Automated Financial Storytelling at Your Fingertips: Here’s How
Every financial professional understands that the numbers matter a great deal when it comes to reporting financial results. Accuracy, consistency, and timeliness are important. Those same professionals also know that there’s substantive meaning behind those numbers and that it’s important to tell the stories that lend additional depth and context to the raw financial statements.
This is where narrative analysis comes into play. The numbers alone can only provide a limited understanding of how the business is performing. To get the complete picture, the reader needs contextual information. Whether that’s an investor, a company executive, or an employee stakeholder, the explanatory notes that accompany financial statements are a critical piece of the puzzle. In some cases, narrative analysis may be necessary to support legal or regulatory compliance.
How Narrative Analysis Is Managed at Most Companies
Most financial reporting tools are focused on generating financial statements. That’s important, of course. Without the right purpose-built reporting solution, directly linked to your underlying data sources, you’ll be left with a collection of spreadsheets, leading to errors, inconsistencies, and time-consuming processes that delay your month-end close.
Most tools stop there. They don’t necessarily enable users to add narrative analysis or to collaborate with others across the organization to refine the explanatory notes that add depth and meaning to the numbers.
As a result, most organizations resort to manual methods of combining their raw financial data with narrative analysis. To complicate matters further, most companies need to present financial results to a variety of different audiences, usually in different formats. This leads to a highly fragmented approach to developing reports. The “last mile” often consists of hours spent manually copying and pasting data from source systems or disparate spreadsheets, and then passing these files back and forth over insecure channels, such as email, until the reports are complete.
Imagine a scenario in which your accounting team has produced draft financial statements. The CFO has asked for a slide show presentation at next week’s meeting of senior executives. You copy and paste the numbers into a summary P&L slide, followed by a few slides that highlight sales trends for the quarter, another for cash flow, and a series of detailed slides that show expenses. The CFO adds a collection of explanatory bullet points alongside the numbers on each slide.
While this is happening, another team member starts to compile the same information for an investor relations web page. This time they’re formatting the reports using an HTML editor, and the narrative analysis is a bit less detailed. Meanwhile, a third copy of the financial statements (also with commentary) is being developed in Adobe InDesign, in preparation for a graphical PDF report to be shared as part of a new investor package.
Now comes the bad news: the accounting team has found that they need to make a few adjusting entries that will impact both P&L and balance sheet accounts. You’ll need to adjust the narrative notes accordingly. You’re already dealing with (at least) three different copies of the same information, but because there’s nothing linking your source system and your narrative analysis to those three (or more) output documents, you’re left with only one choice. Every document needs to be edited individually.
This is where inaccuracies and inconsistencies can easily emerge, if you’re not very careful. Consider the fact that a single financial report can have hundreds of individual data points, some of which might be buried within the narrative analysis itself. It takes a great deal of attention to detail to make sure that you record any resulting changes accurately on every page of each of those documents.
Now consider what happens when the kind of last-minute change described above occurs three or four times (or more) during your month-end closing process. Again, you must edit every report to reflect those changes, and with each of those edits the likelihood of errors and inconsistencies grows higher.
Financial reporting is a high-stakes endeavor. Senior executives, investors, and regulatory agencies are all depending on this information. Even a minor error can lead to a drop in confidence, or worse. This is why traditional manual methods of producing and publishing financial results simply don’t work well. They are tedious, time-consuming, and risky.
Relieve The Year-End Overload with Automated Reporting
Access ResourceAutomating Financial Storytelling
By automating these processes, companies can dramatically reduce their exposure to risk, eliminate wasteful effort, and produce accurate, consistent financial reports and presentations in far less time than it takes using manual methods.
Let’s take another look at the example cited above, considering how this might work at a company that uses an automated internal reporting and disclosure management solution. Someone on the accounting team enters that last-minute adjustment in the general ledger. The financial statements immediately reflect that change in the income statement, balance sheet, and statement of cash flows.
The executive slide presentation, likewise, is automatically updated with the new numbers. Adobe InDesign reflects the changes, too. No effort was required to make those adjustments because they flowed automatically from the disclosure management system.
Now imagine that several of the explanatory notes that accompany the current financial statements require some small adjustments as a result of the new numbers. A team lead in the accounting department makes the changes, sends them to the CFO for approval, and the updates flow automatically to each of the output documents, without further human intervention.
It’s also comforting to know that the company has a complete audit trail showing who has edited the narrative analysis that accompanies the financial statements, and when their changes were made. There is an approval process in place to ensure that the right people are fully informed of every edit and have an opportunity to accept or reject the proposed changes.
The CertentCDM Platform
Automated financial reporting, with narrative analysis enables companies to streamline and enhance virtually all aspects of the internal performance reporting and external disclosure management processes, dramatically reducing the associated risks and costs.
Certent Disclosure Management is a secure, collaborative, enterprise-scalable reporting and process management platform for generating recurring multi-author reports and presentations. It centralizes enterprise data from multiple sources into a single system of record, dynamically integrating numerical data with narrative analysis in a controlled and fully auditable environment. Reports update automatically when the source data changes across all tabular, graphical, and narrative portions of the report.
To learn more about how Certent Disclosure Management enables organizations to automate their financial narrative, download the ebook entitled “Automate Your Financial Narrative: Tell the Story Behind the Numbers”:
Automate Your Financial Narrative: Tell the Story Behind the Numbers
Download Now: