Many Chief Financial Officers (CFOs) are concerned about how technology will impact the sector, and how professionals will adapt.
Financial reporting is one of the areas that should be affected massively by the rise of technology, but many professionals have found it difficult to bring themselves up to date with the latest technological developments. However, there's massive potential for reports that are able to integrate big data and become more accurate.
One of the reasons for this is because many consumers and businesses now rely on reports that use real-time information, as it allows them to make the most well-informed decisions. This is exceptionally important when finances are concerned, as making the wrong move can have dire consequences for the wider business.
But when will financial reporting catch up and implement big data into its findings?
A report from Accenture highlighted the importance of data-driven financial decisions, and the need for finance professionals to be skilled up in these areas to allow businesses to make the most of big data.
The banking and financial industries are being mindful of the importance of big data and the most effective strategies work because they identify the requirements of the business first and then leverage their existing infrastructure and analytics to help them achieve this goal.
Allowing them to start with what they already have, these strategies are scalable and allow the organization to implement more data sources and analytics over time. Not only does this have the benefit of enabling financial departments to set their own pace, but it also means that there is likely to be a stronger understanding of the role and importance of big data.
Financial reporting challenges
However, for financial reports themselves there remains a number of key challenges that the industry is battling to overcome. The complexity of the requirements surrounding financial reporting is one of the most pressing, especially as many bodies and countries are almost constantly changing the guidelines. This means that professionals already have a difficult task ensuring that everything is consistent as the rules evolve both throughout the company and from quarter to quarter.
There's also a substantial risk of making mistakes in the data collected. Regulators often use their own analytics software to spot any irregularities in reported data, which means many organizations need to have a specialist team on hand to check financial reports to avoid fines. However, this is a further problem for the industry. Skilled and experienced professionals are already in high demand before a specialism in big data is even brought up. These factors mean that many organizations may not have the confidence to fully realize the potential of big data, especially when there is so much at risk.
Technology is also rapidly changing, posing another key challenge for financial reporting. Smartphones, tablets, wireless access and the cloud have all changed how consumers access data and how the finance industry uses it. There's also a growing need for automation across the sector to ensure there is real-time visibility whenever it's needed. Although in principle this makes it easier for big data to be integrated, organizations need the right infrastructure and professionals in place to deal with this evolving and expanding technology.
Are analytics a solution?
Analytics have the potential to improve financial reporting, giving professionals a tool to evaluate results at period ends and between reporting periods, helping them spot errors and prevent fraud.
However, it's important that organizations make sure they have the infrastructure and skills in-house before making a significant move towards big data. Even when this is in place, it's vital that elements like variance analysis are carried out consistently. This will help teams spot anomalies in their financial reports by looking at various different subjects, such as balance sheets, income, cash flow, budget versus actual, and prior period comparisons.
Big data and analytics can help improve the quality and accuracy of financial reports, especially when continuous monitoring is used. This helps professionals identify risks earlier on and resolve them before they cause too much damage to the organization, helping to reduce the cost of errors and omissions.
When will financial reporting catch up?
Many financial organizations are already working towards realizing the true potential of big data throughout their sector. However, what's more important is identifying the capabilities a firm has in terms of its infrastructure and skills for coping with analytics and big data. Companies need to start with this and build a strong foundation, perhaps bringing in skilled professionals to help them expand their big data capabilities. In this way, organizations can ensure they are evolving towards the growing need for analytics in financial reporting without jeopardizing the rest of the company.