Finance and accounting teams in local government, higher education, and healthcare know the importance of accurate financial reporting and the ripple effect created by incorrect data. Both internal and external stakeholders depend on error-free financial statements for maintaining the organization’s well-being, tracking its financial health, accurately completing audits, and making informed decisions.
Although the need for accurate financial reports is widely recognized amongst companies nationwide, siloed data within finance departments continues to create limited visibility for both internal and external stakeholders. In fact, a survey conducted jointly by Oracle and Accenture found that almost 40% of senior-level leaders say their business’ effectiveness is impaired by limited visibility into financial-reporting data.
The truth is that many teams’ financial reports are based on incomplete data, which is typically due to disparate systems, outdated spreadsheets, and unstandardized manual processes. Often, incomplete data leads to mistakes that go unnoticed for extended periods of time. Once discovered, these errors can take days, weeks, or even months to correct. By then, the effects of limited data visibility have also trickled into the business’ daily operations, making the problem more difficult to resolve.
The Impacts of Limited Data Visibility
The migration from siloed information to data transparency within your finance team is critical for accurate financial reporting. Read ahead to learn how data silos can prevent your team from producing error-free reports and then learn how technology can enable faster and more accurate financial reporting in your organization.
Issue #1: No Single Source of Truth
Accurate financial reporting is nearly impossible without having a single source of truth. Not only does centralized reporting ensure that there is one set of accurate, up-to-date data to work from that is accessible anytime from anywhere, but it also creates an automatic checks and balance system within your team. Still, over 70% of CFOs across the globe report using three or more data sources.
Without a universal system for storing and retrieving your finance and accounting team’s data, there’s no way to easily identify and correct inconsistencies in your financial reports. Additionally, using multiple systems prevents any nuances of your spreadsheets and reporting practices from being shared with team members, which makes precise reporting more difficult.
Issue #2: Cumbersome Debt Management
Debt management is complex in and of itself. But having limited visibility into the data compounds those challenges, further complicating this task.
Inaccurate Picture of Your Cash Flow
Your company’s financial reports should accurately reflect the business’ total outstanding and future debt. However, with each team member inputting information from multiple sources and even creating and maintaining different files, spreadsheets, and reports, human error is bound to occur. One incorrect figure in the report can offset each line on your spreadsheet thereafter. Thus, detailing accurate cash flow and reporting on debt management becomes cumbersome and difficult to manage. An inaccurate picture of your cash flow and the amount owed to each creditor can have long term negative impacts on your reporting and even potentially impact your rating.
Debt management requires significant collaboration from contributors across multiple departments, and sometimes even with external team members. Limited visibility makes shared responsibilities within one team difficult – add in those additional teams and debt management can quickly become a nightmare. When each person works with identical data from a single source, it’s easier to align on both a team level and cross-functionally to produce accurate information for your reports.
Issue #3: Unreliable Data
Poor-quality data fosters mistrust - especially in industries, like finance, that are governed by strict regulations. Internal and external stakeholders value transparency in all transactions and reporting to help them make informed decisions and ensure financial stability. Using unreliable data in reports can disguise red flags and inaccurately portray the organization’s financial position.
Additionally, when the data can’t be trusted, business functions and processes are impacted. Without data standardization, most teams don’t have complete insight into the quality of their reporting practices and potential for human error, which reduces their confidence in the data. A lack of trustworthy data creates additional opportunities for error as teams come to accept (and even allow) careless mistakes.
How Technology Can Help Overcome the Negative Effects
With technology, you can stop human errors in their tracks by working from one set of accurate, up-to-date, and easily accessible data. Because a centralized, cloud-based technology accommodates multiple internal and external users, your team members can see changes and make updates in real-time, creating accurate data and complete visibility.
A debt and lease management solution, such as DebtBook, provides cloud-based tools to ensure that your data is stored and accessible to appropriate parties. A debt and lease repository provides your team with a centralized database with an organized view of your historical and current debt services and lease contracts that can be filtered, sorted, and expanded for future detail and analysis.
Additionally, the right debt and lease management solution provides your team with easy and quick access to high-quality financial reporting. Audit reports, payment records, continuing disclosure, and debt and lease schedules may involve very manual processes that can take days or even weeks to complete. A modern fintech solution can scale your reporting efforts and help you meet and maintain GFOA ‘Financial Excellence' reporting standards.