Quick, accurate and conclusive financial reporting can help a company build a competitive advantage in any market, says KPMG in its latest advisory.
KPMG says that annnual and interim reports provide an opportunity to build brand strength and promote corporate values. Beyond branding and performance promotion, the speed of reporting can have a profound effect on the perception of the organisation by investors and the public. And in the view of the public, speed can by synonymous with quality, the logic being that management will not issue a media release until it is confident of the content, explains KPMG. "The reward for management is observed through higher share prices and earnings multiples, which reflect a more stable and healthy organisation," says the advisory.
According to KPMG, the monthly close process has three well-defined steps: the General Ledger Close (collecting the data), consolidation (adding the numbers up), and report creation (analysing and formatting the results). Within each step, there is a recurring set of problems that relate to the technology, process and organisation structure of the finance function.
Many organisations believe that the solution to these problems is to implement a finance or business intelligence system and to recruit or develop talented finance resources to bring additional insight to the anaylsis of their results. However, without addressing the underlying issues within the accounts structure and improving the close processes, a new system offers only a few fixes, says KPMG.
KPMG says that performance improvement within the close process can be achieved through standardising the way financial data is classified and stories across the organisation. Some of the steps to achieve this include:
- Having one single chart of accounts
- Allocation of balance sheet account ownership to individuals within the department
- Eliminating high levels of resource and time intensive, error prone and poorly controlled manual data entry and manipulation
- More effective control environment focusing on error prevention to reduce rework
- Flash reporting to quickly identify adjustments in the consolidation process and identify key messages prior to the finalisation of the final set of results.
"To start addressing the issues within finance does not necessarily require large capital investments in new finance systems," concludes KPMG. "Management can start to see measurable performance improvements by improving data structures and financial reporting processes with much lower investments required."