The intricate details of financial reporting (e.g., the presentation of financial statements ranging from cash flow statements and P&L reports) might not be exciting to most people. However, one thing is clear: their significance cannot be underestimated.
Accuracy and transparency in terms of financial reporting are crucial — not only to the company itself, but also to investors, creditors, and regulators who rely on relevant financial reports to make sensible decisions concerning the company and the industry at large.
Despite the importance of truthful financial disclosure, how much information private and public companies should disclose to stakeholders in their financial reporting has been a point of contention for decades.
Existing accounting practices are lagging while leaving behind business executives with a dilemma of the cost-benefit of transparency. Simply put, there are too many obstacles to improving the existing financial reporting standards.
However, emerging technologies are offering solutions that could sufficiently automate financial reporting while introducing an unprecedented level of transparency, accuracy, and security.
Here is a look at what the future of financial reporting could look like.
Without a doubt, management is the starting point of robust and accountable financial analysis. As competition for capital worldwide increases, the future of reporting is geared towards accountable finances, and all eyes are set on the performance of finance executives steering the ship.
The overall quality and reliability of the US financial reporting structure (a blueprint for most organizations worldwide), is enabled by the requirements placed on companies to make directors and financial executives liable for the accuracy of financial statements.
Therefore, for a company to have a reliable culture of financial reporting, it should have forward-thinking individuals in leadership ready to embrace evidence-based methods that encourage transparency. Beyond having sufficient authority and knowledge of proper accounting principles relevant to the business, such executives should also help guide companies through the necessary upgrade processes from one accounting system to the other.
Adoption of new solutions with modern, robust analytics capabilities can help businesses automate much of their financial reporting, giving executives more room for critical decision-making.
Given the impact of accurate financial reporting on business operations, instances of fraud (though infrequent) could have a devastating effect on the reputation of companies, the decisions of investors, and the overall health of an industry.
Fortunately, options such as OverlayAnalytics can help improve trust in financial reporting by creating a single source of truth where a company’s financial reports are stored and organized in a manner that enables real-time reporting and transparency.
The future of financial reporting calls for a level of transparency and compliance beyond what is possible with existing tools and standards. What’s more, the prominent impact of technology on financial reporting standards is undeniable. Therefore, compliance-based reporting can be established with technologies that champion transparency and collaboration.
However, given that billions of dollars are spent annually on accounting tools, CRMs, and more with little to write home about, a problem still exists as companies need seamless solutions that enable compliance-based financial reporting.
OverlayAnalytics is one such solution. This platform does the heavy lifting when it comes to data collection and reconciliation for the purpose of financial reporting, leaving executives with the much easier task of making decisions.
Within your dashboard, rows and columns that make up your business’s financial statements are put in their respective context thereby allowing even regulators to understand the business logic of an organization.
Financial transparency is already becoming one of the most pressing issues globally as investors worldwide continually demand for an increased level of accountability from businesses leading to a need for in-depth financial reporting.
However, existing tools that finance executives use to collect and compile data are not designed to facilitate deep financial reporting that allows investors all the data they would need in one fell swoop.
While tools such as Excel have prospered over the years in terms of helping finance executives achieve their goals, they are limited in that they create data silos that provide limited accessibility. The future of financial reporting calls for more robust tools that are flexible and scalable enough to automate the data collection process while enabling data integrity and accuracy.
A combination of turnkey platforms has the potential to not only help businesses compile in-depth reports, but also simplify the process while providing granular details of a company’s finances. These emerging solutions will also make it easy to flag unusual events, trends, patterns, and outliers in the day-to-day operations of a business.
There is an incredible need to continue pushing the boundaries in the move towards the future of financial reporting.
As Wesley Bricker (former SEC Chief Accountant) opines, “technology is a prominent force that has been a catalyst of profound changes to business models, business process, accounting, and auditing.”
Granted, there will be challenges that will emerge with embracing any type of change, however, business leaders should consider adopting strategies that enable adequate preparation for the unexpected in an increasingly competitive business landscape.