At a time when everyone from corporate executives to regulators and investors wants more, and more timely, financial information, many enterprises are realizing that each additional accounting standard – such as U.S. GAAP or IFRS – adds yet another layer of complexity to the reporting process. Using Fiat Chrysler as a case study, Workiva’s Joe Howell and FCA Group’s Ed Young, demonstrate that financial reporting process improvement depends on harnessing three resources: people; processes; and technology.
More than 65% of large enterprises have more than five legal entities, according to a recent group study.
Depending on your type of business, you might have more than a half-dozen reporting systems.
Typically, organizations were required to comply with a number of reporting standards including US GAAP, IFRS, and others. Each additional standard, system, or business adds another layer of reporting complexity.
A Fundamental Problem of Financial and Management Reporting
A fundamental problem for reporting managers is that the primary, desktop-based tools they use to do their jobs, including email, have not kept pace with business reporting requirements. The truth is that these tools were never designed to handle the complexities of business reporting, to begin with, and instead bring with them their own sets of challenges.
Beyond the tools that most teams use, there are process issues that are too often accepted as just a part of doing business. Interrelated reports are frequently treated as ad hoc, which creates unnecessary duplicated efforts. When in fact, reconciliation for one report can often be applied to other reports. And when teams can find time and space to create process improvements, they may not have the time or capability to assess a process holistically. The process improvements become modular, and they become stuck in a loop of improving the process improvements.
The amount of non-value-add work created from inefficient tools and processes adds up. According to a recent FP&A Technology Survey conducted for the Association of Financial Professionals, 66% of the financial professionals surveyed said that they spend more than nine hours on non-value added activities, and 27% said they spend 20+ hours a month. There clearly needs to be a change.
Changing a process before it is understood could create more problems than solutions. So, start with understanding what you and your team are trying to achieve. What information is needed? What resources are available? Be sure to ask “Why?” at every phase.
Understand your reporting process:
Begin by mapping each of your major reports from cradle to grave. This doesn’t need professional flowchart software – on a whiteboard or on paper is just fine. Ask why the report is needed, what the inputs are, and what the outputs are. How are the interim steps connected? What are the various destinations for the report? What actions must happen in each one, and what are the things that delay the process from moving from one phase to the next?
Common Challenges of Desktop Systems
- Inconsistencies: Duplicative information may appear differently across tables or charts.
- Lack of efficiency: Repeated data must be entered individually for each use.
- Version-control issues: When edits are made, there is no master document for teams to reference.
- Lack of accountability: Edits to documents are not tracked, leaving issues for audit ability or governance.
- Accessibility issues: Files are either hidden in personal computers or locked for individual use on servers.
- Lack of true collaboration: Documents are created and edited in isolation.
- Security issues: Emailed files and comments are too often sent to the wrong recipient.
Begin Improving the Reporting Process
The most effective place to start is the process you are personally responsible for:
Step 1: Collect and normalize data. Let the data collection process normalize your data for you.
Step 2: Organize the information. Organize and control collected information, so reporting teams can easily access and understand the continuously changing information.
Step 3: Create a single source of truth. Establish links between source data and all of its destinations.
Step 4: Collaborate. Find an environment where users can work in parallel.
Step 5: Review, approve and sign off on the same document. Establish a review process where project teams can review contributor feedback in one active document.
Step 6: House final reports in one location. Provide an environment where you can leverage your certified and trusted source information.
Leverage Technology to Improve Your Reporting Process
There are new cloud-based, software as a service (SaaS) business reporting solutions on the market that enable you to take these steps and transform your reporting process.
If reporting challenges are getting you down, break them down into smaller actionable steps. First, evaluate the challenges in front of you. What challenges are you facing today in your reporting? How many processes are built on antiquated tools which are critical to you? How much time do you and your team spend chasing these non-value added items? Second, assess what you can do differently. Establish one source of truth in your reporting process. Connect constant changes. Connect your teams and your data to truly collaborate. Make sure there are accountability and audit ability. Use technology that is available to your advantage. Finally, stop waiting and take action. You and your team can conquer your reporting challenges.