakeholder pressure and new technology requirements, like XBRL.
“We are seeing increasing detail in reporting becoming a key requirement, with more non-financial data a high priority plus pressure to report sustainability information. Additional regulatory requirements include carbon reporting and specialist industry reporting, for example Solvency II reporting for insurance organisations in Europe.”
While 20% of businesses in the survey have invested in just one of the three financial reporting phases (close, reporting and filing); only 5% have invested in two of the three, and only 4% have invested in all three.
Unsurprisingly, spreadsheets (76%) are heavily used in SA to track and manage reporting on a daily basis and e-mails slightly less, at 26%, compared to the global average of 68%.
The survey also discovered that 19% of finance teams claim to have seen their costs rise across the financial close, reporting and filing processes.
Due to inadequate reporting systems, the majority of businesses reported that they still face significant problems with financial reporting. Some 78% of respondents admitted they have inadequate visibility of reporting processes as compared with 68% globally, while 86% of finance managers reported that they find it difficult to control the quality of financial data across the course of their reporting, highlighting that additional attention should be paid to performance management.
It also emerged that 79% of finance managers feel their effectiveness is limited in some way by data analysis-related issues, with most admitting they did not have adequate visibility of reporting processes. Failure to meet formal reporting deadlines was relatively high in SA, with 18% of businesses indicating they have missed statutory filings.
Commenting on these findings, Scott Brennan, executive director, Accenture Finance and Enterprise Performance Consulting Group, says: “These results mirror what we see and experience, and they're illustrative of why companies increasingly find it necessary in today's age of volatility to invest in their performance management.
“Those that tend to be happiest with the results of their enterprise performance management are those that have a vision - they understand their company's strategy; they have a clear view of the metrics they need to monitor, and they know the importance of integrating an enterprise-wide EPM solution.”
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