Complexity is a fact of life for businesses of all sizes, and it’s only growing in the digital era thanks to the increasing interconnectedness of companies, value chains and economies.
Added to the mix is the uncertainty the COVID-19 pandemic injected into the global economy, with C-suite executives pressed to plan for a range of variables created by the outbreak. Lessons learned as a result of the outbreak will stand businesses in good stead with regards to business continuity planning and resilience going forward.
C-suite executives managing diversified businesses across product ranges, channels, and geographies need to pay close attention to financial reporting and analysis. Accurate insight into finances is essential for compliance and is also vital to making better decisions in a complex and uncertain world.
Predictably, financial reporting is an area that becomes more complex as a business grows. This is because of the rising demands created by the need to declare:
- The financial health of a company based on current knowledge and expectations for the future,
- Accurate reports of operating results and cash flow, and
- Financial statements to reflect economic and business reality.
Let’s consider several elements a company must consider as it grows.
It starts with the people
While technology is key to generating accurate financial reports and gaining real-time insight into the business, getting it right starts with putting the right team in place. Such a team must understand the role of accurate data and robust reporting in compliance and in making sound financial decisions.
Financial controls and checks are essential. In addition, segregation of responsibilities is a must so that records can’t be manipulated. The organisation must ensure that different team members are tasked with initiating, approving, recording and reconciling transactions. Also, it is essential to implement fail-safes in areas such as inventory management by adding a third-party review.
A business that is growing in size and complexity may require regular audits, even if it doesn’t breach the thresholds that mandate statutory audits under the Companies Act. Undergoing an audit shows a commitment to transparency and can help management discover discrepancies and inefficiencies that the internal finance team may have overlooked. Furthermore, it can help build confidence among lenders, investors and other stakeholders.
Mitigating complexity with analytics
A growing business is presented with multiple data sources and disparate solutions that may not integrate, leading to poor communication and collaboration. In many instances, the finance function may still be working with spreadsheets. It takes time and energy to consolidate and summarise this data—and it might already be out of date when the report is compiled.
Managers can’t use this static data to develop forecasts and create ‘what-if’ scenarios that are crucial to understanding the business’s drivers of success. An organisation can consider investing in an analytics solution that can improve its ability to gather, organise and analyse data. A growing business will want to be able to:
Connect and analyse financial and operational data through automation
With access to data and the ability to analyse it, executives can start building a repeatable and reliable process that leads to automation, increasing the speed and reliability of analytics.
Consolidate multiple entities
Consolidating data imports across multiple entities provides up-to-date information that ensures accurate forecasting and planning.
Generate self-service reports
Instead of forcing reporting through IT, it pays to empower business users with software that offers strong analytical capabilities, allowing them to streamline the analysis without any reporting delay.
Given the uncertainties businesses face in our complex world, causal relationships are difficult to track, and it’s difficult to decide whether or not a course of action is correct. With analytics, a team can get to the right data to build the big picture of what’s happening in the organisation. This reduces complexity by providing a single, real-time version of the truth.
Conclusion on business reporting and complexity
Dealing with complexity is not simply about predicting the future or reducing risk – it’s about adapting continuously and learning at speed. Businesses need structure and conditions that push adaptability, learning and creative problem solving, and they must encourage an environment where pooled intelligence is allowed to flourish. Furthermore, for any organisation to truly thrive, it must enable transparency and communicate in real-time, giving individuals the right information when they need it.
By Pieter Bensch, Executive Vice-President at Sage Africa & Middle East