Finesse the Financial Statement Process with an Automated Approach

For publicly traded companies, creating accurate and timely financial statements is particularly important, yet even when using established ERP software like Oracle, the task can be challenging. Financial statements are increasingly required on a more regular basis to provide better business visibility for decision makers and meet external reporting requirements, meaning that reporting software has become even more critical.

Per conditions set by the Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS), as well as by governing stock exchanges, companies are responsible for providing three main reports on their cash flows, profit-generating operations, and overall financial conditions as part of their final statement: the cash flow statement, income statement, and balance sheet. Here, we’ll explore the importance of accuracy and timeliness in creating this financial statement package, and why Oracle can often compromise these two critical factors.

Accuracy and Consistency Requirements in Reporting

The importance of compiling and publishing an accurate financial statement package is paramount for companies. External audits focus on how well a company’s financial statements adhere to GAAP and/or IFRS and ultimately provide consistency in annual financial reporting. Decision makers like CFOs rely on financial statements to aid formulation of business strategy, monitor financial liquidity, or drive corporate investment.

Corporate reporting also has a significant impact on outside investment. In a global pwc survey of investors, 68 percent said the quality of corporate reporting is key to their investment analysis, and 88 percent said it impacts their perception of a company’s quality of management.

GAAP and IFRS, as well as the governing stock exchange, have specific requirements for how assets, liabilities, and equity should appear in the financial statement. To create the reports using Oracle data, many organizations will manually export transactions to Microsoft Excel to then analyze and format the data to create financial statements and meet the reporting requirements. Other organizations are still relying on the outdated Financial Statement Generator reports (FSGs) from Oracle’s Report Manager to produce the financial statements, but it’s a complex tool that isn’t flexible as far as the row and column sets that end up there. FSGs would also require the finance team to seek IT intervention should the report requirements change and need updating, as with adding or excluding a specific account number. Either way, manual processes like exporting data and cutting and pasting to get the right information in place within Excel have the potential to introduce errors and incur serious fines for misrepresented financial data.

According to an article by Deloitte, using software that automates financial reporting can help streamline the reporting process and reduce errors. The article goes on to say that software that automates financial reporting can empower those who prepare the financial statements to perform in-depth analyses and simplify financial analytics, which would then serve to further improve the quality of the financial statement package.

Some automated reporting tools, like an Excel add-in, allow finance professionals to substantiate account balance details directly from the financial statement and in real-time, as opposed having to re-run FSGs or re-export data. They also let finance professionals customize and adapt their financial statements to meet external reporting requirements without IT help.

Time is of the Essence in Avoiding Risk

Finance teams are directly responsible for the aggregation of all financial data and relevant notes published in the company’s financial statements. Inefficient reporting tools and processes can have a significant negative impact on final delivery of the financial statement package that could put a company at risk of regulatory fines for missing the reporting date specified by the stock exchange.

The use of slow exporting processes to Excel or the continual running and reformatting of FSG data also threatens timeliness of the reports. To avoid risks, the Deloitte article recommends automated financial reporting software to speed up the creation of financial statements and reduce manual time involved in generating reports. Such automated tools can see financial data in real time without the delays that more manual processes and inefficient tools incur.

Automated financial reporting tools can help streamline audit processes as well. If the software links directly to Oracle from Excel, the financial analyst can show the auditor subledgers and transactions behind the numbers by clicking on the spreadsheet. This automation can reduce the time auditors must spend with a company, and therefore auditor fees.

Achieving a More Automated Approach without Major Costs

FSGs and exports to Excel aren’t the only way companies create financial statements from Oracle products. Hyperion and Oracle Business Intelligence Enterprise Edition (OBIEE) can accomplish this, but at high implementation, consulting, and maintenance costs. In addition, the data isn’t instantaneous as with more automated real-time reporting tools.

According to the Deloitte article, some financial reporting software is too complex for an organization’s needs, and more specialized software may better fit the bill. An Excel add-in is an example of software that can meet the timeliness and accuracy required of financial statement generation, yet without the high costs associated with systems like Hyperion and OBIEE.