Lack of tools also hinder decision making says new research by Oracle
Inefficient financial reporting is leading businesses to lose confidence, incur higher costs and hinders decision making, research has found.
In a report, Oracle and Accenture found that the majority of companies globally have made substantial investments in financial reporting systems intended to improve their close, reporting and filing processes.
However, they pointed out that these investments had been made on an ad hoc basis, leaving businesses with ineffective products and a lack of visibility, quality and confidence in their financial data.
The pair has now suggested that guidance is needed on how businesses can drive value from their investments and achieve reporting objectives
In the report, “Challenges of Corporate Financial Reporting,” the pair found that businesses are unable to fully understand the cost of their financial reporting, with 60 percent of finance professionals unable to identify the total cost.
They said of the 1,123 finance professionals surveyed in large organisations in 12 countries,
82 percent had made changes over the last three years to their close, filing and reporting processes. A further 47 percent said they had invested substantially in at least one of these three areas over the past 12 months.
However, many businesses were still letting the side down with 12 percent admitting to only investing in just one of the three financial reporting phases and 10 percent investing in two.
Despite these investments, spreadsheets (72 percent) and emails (68 percent) are still being used to track and manage reporting on a daily basis, which the companies said showed that new investments were falling short of expectations.
And not conducting business properly is also costing money with 21 percent of those surveyed claiming they had seen their costs rise across the financial close, reporting and filing processes.
A huge 60 percent also admitted they did not know the total cost of managing and publicising financial results.
Oracle and Accenture also claim that due to inadequate reporting systems, the majority of businesses reported that they still face significant problems with financial reporting. Around 68 percent of respondents admitted that they have inadequate visibility of reporting processes, while 84 percent of finance managers reported that they find it difficult to control the quality of financial data across the course of their reporting, highlighting that additional attention should be paid to performance management.
And the inability to effectively gather and analyse data is also having an impact on the wider business. Due to late changes to the chart of accounts, 15 percent of global businesses have reportedly missed statutory filings, putting their companies at risk of financial penalties and potentially impacting share value.
However, the research suggests that companies are making changes in this area with 86 percent claiming that they are likely to make a significant investment over the next five years and 46 percent of businesses saying they are due to overhaul all three phases of reporting.
Professor Andy Neely, Director at the Cambridge Service Alliance,said: “Modern business success is founded on good quality data and the ability to analyse it in a meaningful way. Without these two factors, it is very difficult to formulate the right insight to help your company grow.
“The research shows that finance departments in many organisations are currently falling short of both these fundamentals and need to look now at how they can improve the way they collect, sort and interrogate financial data if they are to overcome the challenges they are currently facing.”