Running the finance department of a mid-size and large organization is a lot like many other leadership roles: you need to be able to withstand criticism, get over setbacks and charge forward into the somewhat unknown. This might be summed up by the word “confidence,” but even the best CFOs may not be as confident as they wish they were.
In a recent EY report, which surveyed 1,000 financial executives in organizations with revenue greater than $500 million across 25 countries, it’s stated that confidence in reporting that meets various compliance requirements plummeted from 84% last year to 55% this year. It gets worse: CFOs are also less confident their financial reporting will meet the expectations of the board of directors (from 71% last year to only 48% this year). As for key performance indicators (KPIs), only 44% believe they are being consistently applied.
This was EY’s overall conclusion:
“The increased scope of the reporting generated by the finance function — driven by increasing complexity and stakeholder requirements — is stretching it and is reducing confidence . . . Corporate reporting needs to be all things to all people — relevant, timely and cost effective. CFOs need to step back and evaluate what they are producing and address concerns over confidence and effectiveness quickly.”
The Audit Committee Is Watching You
As grim as all this sounds, it’s possible that we are simply reaching an inflection point in the opportunities for financial reporting and the increased scrutiny such reports come under.
In its summary of the EY research, Economia suggested these two forces are making CFOs more self-conscious and overworked than ever before.
“They are worried because they believe performance is being adversely affected by the complexity of new reporting requirements, the reporting overload and the pressure from audit committees,” the post said.
Nurturing those relationships might have to begin by making sure reporting is done in such a way that the end results are easy to digest and are consumable.
Because Excel is so universal and consumable in finance – perhaps by adopting a system that renovates and automates your existing Excel templates and reports, and that saves your entire organization the tedious, error-prone work of recreating templates, formulas and models in a net-new environment will give finance leaders more time to analyze and report without focusing so much in putting all the data together.
Audit committees may be more open to a simple Excel spreadsheet than an overly-complex system, for instance – as long as it’s controlled, systemized and audit-able. There may also be a need for a phased approach to improve reporting in certain areas and then iterate everywhere else. That’s because EY said more than 60% of firms have more than 10 business units and 48% must comply with more than 10 reporting standards, from IFRS to local GAAP.
In some ways it’s a good thing that audit committees are paying more attention to what comes out of the finance department. Perhaps a healthy discussion on the KPIs that make the most sense will help CFOs and their teams prioritize their efforts and start delivering the kind of reporting that everyone can stand behind.
Sometimes confidence is a matter of “fake it until you make it,” but in this case the potential for long-term CFO success is entirely genuine—and very much achievable.
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