How to Maintain a Trustworthy Accounting & Finance Organization

With so much of our energy focused on revenue generation, it’s easy for businesses to downplay the importance of less tangible assets—ethics, social awareness, and in particular, trust—for success.

Trust in numbers, processes, and people is vital to maintaining long-term value in a world that grows more complex and competitive by the day.

Fortune Magazine agrees, basing two-thirds of the scores for its “100 Best Companies to Work For” on the Great Place to Work Institute’s trust index. Similarly, Founder’s Guide notes that trust is important when businesses collaborate, but it’s “not always easy to have when you see bad things from the company that you’re working with.”

Maintaining trust is important at all levels of an organization, but trust in Finance, in the numbers, is the first step toward a healthy, trustworthy company.

Building Trust in Your Data

Trust in the data produced by invoices, payments, and expenses of any business is not just an esoteric concept. It’s as real as the extra costs—in dollars, time, and reputation—incurred when that data goes wrong.

Consider what may happen to an automobile maker when a design error, say for a steering gearbox, travels undiscovered through assembly and into production. The error is finally discovered.

The engineering group issues an engineering change order (ECO). The current design’s production must stop, and costs mount. Time is wasted, and the company’s reputation may also suffer.

Accountants like to compare the accounting function to a numbers factory. The numbers (data) make up the disparate parts, and the accounting processes connect numbers into larger components that build the final products. In this case, the products are the quarterly and year-end financial statements, which are then sent to “the street.”

If a material error in the numbers propagates into reports, the resulting misstatement can do at least as much harm to a business’ reputation as the ECO did to the automaker.

For the Office of Finance and its enterprise, a material error in Accounting can also invite serious penalties. Accounting staff may have to redirect efforts to find and correct the error(s). And ongoing processes might require a pause to wait for the corrections.

Labor costs spike, reporting might be delayed, and the damage to officers’ reputations could be paramount.

The Value of Accounting Automation

CFOs agree that accounting automation is essential to heading off such errors, particularly now that the business world is creating more data—bigger data—and greater business complexities than ever before. An integrated automation platform helps maintain integrity in numbers and process in several ways.

For one, it keeps a centralized database of all accounting information, updated in real time for use by various accounting functions. Reports are consistent in content and style, and accompanying documentation is available to all users.

BlackLine enforces accountability by maintaining complete audit trails for transactions. It bolsters integrity through segregation-of-duties controls, so a single user can’t perform both the preparer and reviewer function on the same account reconciliation.

Developing Trust Through Reporting

Integrated real-time reporting fosters trust in accounting processes, especially when it lets users view compliance and risk management controls via user-friendly dashboards.

With BlackLine’s dashboards, controllers and CFOs also have the means to communicate risk management and other process integrity information to executive leaders and the larger business.

The ability to communicate risk management initiatives is becoming more valuable, as businesses strive to build trust in corporate strategies to address newer risk concerns related to environmental, social, and governance (ESG) issues.

These issues are more visible and more vital to business strategy than
ever before.

For instance, in October, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) released Enterprise Risk Management: Applying enterprise risk management to environmental, social and governance-related risks.

Co-developed with the World Business Council for Sustainable Development, the document is intended to bring environmental, social, and governance (ESG) risks and opportunities into focus for the world’s businesses and other organizations.

Among other details, the new COSO guidance includes several real-world
examples of how organizations can apply COSO’s recently revised framework, Enterprise Risk Management—Integrating with Strategy
and Performance to ESG endeavors.

Why Trust Is Important to COSO

If the ERM framework represents a 35,000-foot view, says COSO Chairman Paul Sobel, the new guidance zooms in to 10,000 feet.

Both COSO documents place importance on areas that relate directly to building and maintaining organizational trust.

“Both documents feature principles that relate directly to trust,” Sobel says. “They touch on ethics, core values, integrity, and desired culture and behavior.

“Trustworthiness is important to COSO. We were founded to bring structure and understanding to controls, and in large part, as a way to restore faith in the financial markets.”

Sobel notes that the CFO can play a major part in fostering that trust.

CFOs today are broadening their reach, and are more involved in external reporting than ever before. “The CFO should play a role in identifying risk,” Sobel says, and often “owns or is an integral partner in monitoring environmental, social, and governance issues.”