Johannesburg, 04 Aug 2020
As businesses grow, financial reporting becomes more complex, placing increasing pressure on the CFO. The increasing interconnectedness of companies, value chains and economies in the digital era just adds to the complexity, while the COVID-19 pandemic is creating global economic uncertainty, leaving C-suite executives needing to plan for an uncertain future.
“C-suite executives at businesses that are diversified across product ranges, channels and geographies need to pay close attention to financial reporting and analysis,” says Pieter Bensch, Executive Vice-President for Africa and the Middle East at Sage. “Not only is accurate insight into the business’s finances essential for compliance, it’s also vital to making better decisions in a complex and uncertain world.”
Financial reporting gets more complex the larger a business becomes because of growing demands when it comes to declaring the following:
- The financial health of the company based on current knowledge and expectations for the future;
- Accurate reports of operating results and cash flow; and
- Financial statements to reflect economic and business reality, helping investors make decisions.
Bensch highlights four key elements that a business needs to consider as it grows in size.
1. Start with the people
“While technology is key to generating accurate financial reports and gaining real-time insight into the business, getting it right starts with putting the right team in place. The team will require an appreciation for the role of accurate data and robust reporting in compliance and in making sound financial decisions.”
Financial controls and checks are essential, including segregation of responsibilities so records can’t be manipulated. Different team members should initiate, approve, record and reconcile transactions, while an organisation could put fail-safe measures in place in areas such as inventory management by adding a third-party review.
Executives running a business that’s growing in size and complexity may consider regular audits, even if they don’t breach the thresholds that trigger a required statutory audit under the Companies Act.
“Undergoing an audit shows a commitment to transparency and may help management pick up discrepancies and inefficiencies overlooked by the internal finance team. It can also help build confidence among lenders, investors and other stakeholders.”
3. Mitigating complexity with analytics
A growing business will have to manage data from multiple sources that might not integrate, impacting communication and collaboration. It’s entirely possible that the finance department may still be working with spreadsheets. It takes time and energy to consolidate and summarise this data – and it might be out of date by the time the report is compiled.
“Managers can’t use static data to develop forecasts and create 'what-if’ scenarios, which are crucial in understanding the drivers of success in the business. It may be worth investing in an analytics solution that can improve the organisation’s ability to gather, organise and analyse its data.”
An analytics solution will enable the business to:
- Connect and analyse financial and operational data through automation
With the ability to connect to data and analyse it, executives can start building a repeatable and reliable process that leads to automation, increasing the speed and reliability of analytics.
- Consolidate multiple entities
Consolidating data imports across multiple entities provides up-to-date information that will ensure forecasting and planning is accurate.
- Generate self-service reports
Instead of forcing reporting through IT, it will pay to empower business users with software that offers strong analytical capabilities, allowing them streamline to analysis without any reporting delay.
4. Mastering uncertainty
“With all the uncertainties and unknowns businesses face in our complex world, causal relationships are difficult to track and it’s hard to decide whether a course of action is right or not. With analytics, as outlined above, a team can get to the right data to build a quality picture of what’s happening in the organisation. This reduces complexity by providing a single, real-time version of the truth.”
Businesses need to create an environment that encourages adaptability, learning and creative problem-solving, and they must adopt solutions that allow integrated data to be used for maximum business benefit. They also require the ability to share data in real-time, giving expert individuals the right information when they need it.
In conclusion, Bensch says: “Dealing with complexity is not simply about predicting the future or reducing risk – it’s about continuously adapting and learning at speed.”
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