Automation is key. That is the finding of a study done by Ventana Research, co-sponsored by Cognos, which asked 200 companies in various industries to identify the challenges faced by finance departments.
The study found that finance departments could benefit from major changes to key financial management processes to be more effective in executing their accounting cycles and to more readily deliver the information needed to improve performance.
Companies surveyed worry about their ability to sustain their Sarbanes-Oxley Act compliance efforts. It is clear systems that were adequate pre-Section 404 fail to provide finance departments with the ability to address evolving demands for tighter and more efficient controls. These systems often involve too many manual steps and rely on inherently uncontrollable systems such as spreadsheets. Organizations need secure data environments to reduce control risks in the consolidation and reporting process.
Reducing the time it takes to complete an accounting cycle has become a bigger issue for finance departments.
“The Ventana Research study results prove what we have heard from forward thinking customers around the world. Now is the time to renew systems that form the foundation for cost effective, sustainable compliance and timely, accurate and complete performance data,” said Doug Barton, vice president, Product Marketing, Cognos. “Improving this core process lays the bedrock for more dynamic performance management and greater competitive advantage.”
The Ventana Research study, which surveyed more than 200 companies across industries, focused on two key areas: financial reporting, and closing and consolidation performance. Highlights include the following, according to a release from Cognos:
- 80 percent of respondents indicated they were missing some critical information from periodic reports.
- Basic information that companies have traditionally collected is abundant. However, employees are not getting useful information that would contribute to improving their performance. Leading indicators about their company's or business unit's future performance was not available to more than 50 percent of the respondents.
- 57 percent of companies take more than five days to close the books; 73 percent believe it should be four days or less.
Spreadsheets are a root cause of longer closing cycles. Less than 10 percent of companies have eliminated their reliance on spreadsheets that frequently supplement the consolidation and reporting process for core activities like calculation of accruals or translation of currencies.
About half of the companies that limited spreadsheet use were able to close in four days or less, compared to only 27 percent that used them extensively. Ventana Research estimates limiting spreadsheet use enables a 20 percent faster closing time.