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Data challenges emerge as F&A confidence slumps

By David Brightman, director of product marketing EMEA, BlackLine

As the UK takes tentative steps towards the end of the current lockdown, a collective sense of relief is spreading throughout the business community. The easing of restrictions feels like a light at the end of a very long tunnel – but it’s important to remember that we haven’t reached the other side just yet. The business and economic landscape will likely remain tough for some time to come.

UK businesses are still grappling with the ramifications of Brexit, and the government, in consultation with the Department for Business, Energy and Industrial Strategy (BEIS), has proposed a radical shake-up of the audit and accounting industry. That will result in greater regulation for the sector and executives at major firms.

In a recent BBC article, Sir Donald Brydon, a former chairman of the London Stock Exchange, provided a succinct summary of the implications this will have for UK companies. “People want to know three things about a business – how is it performing, is it honestly run, and will it survive,” he wrote.

In the current climate, this means doing everything possible to rebuild and maintain stakeholder confidence in the way an organisation runs and operates. Research recently conducted by Blackline with c-level executives and finance professionals suggests that finance and accounting (F&A) has a crucial role to play in this endeavor. Not only by providing a clear picture of current and future performance, but also – and perhaps more importantly – by providing reassurance that this picture is accurate.

Measuring company performance

There is no doubt that the ability to analyse financial data effectively and react quickly to changing market circumstances will be vital for company performance in the coming months. Our research shows that value-add activities like financial forecasting, stress testing and analysis have moved up the corporate agenda, and F&A are increasingly being asked to contribute:

  • 43 percent of respondents say their organisation has become more focused on scenario planning and stress testing as a result of the pandemic
  • 40 percent say the finance department is increasingly being called upon by the Board to help with these activities

It seems obvious that F&A should be involved in activities that measure and predict financial performance. But nearly a third (32 percent) of our survey respondents said their finance function is not currently involved in scenario planning at all at their organisation. Additionally, close to a third (30 percent) said their organisation does not have the technology to properly analyse financial data in real time. This is a particular problem in the UK, where the number of companies that do not have adequate technology is closer to four in ten (39 percent).

Challenges for trust and transparency

This lack of visibility is concerning and seems to be fueling a more insidious problem: the diminishing trust that senior executives and F&A professionals have in the accuracy of their own organisation’s data. Overall, less than half (43 percent) of respondents said they have complete trust in the accuracy of their company’s financial data, and a quarter also said they are not confident that all the data they use to make financial forecasts is accurate.

Comparing this to a survey of the same audience from 2018, it seems that confidence in the numbers has actually fallen over the last two years. There is also a clear discrepancy between the views of the c-suite and those closest to the numbers:

  • In 2018, 71 percent of c-suite respondents claimed to completely trust the accuracy of their financial data, but only 38 percent of F&A professionals said the same.
  • Now, over half (56 percent) of c-suite respondents still say they have complete trust in the accuracy of their financial data, but less than a third (30 percent) of F&A team members agree.

When respondents who did not completely trust the accuracy of the financial data were asked why, the main reason (cited by 37 percent of respondents) was their continued reliance on clunky spreadsheets and outdated processes that leave F&A teams in the dark until month-end. More people felt this was a problem in 2020 than in 2018 (28 percent), suggesting that digital transformation initiatives in F&A still have a long way to go.

Rebuilding trust in financial data – and the business

To some, this reliance on outdated tools and processes may seem like an ‘internal’ problem. In reality, it leads to a lack of oversight and control that can have serious consequences for the wider business (the government’s new proposals could also mean directors of large businesses will be held directly accountable for significant accounting errors – possibly resulting in fines or suspensions).

This may sound daunting, but the good news is that the pandemic has created a renewed urgency around digital transformation and investment in technology that will almost certainly help. The majority of our survey respondents recognised that the right technology could help their business overcome challenges around visibility, accuracy and control.

In fact, over a third (36 percent) say the pandemic has already made their company invest more in technology that automates and three in ten (32 percent) say developments over the last year have made people at their company value real-time access to financial data more. A third also plan to introduce new / scale existing automation solutions to increase the accuracy and reliability of their data.

Now is the time for CFOs and other F&A leaders to prioritise technology that could eradicate poor visibility and control – which should in turn reassure stakeholders that they are getting an accurate picture of a company’s financial health and resilience.

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