5 measures to future proof reporting and preparing for a 4IR environment
By Christiaan Brink, Product Executive for CaseWare Africa, Adapt IT.
Managing the financial reporting process in a structured way that is easy to understand, is challenging in a fast-moving world fraught with regulatory and compliance complexities, with the volume of things to account for growing at an unprecedented rate.
The complexity of this environment is set to increase in the 4th Industrial Revolution. With more technology to empower financial professionals than ever before, this has not eliminated professional conduct that is void of ethics, good governance and sound judgement. The recent bout of South African corporate scandals, questionable audit practices, trading suspensions and financial reporting restatements, bear testament to that getting it right is about more than just embracing technology.
At the same time, technology is the key enabler to empower finance professionals and provide them with the tools necessary to drive higher standards and the speed of execution that modern business demands. It is paramount for these professionals to automate core business processes and repetitive tasks, not only to weather the changes the 4IR will ultimately bring, but to shift focus to expertise and skills that cannot be emulated by machines.
5 key measures to future-proof financial reporting are:
1. Automate absolutely everything
In financial reporting, manual inputs, amendments and calculations are prone to error, particularly when teams are working to tight deadlines. As the pressure mounts, teams are forced to take shortcuts, skip steps and make assumptions.
At CaseWare, we are continuously surprised at how many large corporate firms still consolidate using Excel. Aside from risking macros and formulas that may go wrong, managing this understanding and complexity over time is extremely tedious. To avoid this, organisations need to connect all business processes directly with systems and platforms to allow them to process, calculate and store data automatically, centrally, securely and – as far as possible – in real time. They can then deploy reporting tools on top of this to set up all the insights they need, and enable automated financial reporting.
This empowers teams with more time to apply the much needed value-added qualities that are uniquely human, such as creativity, critical thinking, problem-solving, innovation, relationship building, judgement and advice.
2. Standardise reporting and KPIs
Centralising and automating all data creates an ecosystem the business can continuously supplement and enrich. This then empowers the organisation to define and implement all the standardised reporting they need, in a consistent way, automated end-to-end and on an ongoing basis.
In the case of IFRS 9 for example, the challenge is not specifically what must be disclosed, but how to arrive at what the disclosure requires, as the datasets needed are not always readily available and might be difficult to work with. Therefore, business needs to look wider than just financial reporting data and treat all data as a strategic asset that must be well measured, collected fluidly, stored on a large scale and combined in a strategic fashion. Big data and running complex calculations are becoming a reality that more and more businesses will have to come to grips with, and build strong capabilities for.
Achieving all of this is highly powerful, as businesses are then able to define, measure and report KPIs on insights that drive their success in ways they have never before been able to do.
3. Simplify understanding
From a regulatory and legal perspective, financial reporting must adhere to very specific disclosure and compliance standards. However, in most organisations, the majority of employees are not financial professionals and they may have limited ability to readily understand this information.
By centralising data and standardising reporting, it becomes possible to institute organisation-wide management and operational reporting that empowers employees at all levels with metrics and KPIs they can easily understand. It also gives them a clear view into how they are able to influence them. This is immensely powerful in creating the right incentives across a business.
4. Drive an environment of transparency
Obfuscation, disinformation and fake news thrive in a setting where perception is disconnected from reality and facts. With modern technology at their disposal, companies are now better placed than ever before to create an environment of transparency. And with blockchain ledgers increasingly being implemented within transactional system back-ends, organisations are better equipped to validate the integrity of who did what, and in which order.
5. Surface problems immediately
In a world where data is a strategic asset, we are now able to make greater sense of all our transactional data and process insights – for example from our general and subsidiary ledgers. We can connect these datasets to processes that catch outliers and questionable activities instantly, and set up exception reporting which can be surfaced from the executive level, down through the organisation to a level of detail which everyone can act on immediately. These systems are already starting to incorporate machine learning and AI capabilities to spot problems and take action faster than ever before. However, it is very difficult to take advantage of these technologies if data is not centralised.
It is now more important than ever not to wait for audit findings, but instead to empower every employee to be their own compliance officers and create an environment where problems are surfaced quickly with data, and dealt with decisively.
As organisations brace themselves for the impact of the 4IR, they should take advantage of the platforms, systems and automation at their disposal already today and work to build the appropriate technical capabilities and skills within their finance teams. Those that invest and continually increment in their technology foundation, will be well placed to take advantage of 4IR technologies as they mature.
Christiaan Brink, Product Executive, CaseWare Africa, a division of Adapt IT.
Christiaan holds a degree in Computer Engineering and has extensive product development experience and a passion for technology. He has spent the last 12 years based in the UK creating software solutions for the investment data industry across EMEA. Christiaan recently joined the Adapt IT group where he currently leads the product group for the CaseWare Africa division.