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Financial reporting: Why CFOs are feeling the pressure

Henry Umney, Director, ClusterSeven
|Jun 19|magazine10 min read

Finance departments have now faced budget cuts and staff reductions for over a decade. This has taken a serious toll on them, especially due to the ever-growing pressure of regulation, compliance and financial reporting. Forced to make cost cutting a priority, CFOs have had little choice but to compromise on their strategic priorities such as bolstering their financial analytics, modelling and reporting capabilities.

Latest research by the FSN Modern Finance Forum entitled “The Future of Financial Reporting Survey 2017” has highlighted that financial reporting is putting a huge strain on finance teams, which is keeping 97 percent of CFOs awake at night, worrying about at least two aspects of reporting. 62 percent of finance teams are concerned that they will not meet all their reporting deadlines. 55 percent of CFOs aren’t even confident that the financial controls are working properly.

Most organisations deploy enterprise IT systems such as SAP, which take care of 80 percent of the business requirements of finance departments. But due to their complexity and lack of flexibility they are not able to meet the remaining 20 percent of requirements, which are representative of the more complex and evolving business structures, regulations and financial reporting processes. As a work around, finance departments are dependent on the IT function to make the necessary amendments to their reporting structures in the enterprise systems. This causes delays, leaving CFOs (69 percent) with no option but to resort to spreadsheets to fill the functionality gap and to plaster over the reporting processes. This cycle continues endlessly, causing a spreadsheet-spiral and in turn data chaos right across the reporting ecosystem.

71 percent of organisations using spreadsheets to collect data across business units. Spreadsheets are also widely used for processes such as final mile reporting, as well as for complex financial modelling, and data aggregation and manipulation. However, their use is unstructured and uncontrolled.  Ideally, a CFO must have visibility and transparency of the data sources that feed into the financial reports; and the providence of each. The reality, unfortunately, is that the data links between the different spreadsheets and EUCs across departments, regions and models are typically undocumented and as such impossible to view and decipher.

CFOs have lost control over their reporting processes. Due to easy access to spreadsheets, typically anyone can create a business-critical financial process, with no checks and balances to ensure accurate data usage in models and reporting processes. Furthermore, due to the intricacy and multiplicity of data sources, it’s difficult to ensure that only current and accurate data is being fed into the spreadsheet models. 46 percent of CFOs worry that an error will be discovered in a business-critical spreadsheet; and 43 percent fear that they will be faced with questions on accounts that they won’t be able to answer immediately.

With the cost cutting trend expected to continue, efficient and accurate delivery of business requirements must be a focus area for CFOs. Research finds that 47 percent of management spends, on average, 43 percent of their time monitoring and validating information on spreadsheets. Also, despite all the issues that spreadsheets pose to business, the spreadsheet is here to stay with its use still predicted to increase over the next two years.

It makes astute business sense for finance departments to adopt technology in order to safely take advantage of the benefits these EUCs offer, driven by a CFO-led cultural and mindset change.  Unobtrusive and easy to deploy technology exists that can help finance departments establish processes for end-to-end control of spreadsheets across their lifecycle, and gain transparency around their data and data lineage – from creation through to decommissioning. Additionally, finance departments can ensure that the business-critical processes residing in spreadsheets are appropriately incorporated into the core enterprise systems in a timely manner, based on defined EUC usage policies and specific organisational and regulatory requirements. This will help finance departments maintain a ‘single version of the truth’ at all times; and break the spreadsheet-spiral™ that is challenging many CFOs and their departments – and perhaps even holding them back.