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The Hidden Costs and Risks That Threaten Financial Reporting

7 May, 2019

Corporate finance departments of every business – public or private, SMBs or MNCs – gear up for this regular ritual called Financial Period-end Close. This is crunch time for finance professionals. Most of them end up working 14-18 hours per day for weeks, all to make sure the financial reporting is accurate and ready before the deadline. When the books are to be closed, finance professionals comb through their spreadsheets amidst high pressure and are seen in full mobilization. All this to get those consolidated reports to higher management, the Securities and Exchange Commission and other regulatory government agencies.

A recent survey by Ventana Research stated that only 25 percent of businesses use “some degree of automation” to support their core financial functions.

  • But, why do organizations still require high manual involvement for the financial close?
  • Why is ensuring financial statement accuracy so critical and stressful for finance teams?
  • What kind of business risks are organizations exposing themselves to?

In this age of IPOs and M&As, financial statement inaccuracy can lead to events which can cause stock prices to plummet overnight. Restatement of earnings can negatively impact company credit ratings. This can have potentially devastating outcomes for companies with a multinational presence. Financial misstatement can also cause a lot of operational roadblocks for global organizations.

These points lead us to further questions. What factors lead to poor financial reporting? And how can this be avoided? Let’s explore these questions.

Financial Reporting Mishaps: How do they happen?

The Institute of Management Accounts (IMA) found that nearly 75 percent of finance teams seek to spend less time on their financial close processes. The biggest roadblocks in achieving this goal are:

  • Working with organizational data at scale

    As companies scale, the volume of data they work with scales exponentially. Managing this data efficiently while ensuring its accuracy, can be a significant challenge for organizations without a smart CloseFAST reporting mechanism.

  • Managing data lineage

    Referring to the “financial close” as a single process is incorrect. It consists of many different, disjointed processes involving different stakeholders and systems. To pull off a successful fiscal-end financial close, it’s critical to eliminate departmental silos so that teams work efficiently.

From staffing issues to breakdowns in communication, to unnecessary manual involvement during verification and analysis, there are a plethora of issues which lead to inaccurate financial statements.

Reducing Manual Involvement is Critical

As organizations scale up, the possibility and rate of errors increase exponentially. This opens up organizations to financial compliance risks and liabilities. However, businesses still continue using slow and error-prone processes with a lot of manual involvement, using Excel spreadsheets or even paper, during critical financial close periods. If the numbers in the general ledger (GL) don’t reconcile, teams can end up wasting days going over mismatched journal entries balancing debits and credits. To address such scenarios, organizations end up allocating more dedicated personnel to the process which though counter intuitive makes things more complicated

Oracle EBS: A Pillar for Financial Reporting

Many organizations have deployed Oracle EBS as their system of financial record. It is a mission critical tool for financial record management. Oracle EBS does a great job in managing and maintaining records but many users feel that Oracle EBS falls significantly short in addressing data lineage and ease of use, when it comes to financial reporting. Financial statements have to be accurate of course, but they also need to be easily navigable for cross-checking and analysis. The need for multi-level drill-down capabilities is apparent in such scenarios.

  • Financial statements need to be simple in terms of navigation, allowing users to establish context and map the linking for the presented data.
  • Managing data lineage is important because financial data for most organizations keep changing on a periodic basis.
  • Financial statements often have multiple layers of cross-linked data, which need to be analyzed. It’s important to identify how the elements within – from GL to sub-ledgers, transactions, and relevant attachments – are linked and mapped out.

A Simple Solution

Managing the financial close process across multiple operating units drastically increases the complexity of this process. Today’s global markets are pushing organizations to optimize financial operations continually with constant adjustment, requiring financial reporting to be highly dynamic with real-time visibility.

CloudIO’s financial reporting solution seamlessly integrates with Oracle EBS to enable you to:

  • Access all your General Ledger and SLA data in real time for time-critical financial period close reporting
  • Powerful and interactive UI allowing you to drill down to the PO level
  • Searchable reports allowing you to get to what you want faster
  • Fully integrated with Oracle EBS to use the existing definition and provides a modern user interface that overlays on top of Oracle EBS data
  • Enhanced, highly user-interactive CloseFAST reporting where users can drill down from GL to respective sub-ledgers
  • View the entire E-Business suite data from GL Balances to AP, AR, FA and Cash management

With CloudIO’s CloseFAST reporting application, finance teams can ensure accurate and smooth period-end close activities, while reducing associated operational risks.

Facing similar financial reporting challenges in your organization?

Get in touch with us to learn how CloudIO can simplify financial reporting for your organization.


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