Imagine yourself in an airplane with pilots using navigation equipment they don’t fully trust because important flight data may have been entered incorrectly. Consider your thoughts if you were in a hospital operating room in which your surgeon wonders if clumsily conducted medical tests will cause a problem during surgery.
That’s essentially the same position in which many corporate finance leaders find themselves when they don’t know if they can depend on their own businesses’ financial numbers. Effective planning and forecasting are each a modified dice-roll if the data used to make them is suspect or wrong.
A surprisingly large number of corporate financial leaders in the U.S. and a number of other countries are unsure of the confidence they can have in their own data, according to an international survey commissioned by BlackLine Inc., a financial controls and automation software provider.
The survey’s more than 1,300 respondents were from the U.S., Canada, United Kingdom, France, Germany, Australia and Singapore. The sample was comprised of C-suite (senior-level) executives and senior finance officials. Interestingly, the closer the respondents are to the actual financial figures, the greater are their concerns.
“When asked what would help their company respond to business disruption, CFOs said one of the most important factors would be the ability to access and analyze financial data in real time. However, 37% admitted they do not completely trust their own data. Levels of trust are even lower for those closer to the numbers, with 50% of senior finance and accounting professionals indicating they do not fully trust the financial data they are working with,” BlackLine said.
The implications of such a lack of confidence in corporate financial information are significant. If a finance professional doesn’t trust the data with which they’re working, that’s a potential problem in the accurate and timely preparation of financial statements, investor information and tax returns. Corporate or government financial data drive major and minor decisions. Many people count on current and projected financial activity and results, and what they mean for employees, customers, regulatory authorities, tax collectors and more.
An eye-opening 78% of survey respondents “are concerned about another global financial crisis,” and cybersecurity issues have the attention of 76% of respondents. Perhaps the most startling finding is that 98% of survey respondents cited a lack confidence in the visibility of their own organization’s cash flow, even as 37% say understanding real-time cash flow is a critical element in dealing with unexpected market changes.
A reliance on manual processes appears an outsized stumbling block, even at this point in the 21st century, to achieving financial professionals’ greater confidence in their financial information. Manual work also eats up time available to develop strategies and tactics for forward-looking financial planning: some 68% of respondents said manual procedures can result in errors, resulting in bad decisions.
While worthy of examination and contemplation, a survey can’t reflect the universal realities for businesses. But it would be an error to disregard its warning flags and useful business guidance. One subject about which it fairly screams is that going forward, artificial intelligence will figure even more prominently as a way of confirming data and eliminating by-hand computations, record-keeping, reporting and other aspects of corporate financial life. More than three-quarters of respondents cite AI as a business essential now and in the future.
In the near term, companies concerned about financial information validity should be talking to, consulting with and assigning responsibilities to experienced and technologically-advanced accounting partners. This working relationship and partnership should be with accountants who can serve as business advisers and planners, working with CFOs and CEOs to drill down into the numbers as they are and to help devise strategies and tactics based on the best possible information.
Financial data reveals a company’s life and future, and it must be accurately compiled and interpreted. You’d want no less accuracy and foresight if you were on a plane and depending on the pilots, or being wheeled into an operating room and counting on the surgeon.
Approach the subject as if your (business) life depends on it.
This article first appeared in Knox News.