3 of the biggest problems CFOs face when it comes to financial reporting
Among the many positions that keep a business running smoothly, few are more important than that of CFO. Regardless of industry or company size, managing a company’s financial and reporting tasks is what ensures a successful future.
Of course, anyone who has actually worked in this field knows that financial reporting is fraught with challenges. Finding ways to overcome these common obstacles is essential to improving the quality of your work and ensuring the stability of the business as a whole.
1. Data from multiple platforms
While technology has dramatically streamlined financial reporting in many ways, the sheer amount of data now available – and the number of platforms used to obtain that data – present new challenges for CFOs.
For example, in a global survey by Workday of 400 CFOs, 32% of respondents cited data collection as the biggest challenge they faced in reporting. Perhaps even more surprisingly, in another report (also from Workday), 47 percent of CFOs said they manually aggregate their data, although an increasing percentage drew information from three to five sources.
Potential sources of financial data include the company’s website, CRM platforms, ERM software, and other tools that track transactions and interactions with customers. Unfortunately for CFOs, many of these platforms also track a wide range of non-financial information. While this information can prove invaluable in other areas (such as helping to identify bottlenecks in the sales process), it further complicates the CFO’s job.
Obviously, entering this information manually can take a long time. Tools like DataRails dramatically simplify data collection by integrating with CRM platforms and pre-existing general ledger systems to automatically collect information in a single report that analysts and executives can access in the familiar environment. ‘an Excel spreadsheet. This can greatly reduce manual labor, leaving more time for high-level tasks. It also reduces the risk of human error.
2. Keep abreast of regulatory changes
Regulatory changes are a constant concern for CFOs, especially when it comes to maintaining compliance with government reports, United States Generally Accepted Accounting Principles (US GAAP), and International Financial Reporting Standards. The more a business operates, the more a CFO will need to monitor and know about regulatory standards.
As part of this, CFOs need to ensure that the rest of the business understands the changes in reporting standards and what they mean for the business as a whole. For local and consolidated reporting, the CFO should take the initiative to educate the organization and secure buy-in, while preparing the business with the right technological tools.
As Thorsten Hein explains for FEI, CFOs need to fully embrace AI and analytics to improve compliance across the enterprise. In this context, he suggests, “Integrate teams and reports. The larger the company, the more heterogeneous the IT landscape, the greater the data issues. Integrating actuarial, financial and IT departments is essential to centralize reporting, eliminate data and interpretation issues, and provide a consistent and holistic view across the organization.
CFOs also need to take the lead in improving their organization’s data skills while aligning and standardizing processes, including the use of automation tools where appropriate. A proactive approach helps the business stay compliant, even as standards change to reflect new technologies and new economic realities.
3. Turn reports into action
A spreadsheet filled with financial data tells a story, but quite often it can be difficult to figure out exactly what that story is. Even more difficult for CFOs is communicating vital financial information in a way that will prompt them to make meaningful decisions. Accurate financial data provides valuable information about the health of the business as a whole.
As Deniz Caglar, Matt Mani and Josh Peters write for Strategy + business, “You [the CFO] help the business turn down many activities so that the most important ones can thrive. The deciding factor is strategic value. Economies of scale and the weight of the market are no longer the formidable barriers to entry they once were. Resource allocation must now prioritize a company’s most distinctive capabilities, those differentiating things it does particularly well that allow it to outperform its competitors over time.
Unfortunately, turning data into action isn’t always that easy. A McKinsey report found that while four in ten CFOs saw strategic leadership as their greatest value, non-financial leadership still mostly associated CFOs with “traditional finance activities”.
To drive performance and decision making, CFOs need to present financial data in a clear and actionable way. This could include changes as simple as visual dashboards that communicate information better to the implementation of predictive budgeting tools that can forecast results and performance based on certain actions. Such tools are essential to ensure that financial information is not overlooked by other members of the C-suite.
Improve financial reporting, improve the business
Optimizing your financial reporting capabilities ultimately reduces the risk of errors, improves the way you use your time, and makes it easier to get meaningful information from your data. By adopting the right financial reporting tools and updating your processes, you can gain efficiency and transparency.
By helping the whole organization to better understand your company’s financial situation, you can ensure greater stability in the years to come.