BlackLine Survey: How to Bolster Investor Confidence

Today, more than ever before, it’s critical for businesses to maintain investor confidence. According to a survey of 760 institutional investors by BlackLine and research firm Censuswide, that confidence is greatly bolstered by companies’ adoption of accounting automation.

Clarity over how a company finances its operations should be a crucial part of investment decision making. Financial reports, data, and metrics are all vital tools that can help investors understand company performance, as well as potential risk.

But in the face of unpredictable geopolitical events, economic conflicts, currency fluctuations, and rumors of recession do investors actually scrutinize the books as closely as they should?

We wanted to understand if this really was the case.

So we worked with independent research firm Censuswide to ask more than 700 institutional investors what they thought about the financial controls and processes at their portfolio companies. Here are a few of the key results.

Poor financial controls present a major red flag to investors. A third of those surveyed said that risk of internal fraud or financial non-compliance would make them least likely to invest.

Evidence of poor controls often comes in the form of errors in financial reports. Of the investors surveyed, 29% said they’d be less likely to invest if there were errors or post-reporting adjustments—as well as inconsistently late filings, considered a red flag for 25% of investors.

Company financial reporting is also a strong indicator of effective management. More than half strongly agreed that they need evidence of a good financial reporting track record in order to make informed decisions. That’s because those surveyed felt that one of the best ways for a company to reassure investors is to demonstrate that it can properly manage its finances.

A company’s access to real-time financial data was a key decision factor for many investors. Nearly half said access to real-time finance snapshots was a key consideration, and 41% said that real-time snapshots and key metrics in financial reports were vitally important to investor confidence.

Automated solutions like BlackLine are essential to building effective controls and accessing accurate, real-time data, according to Kelly Harper, Senior Manager, Advisory for Ernst & Young.

“Automation has a direct impact on controls,” says Harper. “Manual processes bring inherent risk because they rely on humans. As for data access, near-real-time financial information simply wouldn’t be possible without automation.

“If automation isn’t part of the process, the numbers will always be reported with a delay. Analysis will take longer, and the results would be stale by the time they made it into the hands of an investor.”

Finance automation should be a priority in determining investment quality, notes the report. Harper adds that “Investors like to see companies that make automation a priority because they are comforted by processes that are managed with technology and not people.

“Also, automation allows more time for financial professionals to analyze the data and provide better information to investors that they would otherwise not have the time to provide.”

Read the full report to discover more of our findings from the survey, including BlackLine’s take on investors’ key concerns.