Having Your Cake and Eating It: Is Automation the Answer to Financial Reporting Woes?
From TABB Forum:
With so much information to sift through in a relatively condensed period, more firms should be looking at automating different processes across their business, writes Clement Miglietti, Chief Product Officer at NeoXam. Indeed, certain tasks that happen once or perhaps twice a year do not require automation. But in the case of financial reporting, automation can clearly play an important role in ensuring fewer mistakes are made, Mr. Miglietti explains, using the Cake Box story as an example.
Ever noticed a correlation between high profile “accounting errors” and the reality of a firm’s financial performance? Earlier this month, we saw sweet-treat maker Cake Box lose almost a fifth of its market value after “inconsistencies” in its annual report were spotted by a blogger. These errors included the not so small matter of an alleged £2million false entry into the cashflow statement.
While Cake Box has hired BDO advisors in a bid to improve its internal audit practices, the revelations shine a much-needed spotlight on the controls and governance frameworks surrounding financial reporting. The reality is, for the vast majority of firms faced with the arduous task of compiling these reports, errors come from highly inefficient and laborious ways of working that go into developing the reports, not from trying to falsify the books. The world of financial reporting is a complex one, and some line items need more attention than others.
This is why, with so much information to sift through in a relatively condensed period of time, more firms should be looking at different processes across the business that can be automated. Certain tasks that happen once or perhaps twice a year do not require automation. But in the case of financial reporting, automation can clearly play an important role in ensuring fewer mistakes are made. Ultimately, reporting on company financials is a repetitive task that firms like Cake Box know they have to do.
Therefore, in the long run, it has to be worth streamlining the process compiling these reports by putting together machinery that automate large chunks of the financial reporting required. The pain point is often around the accessibility and quality of the data. Often, when someone in finance is compiling the report, they have to run around and gather the data from numerous different people from across the business.
A minority of firms have always and will always continue to find all kinds of clever ways to take next year’s forecast earnings and massage them into this quarter’s figures, without giving a second thought to what this means for the future. The vast majority however just need to focus less on whether or not there is a bad actor in the business trying to falsify company earnings, and more on ensuing year end financials are based on clear and reliable data. Only then will firms be able to decrease the time and cost spent on the reporting process ahead of submitting year end reports to investors, and instead spend more time on devising the strategies that are going to maximising long term performance for shareholders.