This article originally appeared in Strategic Finance Magazine and is Part 2 of this blog series. Read Part 1 here.
Nearly 70% of global business leaders and finance professionals claim their organization has made a significant business decision based on inaccurate financial data. Almost 22% of C-suite respondents say it takes up to 10 days per month for their organization to identify errors and make adjustments, potentially wasting as many as 114 days each year.
These findings are from a global survey commissioned by BlackLine of more than 1,100 C-suite executives and finance professionals, to gauge confidence levels in financial data and the perceived impact of errors on the business.
The results reveal four essential ways that organizations can build and maintain trust in today’s increasingly unpredictable, rapidly changing business environment. Here are the first two.
Eliminate Human Error & Deliver Accurate Data
Accountants have always held high levels of accuracy as a core value, but the rapid pace of business and the demand for real-time financial information have made it increasingly difficult for accountants to process the extraordinary amount of data flowing through modern organizations.
Continued reliance on manual or outdated systems means tremendous amounts of overtime are required to meet the competing demands of closing the books both accurately and on time. According to the Society for Human Resource Management (SHRM), overtime itself is a significant factor in poor performance and increased errors.
To maintain the trust of leadership, stakeholders, and shareholders, organizations must find ways to reduce and even eliminate the possibility of human error.
How? By streamlining outdated, clunky, manual processes and giving accounting professionals solutions that help them maintain high levels of accuracy, even as the pace of business accelerates.
Centralize Key Functions
It’s difficult to achieve meaningful transparency with legacy accounting systems because these systems make it difficult to quickly identify mistakes and discrepancies.
BlackLine’s global study found that 55% of respondents were “not completely confident” that they could identify financial errors in advance of reporting_._ Of those, 26% were concerned over errors that they know must exist, but of which they have no visibility.
Transparency’s value in Accounting and Finance goes beyond increasing the visibility of errors and improving the accuracy of statements. Transparency also helps build trust externally, which in turn, leads to large-scale business benefits.
Studies show that organizations with increased organizational transparency:
Benefit from a reduced cost of capital. An article in the Journal of Accounting, Auditing & Finance states that “increased reporting transparency provides evidence of an association between transparency and cost of capital”.
According to an article in ScienceDirect, when an organization provides more transparency within financial statements, that organization experiences a lower cost of capital, primarily due to the fact that “uncertainty regarding the value of its equity may be lower”.
Increase sales. In another study cited in a Harvard Business Review article, making the costs and processes of various products transparent, including the amount of markup, led to a dramatic jump in sales. By providing full operational transparency for one product, a wallet, researchers were able to increase sales by 26%.
Increase stakeholder confidence. Research compiled by Harvard Business School showed that increasing the levels of operational transparency within government agencies positively influenced citizen attitudes toward government. Revealing the “hidden work” increased the self-reported level of trust by 14%.
Accounting organizations can address the need for more transparency by transitioning from outdated and often manual accounting operations that hamper visibility to more centralized, modern processes and solutions. Instead of using and storing spreadsheets on multiple servers (or with multiple accountants), organizations can create a central location for all close data and operations.
Centralizing key accounting functions—reconciliations, task assignment and management, journal entries, analysis—enables a more holistic approach to the financial close process and ensures immediate, real-time visibility into all activities.
Read this blog to learn more about what BlackLine’s global survey of 1,100 C-suite executives and finance professionals revealed about the global scale of financial data inaccuracies.