How Technology has Affected Financial Reporting
In the last decade, the corporate world has witnessed many changes and technology has permeated every aspect of business, including financial and managerial reporting.
Below are three areas where the impact on reporting has been the most significant. If your company isn’t realizing the benefits from these changes, it’s missing a golden opportunity.
Tools
QuickBooks, Xero and similar products have set a new baseline standard for ease of entry and reporting. They are helping owners and non-financial managers see financial reports and supporting information more transparently and more often than ever. Much of the manual work done in the past is now automated, creating efficiency. Technology has produced an array of business metrics that go well behind the traditional financial statement; quickly summarizing key measures that lead to better and faster decision making.
This means big changes for the CFO and financial consultants. Both clients and employers are looking for revenue generation ideas, cost-saving ideas, an asset base producing better returns and more flexible capital ideas. It’s all about providing insight that impacts the bottom line.
Financial statements no longer hold value in and of themselves. It’s how the data is framed and used to create information that matters. For CFO’s specifically, this technologically enabled shift has moved the finance and accounting role from one of primarily historical record keeping to forward looking business planning and long term forecasting.
Anywhere, Anytime
Real time is wiping out the concept of the traditional accounting close. Historically, general ledger entries weren’t made until the end of the month. With technology and the pace of business, the process is now instantaneous, ongoing and all entries related to any one activity are being made simultaneously.
For companies that can’t keep up with the changing practice, the use of the general ledger system will fall by the wayside, opening the door for the development of other subsystems that drive decision making. This creates a risk of the financial group becoming less relevant, possibly to the point of being redundant.
On-site presence is also less relevant. The virtual office is allowing people to work from anywhere, expanding capabilities and the talent pool, and enabling consultants to take on multiple clients at once. Anywhere anytime is the new norm.
Analytics, Analytics, Analytics
Decision support is available at lower cost than ever before. First-tier financial information—financial statements—is immediately available and has now become a commodity. For example, the process of calculating how quickly you collect your receivables through Day Sales Outstanding is now generated with a click on QuickBooks.
This places greater value on second and third tier information. In this example, that means being able to understand the quality of your accounts receivable and predict non performing accounts. Deriving additional data beyond ratios through assessments and predictions is where the technology is heading. It’s the ability to build on what’s already there that will give a competitive edge.
Essentially, CFOs and consultants have been pushed to focus more on analytics and forecasting by clients who expect it now more than ever.
In some industries, technology can bring a plethora of unwelcome change. In terms of financial reporting, technology is changing how things are done and enabling them to be done at a much faster pace. It is also bringing more value. Those are two things any company would welcome.
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