February 3rd, 2010 | Posted by Financial Reporting has been overlooked in finance reengineering initiatives – mostly because it’s not a huge source of financial risk, and is not generally a significant cost center.
In most companies the financial reporting process remains largely manual: document roll-forward, gathering input from around the globe, assembling packets of redlines, data input – all are largely managed with tools such as Microsoft Word, e-mail, the telephone – and a significant amount of nagging. In the center of this process is the SEC reporting manager, who acts as a human hub: administering process, reviewing changes, brokering conversations with critical board and management members, and facilitating relationships with the printers and auditors.
In the last six years, financial reporting has been under significant pressure. Sarbanes-Oxley increased the requirements for certifications and controls, deadlines for reporting were shortened, and XBRL created another step in the filing and preparation of financials. Globalization compressed already tight deadlines, and requires additional collaboration. The IFRS and SEC plans to overhaul the reporting systems promise changes down the road. Given the economy, making the business case for additional staffing will be difficult.
Time For Relief
It’s time to relieve the SEC department of manual risk and administrivia. The current model isn’t sustainable: managing a global and manual process, in an environment where the rules are shifting, and the technology requirements increasing, while staff levels are falling. It’s a recipe for disaster, one reason why some companies have jumped at the chance to transform the process with automation.
There truly are options to move the process to a less manual place. Here are some suggestions to consider when automating financial reporting:
- 1: Create an Agile Process
- Create a reporting process that can adapt to future scenarios, can sustain turnover, and support a global operation.
- 2: Be a Change Agent
- If you are at the end of a manual close process, start using tools that support collaboration in data gathering, allow visibility into the status of the document drafts, and decrease the administration for your staff. Set an example: what’s possible? How can you innovate? Facilitate meaningful discussion about process optimization, and hold regularly-scheduled meetings to review progress.
- 3: Build and Maintain Momentum
- Rome wasn’t build in a day. Similarly, changing an important process such as financial reporting will depend on incremental, gradual improvements over time. Wean team members from the old ways. Allow paper-based reviews for some period of time. Move process-by-process onto technology, and trumpet your successes as they occur.
Automation of the financial reporting process has clear benefits: increased transparency, reduced costs and effort, shorter cycle times, better information with which to make strategic business decisions. If you decide to move from a manual environment to an automated one, become knowledgeable about the technologies available to support the reporting process, and build with the future in mind. So when new requirement arrive in your in-box, you’ll be poised to act.
