Why Digital Financial Transformation Starts with Transforming Actuals

Patrick Schmidt, former accountant and current Principal Solutions Consultant at BlackLine, notes that it's no longer a question of whether technology should be on a CFO's agenda. It's a question of how best to use it, which processes to apply it to, and where to start implementing it to bring the most value to the business as part of a finance transformation journey.

While companies offering predictive analytics and intelligent forecasting have recently become transformation darlings, these solutions depend on the completeness and accuracy of your foundational accounting data. The hard truth is that you’ve got to get your actuals right before you even begin to consider advanced technology.

It’s surely no surprise to you that actuals are what really matter in business. They are the numbers reported in financial statements, tax returns, and compliance documents. They also play a huge role in business analysis. Companies are always planning, so they produce budgets and forecasts against which actual results are later compared and analyzed. This helps leadership understand what is going wrong or right with the business.

Your actuals serve as the starting point for all subsequent financial operations activities, acting as the basis and input for critical decision-making processes. Downstream financial activities such as budgeting, forecasting, and strategic planning rely heavily on the accuracy and integrity of actual financial data.

Actuals also provide a tangible grasp of current and past financial happenings. Understanding the true movement of funds in and out of the company lays the groundwork for predicting future financial results. This comprehension of present and past realities is essential for crafting well-informed financial predictions and estimates.

Accurate actuals are critical for companies to:

• Refine estimates of business costs

• Make plans and assess the validity of those plans, especially when presenting to investors or boards

• Adjust future budgets by comparing actuals against forecasts

• Perform variance analysis to understand the difference between planned and actual numbers

• Reconcile actual revenue and costs against what had been anticipated to monitor cash flows continuously

• Accurately report on finances to stakeholders and pay taxes correctly

When it comes to financial data, the problem certainly isn’t a lack of it—it’s the sheer volume of it and the unfortunate fact that many companies don’t trust theirs. In fact, in a recent BlackLine survey, 42% of overall respondents stated they do not completely trust the accuracy of their organization’s financial data.

What’s causing this? Nearly a third (31%) of respondents said it’s because the data is from too many sources, meaning they cannot be sure all data is being accounted for.

Other reasons are that most of the data are inputted manually—increasing the risk of human error—and that a reliance on clunky spreadsheets and outdated processes (such as manual journal entries) leaves finance teams in the dark until month-end.

With the ongoing uncertainty in the business landscape, companies must be able to trust their data so they can leverage accurate insights that inform real-time intelligent decision-making and planning. Getting this right requires visibility and access to real-time financial data that most companies simply don’t have.

Decentralization. Business isn’t local anymore, it’s global. While expansion is good for business growth, it’s burdensome for business processes. The close is a complex process that can be difficult to manage even without multiple currencies and locations and disparate systems.

While a shared services approach has become popular for centralizing processes and data, centralizing functions can’t eliminate the difficulties of capturing macro views of the entire business. Processing may be more efficient, but a cohesive story and perspective are still missing. Accounting teams are still stuck closing last month’s numbers rather than propelling the business forward by highlighting real-time trends.

Lack of time and resources. Even if an organization has embraced financial close automation, how many hours are spent turning data into actionable insight? Even with the latest and greatest tools and a team focused on decision-driving insight, creating forward-looking insights and analysis still get pushed down the priority list as month-end close activities take precedence.

Data and process errors. Humans aren’t perfect, yet many F&A processes rely on error-prone, human-driven processes. Calculations, reporting, decisions, and financial statements depend on these processes being error-free. Even small mistakes can lead to inaccurate journal entries, incorrect payments, and other missteps that can result in re-work, misguided business decisions, fines, penalties, restatement-related damages, and more.

BlackLine offers a platform of solutions designed to give businesses real-time visibility into financial numbers at any point during the period. We can help solve your most complex accounting challenges with our end-to-end solutions. Let’s take a look at how we can help you get that foundational data in great shape.

Financial Close Platform

BlackLine's Financial Close platform provides a seamless, unified, and complete platform to deliver accurate actuals. We call it connected transparency. With BlackLine, there’s a single line of sight, a view of a company’s financial performance starting from the individual transaction all the way to the consolidated financials. We provide the highest level of transparency and confidence in the numbers so you can be sure that your processes will deliver complete and accurate financial information.

Variance Analysis

BlackLine's Variance Analysis solution automates the calculation and identification of account balance and activity fluctuations. This enables continuous monitoring for risk, ensuring the effective and timely execution of critical management review controls and supporting agile decision-making.

Accrual Process Optimization

BlackLine’s unified financial close platform centralizes, standardizes, and enables continuous accounting within your accrual processes, creating increased capacity. With an automated accrual process, F&A teams can:

• Import data from data sources like payment processors and GL

• Prepare and record new accruals based on imported data

• Compare accruals against actuals

• Reverse accruals and record true-ups based on automated matching results

• Analyze accruals through reporting

Financial Reporting Analytics

BlackLine's Financial Reporting Analytics provides a centralized workspace to perform consolidation activities with end-to-end transparency and automated fluctuation analysis and attestation, allowing companies to:

• Unify data and streamline workflows

• Improve visibility and accelerate reporting

• Enhance control and decision-making

It’s no wonder thousands of companies rely on BlackLine to close faster with complete and accurate results. It’s exciting to look to the next steps in your digital finance transformation but remember: successful change requires more than just technological upgrades—you must start with timely and trusted actuals.