Simplifying statutory financial reporting with content-driven technology

Statutory financial reporting, often referred to as the “last mile” of record-to-report processing, is complex. It must consider stringent regulatory requirements. This ties statutory reporting to local or – jurisdictional nuances.

The documents created through this process – underpin business reports and other processes such as corporate tax and transfer pricing.

But the slightest statutory financial reporting mistake can even put brand reputation at risk. Increasing demands from stakeholders and regulators make the process more challenging than ever. Without the right technology capabilities, organisations may struggle to maintain integrity in disclosure statements.

The recent CFO Lunchtime Live WebCast explored the statutory financial reporting process with two guest speakers. James Solomons, Global CFO of Xref, spoke with Trish Wilson, Partner – Assurance, Financial Accounting Advisory services for Ernst & Young, and Andrew Hay, Head of Proposition – Software Solutions, Asia and Emerging Markets at Thomson Reuters.

Manual processes delaying progress

Within most organisations, statutory financial reporting processes are heavily reliant on manual processes, with 58% of respondents using spreadsheets / word processing tools. Only one in five (20%) are assessing the move away from manual and are either using or deploying technology.

Despite this, organisations are going through finance transformation projects, ERP migrations to drive transparency, efficiency and reduce costs. Many are evaluating the vendors they use globally as they prepare for ERP upgrades, according to Hay.

“There’s a huge number of SAP upgrades going on at the moment, whether they are in planning, or whether they are going live,” says Hay.

“That to me is actually a really big trigger point… a lot of organisations across not just finance but tax and the enterprise as a whole are asking, what are we actually doing as an organisation? What process do we have in place? And what are we trying to achieve?”

The automation journey is one which requires numerous stakeholders to define their objectives.

“We’re seeing strategic alignment between IT, finance and tax, and finance simplification as one of the drivers of the operating model, which means looking to where the automation journey is. It doesn’t matter where you are currently looking – what’s time consuming, what’s high value, what are those elements that the ANZ regulatory landscape is demanding of you? A tool like Thomson Reuters is always up to date from the ONESOURCE perspective,” describes Wilson.

The delivery model

As compliance gets tougher, costlier, and riskier, organisations are scrutinising their delivery models and transforming their approach. With the great resignation, there is also the war for talent to consider, Solomons points out. So, how is the delivery model evolving and impacting talent?

“Gone are the days where it’s either onshore or offshore. Everybody’s doing things differently,” replies Wilson.

“CFOs are telling us all the time that they’re using the operating model agility to address access to talent and resources. Attracting those who are more data miners or business partners are being better utilised… the mundane tasks really do need to be identified and automated, in my opinion. There’s a shift from cost to value.”

Following on from Wilson’s comments, Hay observes the increasing number of multinationals centralising core functions within their business. Questions being raised along this process include:

“Do you stay with your existing process? Do your own research for each of these countries? Do you rely on your audit teams? Or do you actually leverage new content-driven technology?”

Key challenges and the case for change

Global reporting requirements are evolving. These require organisations to report and present data at an unprecedented level of granularity, adding operational and process complexity, and risk.

About 40% of poll respondents said that keeping up with new regulations and accounting standards is their most significant process challenge. Another 40% cited data management and the need for increased efficiency as their key challenge.

“The pressures on the finance team, reducing costs and the cost of finance is just going up and up, because we’re just loading more people up on doing manual tasks…. it’s an unprecedented opportunity to stop and rethink about the model and say, I actually don’t need to do this myself. I can automate it,” shares Wilson.

Without adequate standardisation, auditors are likely to spend more time integrating different formats and reviewing different outputs, leading to risks of inconsistency and errors and audit overruns. Further, simple things like roll-over, notes and page referencing, formatting etc., can cause significant delays in the statutory financial report generation process – putting this process on the change agenda.

“If you’re going through multiple iterations of drafts with auditors, that, to me, screams out that something is wrong with the process,” says Hay.

Technology drives remarkable results

The burden of time is a significant factor in statutory financial reporting. Taking longer to conduct statutory financial reporting reduces the focus on value-add activities. It can also heighten the likelihood of errors or missed deadlines. Technology helps organisations oversee the process holistically, enabling staff to focus on tasks that add more value.

Investing in technology at the start can help you meet your pressing deadlines and enable you to focus on value-added tasks, says Hay.

As Wilson adds, if your auditors are able to concurrently work on the financial statements you have drafted and form a view early-on, you have future-proofed your process.

Utilising technology to automate manual, iterative tasks can free up staff to do more interesting and engaging work. This helps them add more value to the business. The importance of technology is reflected in the poll results, with about 60% looking to invest in technology in the next couple of years.

Implementing the change

As you embark on this transformation journey and decide whether it’s a big bang or a phased approach depending upon your priorities and internal investment timelines, what is key is to have a roadmap, urges Wilson.

“Have a roadmap and prove that one works first, and then the rest of the business will follow. And it’s quite easy. Once you’ve done one… and you’ve gone through all of the pain and the issues, you can then standardise the process.”

She concludes by sharing the “five Cs” – engaging stakeholders on the cost of finance; improving control; ensuring connectivity between users, driving consistency of reporting and meeting compliance obligations, should help get it across the line.

Hay agrees with Wilson, adding that to execute a successful transformation finance leaders should also look at the dependencies of people, process, data and technology.

“You need to sell this internally… and as Trish noted earlier, early buy-in is key,” Hay concludes.