Imagine being on a plane using navigation equipment that the pilot does not fully trust, as important flight data may have been entered incorrectly. Consider what you would think if you were in a hospital operating room and the surgeon wondered if a clumsily performed medical test would cause problems during the surgery.
This is essentially the same position many corporate finance leaders find themselves in when they don’t know if they can trust their business’s financial numbers. Effective plans and forecasts are modified rolls of the dice when the data used to create them is questionable or wrong.
A surprising number of corporate finance leaders in the United States and many other countries are unsure whether they can have confidence in their company’s data, according to an international survey commissioned by BlackLine Inc., a provider of financial management and automation software.
The survey included more than 1,300 respondents from the United States, Canada, United Kingdom, France, Germany, Australia, and Singapore. The sample consisted of C-suite (senior-level) executives and senior finance staff. Interestingly, the closer respondents are to the actual financial numbers, the more concerned they are.
“When asked what would help their companies deal with business disruption, CFOs said one of the most important factors would be the ability to access and analyze financial data in real time. , 37% admitted they don’t fully trust their data. Those closer to the numbers have even lower trust levels, with 50% of senior finance and accounting professionals saying they don’t fully trust their data. “They say they don’t fully trust financial data,” Blackline said.
The implications of this lack of trust in a company’s financial information are significant. If financial professionals don’t trust the data they’re working with, there are potential problems with producing accurate and timely financial statements, investor information, and tax returns. Corporate or government financial data drives major and minor decisions. Many people have expectations about current and projected financial activities and results and what they mean for employees, customers, regulators, tax collectors, and others.
An astonishing 78% of survey respondents are “concerned about a new global financial crisis” and 76% of respondents are focused on cybersecurity issues. Perhaps the most surprising finding is that even though 98% of survey respondents said understanding real-time cash flow is a critical factor in dealing with unexpected market changes, 98% of respondents say they are not confident in their organization’s cash flow visibility.
Reliance on manual processes, even at this point in the 21st century, appears to be a major barrier to financial professionals gaining greater confidence in their financial information. Manual tasks also consume time when developing strategies and tactics for forward-looking financial planning. Approximately 68% of respondents said manual procedures can lead to errors and lead to incorrect decisions.
While there is value in research and reflection, research cannot reflect the universal realities of business. But it would be a mistake to ignore its warning flags and useful business guidance. One of the themes that the magazine talks about quite a bit is that in the future, artificial intelligence will become even more important as a way to review data and eliminate manual calculations, record-keeping, reporting, and other aspects of corporate financial life. It means that it will be done. More than three in four respondents cite AI as essential to their business now and in the future.
In the short term, companies concerned about the validity of their financial information should discuss, consult, and assign responsibility with an experienced and technically advanced accounting partner. This collaboration and partnership needs to be built with accountants who act as business advisors and planners, working with CFOs and CEOs to dig into the current numbers and devise strategies and tactics based on the best possible information. We support you.
Financial data reveals the survival and future of a company and must be compiled and interpreted accurately. The same precision and foresight would be required if you were flying a plane and relying on the pilot, or being wheeled into the operating room in a wheelchair and relying on the surgeon. Approach the subject as if your (business) life depended on it.
Samuel French is president of Rodefer Moss & Co. PLLC, a bistate accounting firm based in Knoxville. His website for the company is www.rodefermoss.com.
