Published on the 10/09/2015 | Written by Todd Hunt
Entrusted with managing the financial risks of global and increasingly complex enterprises, the modern CFO needs modern tools, writes BlackLine’s Todd Hunt...
If financial statements are incorrect, company reputations suffer. When the errors are significant, they can threaten the CFO’s job, along with those of other senior executives. As a result, the CFO needs tools which automate the process of compiling accurate financial statements, delivering advantages of accuracy and speed.
A case in point is last year’s series of changing forecasts at Australian education provider, Vocation Limited. At the start of the 2014/15 financial year, the company predicted it would achieve annual earnings of between $53 and $57 million but over the next six months this forecast was twice revised down. In December, the company announced it was now anticipating earnings of between $25 and $20 million. Then in March 2015, Vocation restated its results for the first six months of the financial year with the announcement of a $273 million bottom line loss.
At the same time, it informed the stock exchange that regulatory audits for some of its businesses were “either in progress, or with outcomes pending”. Over a series of months, the woes led to the resignations of a number of key executives including the former chairman, CFO and ultimately, the CEO.
Human error and the limitations of ERP
Many accounting irregularities are the result of human error, a careless finger keying in the wrong figure. The sheer volume of numbers involved in closing the books exponentially increases the risk of a mistake. A large multinational enterprise, for instance, can produce a general ledger comprising 100,000 balance sheet accounts.
Small wonder few financial decision makers have complete trust in the accuracy of their organisation’s financial data.
ERP systems only go so far in automating financial data processing. In many organisations, hundreds of accountants must reconcile tens of thousands of accounts, journal entries and intercompany transactions—by hand. Since these processes are not automated, there is no visibility into the underlying account details, much less who provided them.
To reduce the threat of accounting irregularities, modern organisations are turning to cloud platforms that automate financial close processes like accounts reconciliation. Such systems ease manual, repetitive back office processes, giving CFOs more confidence in the accuracy of the closing figures.
How the cloud provides the answer
Cloud platforms present multiple benefits, chief among which is that they provide the CFO with a holistic view of enterprise accounts. This visibility has not been possible with manual processing involving spreadsheets, where documents are created and used differently across the business, with accounts added or deleted by individuals who leave no mark.
High staff turnover exacerbates the situation, as new hires are prone to altering spreadsheet templates—inserting new rows, tabs and files that no longer add up correctly.
A cloud platform reduces the risk of not closing the books in time by providing fast access to financial data. It also delivers the ability to drill down into the details. As a result, it removes the problems of the past when accountants engaged in reconciling accounts would find errors, requiring them to check with co-workers for answers. All too often such queries would culminate in a dead end, with the colleague unable to find the relevant document.
In the cloud, templates ensure standardisation of the reconciliation process across the company, as well as the proper segregation of duties. An online document repository stores and safely archives all supporting documentation. And the cloud architecture presents the ability to track workflows across the largest global businesses. All that is required is an internet connection.
As the company inches toward the close, questions that arise over outstanding items are quickly and easily resolved. Unmatched transactions pop up like red flags, enabling accountants to focus on exceptions and create reconciling items.
The risk of a wearied accountant making a bleary-eyed blunder is vastly reduced, offering greater confidence to the CFO in the integrity of the balance sheet for reporting purposes.
Cloud-based accounting tools also give CFOs quicker access to accurate information.
Merely by being able to communicate with colleagues on a single platform at any time or from any place helps accountants attend to their tasks more effectively, while reducing the time it takes to close the books—accurately. The time saved can then be accorded to other more strategic tasks on behalf of the CFO.
Over the past four decades, technology has undeniably changed for the better the way accountants operate. From early spreadsheets to modern financial software solutions, the tasks of bookkeeping and accounts preparation have become easier and faster. And the next advancement is occurring right now, with the automation of finances in the cloud.
In this time of higher audit thresholds, stringent regulations and intense competition, accountants’ time should not be squandered on routine tasks. CFOs need reliable and accurate information they can trust and access easily via the cloud.
Todd Hunt is Asia Pacific VP and GM for BlackLine. He has more than 20 years of experience in the software industry having held senior management positions in sales, account management, business development and customer relationship management.