Decoding Enterprise Reporting Applications and their Problems
In the previous post, we discussed the difference between reporting and analysis.
We mentioned how both the processes are interdependent yet differentiated.
Today we will address the problems in this process.
The typical process to reach a report and analysis is as below:
Data Gathering- Obtaining source documents and data that support the recording of financial transactions
Data Assembly- Extracting information from various systems and fashioning data together for use in desired presentation layers.
Reporting- Presenting data and information in a prescribed format, for example, balance sheet, income statement, etc.
Analysis- Activities meant to give further insight and intelligence from financial results.
But, top management in companies is not happy. Neither is the financing and accounting executives.
What are the CFOs saying?
- Only 28% trust the reported numbers.
- The average time to close is 7 days.
- 90% are under pressure to close faster.
- Only 39% are satisfied with the quality of the closing process.
- 83% use Excel to generate report balances and results.
So, what exactly is the problem?
Despite unprecedented advances in workplace technology, accounting and finance professionals continue to struggle with manual and inefficient closing month-end processes.
Challenges include the time required to draft and revise supporting documents, version control conflicts, accuracy issues, compliance with audit requirements, and conformance to regulations, while deadlines continue to get shorter.
The largest problem is neither the lack of data nor the capacity to analyze it.
It is the ability to produce reports and supporting schedules that substantiate financial results as presented in the financial statements while complying with reporting assertions (completeness, validity, accuracy, etc.).
The process starts off with hopes that the month-end close will run smoother than the previous month. However, those hopes soon disappear as adjustments to figures that were deemed final, require the finance team to go back, re-wrangle, re-stitch, re-twist, and reformat all affected reports.
Controllers live in this reality frequently and will tell you this is by far the worst part of the financial close process. It adds no value to the organization, creates employee stress, is prone to error, and unnecessarily consumes time from performing activities that could facilitate the organization in utilizing financial data to make strategic decisions.
It has been taken for granted that this process requires a stressful period of on average seven days when finance folks work extended hours in multiple cycles of extracting data, creating supporting schedules, tying back to the source, and repeating the entire process until the books are “final”.
To make things worse, most organizations still rely on tedious, time-consuming, and manual activities for the month-end close, leading to oversights and errors.
In addition to the implicit cost of inefficient processes, organizations have spent billions of dollars in consulting fees to review financial reporting processes and implement solutions that mitigate gaps in it.
Band-Aid solutions are offered and implemented but only add to the chaos in the existing financial reporting environment.
Comptrollers, in turn, spend more time “babysitting” processes than performing essential job duties.
Reports are built manually after the gathering and assembly are automated.
Why not make all the four steps automated?
Why spend 7 days generating month-end closes?
Watch out for the next post as we bring to you a solution to the problem discussed above!
This post was originally written by me on medium.