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BUSINESS

Does your company know where its money is?

By  Ashley Whittaker, President, Global Sales at FundCount

If you were required to assess the book value of your company and report it to your board by the close of business today, how accurate would the report be? How many systems and personnel would it take to fair value every asset and compile a test balance? And how much variance would you see on the report if you were asked to repeat the same task tomorrow?

Financial data is flowing at unprecedented rates, obscuring the present value of a company’s assets and impacting the basis of sound managerial decision-making. While efficient data management is the cornerstone of informed decision-making and financial control, many companies face challenges when valuing assets and reconciling balance sheets, tasks that can often take weeks or even months. Pervasive manual processes, prone to errors and inefficiencies, further compound the problem. Depending on your business, multiple legal and tax structures can add another layer of complexity to data management.

For companies with a diversified portfolio of assets – real estate, securities, receivables, non-marketable assets, and cash – determining an accurate value of each asset in real-time and producing meaningful reports can be an arduous, highly-manual task. In a volatile market, the value of these assets is determined by the speed at which relevant data can be accessed. Without constant command and control over financial data, uncomfortable questions arise – does your company truly own its assets? Can an accurate value of your company at a given point in time even be determined?

Data management – the key to value, but an elusive cost

While technology holds the promise of streamlining data management and reporting, companies often struggle to justify substantial investments in the required systems. Even top investment firms with billions of dollars under management still rely on rudimentary tools like Excel spreadsheets for critical performance reporting. Putting a dollar cost on outdated technology is difficult, but this misuse of technology can hinder decision-making and lead to a lack of data standardization across the organization. Additionally, some companies fail to leverage their primary accounting or investment systems for reporting purposes, leaving staff to compile complex data into reports, which are often prone to error and produced with such a delay as to render them meaningless.

Reporting excellence: where are your key performance indicators?

Improving financial controls and governance is a noble goal, but companies often struggle with measuring the impact of data delays against the costs of implementing new systems. Such measurements are needed if we expect to make any improvements.

To overcome the challenge of articulating how costs relate to performance and risk management, companies must identify and establish key performance indicators (KPIs) that align with their reporting goals and drive excellence in financial control. By having a clear set of KPIs, companies can better track their progress and make data-driven decisions.

At a minimum, companies should establish financial reporting and governance KPIs that track:

  • the time to produce financial reports and reconcile data
  • the accuracy of reports
  • financial reporting operational costs
  • the time required to make a critical business management decision

Once these KPIs are established and goals for improvement are identified, management can better understand where to prioritize resources. This path often looks similar across companies, starting with efforts to consolidate and optimize systems. Time and cost are often cut, and reporting accuracy improved, by reducing data streams and points of manual intervention. Through this process, companies often begin to see a data management future based on a golden record – a clean, validated data source that can be relied upon for all reporting and decision-making.

The quest for a single source of truth

A central goal of effective data management is to achieve a golden record, a single source of truth that can be leveraged throughout the organization at the push of a button. The more streamlined the data flows within an organization, the lower the costs, risks, and likelihood of errors. Consolidating data sources reduces redundancy and ensures greater accuracy and timeliness in reporting. With a single source of truth, decision-makers can access reliable and up-to-date information confidently. Decision-makers can now know the value of their company at any given moment, empowering them to make well-informed choices that positively impact the company’s financial position.

Amid an accelerating volume of data, the speed of data access is crucial for accurate decision-making and financial control. To thrive in a volatile economy, companies must prioritize data management and embrace technology to streamline reporting processes. By establishing clear KPIs and striving for a single source of truth, organizations can reduce costs, minimize risks, and enhance the accuracy and timeliness of their financial reporting. Embracing these principles will give companies a competitive advantage and ensure they retain full control over their assets and financial future. Companies that know where their money is also know how best to grow it.

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