Clear outlooks from the Cloud - Giving CFOs assured enterprise visibility

Today’s Chief Financial Officer has the most challenging job in business, entrusted with managing the financial risks of global and increasingly complex enterprises. If the financial statement is incorrect, it’s the CFO that is accountable.

A case in point is the recent Tesco accounting scandal. The large supermarket retailer overstated its first-half 2014 profits by £263 million, which it attributed to incorrectly booking payments from suppliers. Shortly afterwards, Tesco brought in a new CFO to help restore the firm’s credibility and accounting teams.
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 only 27 percent of financial decision makers trust the accuracy of their organisation’s financial data “completely,” according to a recent survey of CFOs. The reason? According to the UK poll, most of the 250 respondents say their companies continue to rely on manual accounting processes that leave them vulnerable to error.

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.

Mustering a Solution
Cloud platforms present multiple benefits, chief among them providing the CFO a holistic view of enterprise accounts. Such visibility has not been possible with manual processing involving spreadsheets. Traditionally, documents often are created and used differently across the business, with accounts added or deleted by individuals who leave no mark. High turnover makes the situation worse, as new hires are prone to altering spreadsheet templates—inserting new rows, tabs and files that no longer add up correctly.

A cloud platform also reduces the risk of not closing the books in time, by providing fast access to financial data, in addition to the ability to drill down into the details. In the past as a company neared the financial close, accountants reconciling accounts might find an error requiring them to reach out to coworkers for answers. Sometimes the queries culminated in a dead end—the colleague couldn’t find the relevant document or had failed to preserve a physical record.

Automating accounts reconciliation in the cloud removes these challenges. The system’s 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 quickly 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 company’s balance sheet for reporting purposes.

Cloud-based accounting tools also give CFOs quicker access to accurate account information to help them and others in the C-Suite make more informed, strategic decisions making the business more efficient, while providing opportunities for growth and competitive advantage.

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.

Past and Present
Let’s just look at the problems created by manual processes to reconcile intercompany transactions. In a growing company, it is not uncommon to have different entities within the organisation producing transactions in a wide range of currencies subject to varied tax treatments. These entities may have diverse systems and dissimilar reconciliation and settlement processes, creating the risk of disconnected transaction settlements and out-of-balance positions material to the organisation’s financial statements.

Nearing the financial close, internal audit suddenly questions the accuracy of a particular intercompany transaction. Company accountants are now tasked with fulfilling the needs of the audit testing. Hunting for the facts, they learn that a particular physical record appears to be lost or otherwise unavailable. This can result in days and weeks to track down the document for verification purposes.

The evidence in hand at last, accountants now hand over a binder containing a sheaf of stapled records to internal audit. Finally, the financial statements are ready for the CFO’s signature. Without visibility into the underlying details, the CFO takes a deep breath and puts pen to paper. Obviously, this is no way to run a modern finance organisation in today’s fast-paced global business environment.

The solution is automating finances in the cloud. “Technology has made basic accounts preparation and bookkeeping easier for businesses,” the Institute of Chartered Accountants in England and Wales recently noted in a recent paper. “This has the potential to change the role of the accountant, creating different opportunities to add value.”

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.