Complexity is a fact of life for South African businesses of all sizes, and it’s only growing thanks to the increasing interconnectedness of companies, value chains and economies in the digital era.
By Pieter Bensch, executive vice-president, Africa & Middle East at Sage
Added to the mix is the uncertainty the Covid-19 pandemic has injected into the global economy, with C-suite executives needing to plan for a range of possible outcomes to the virus outbreak.
C-suite executives with businesses that are diversified across product ranges, channels and geographies need to pay close attention to financial reporting and analysis. Not only is accurate insight into the business’s finances essential for compliance, it is also vital to making better decisions in a complex and uncertain world.
Naturally, financial reporting is an area that gets more complex the larger a business gets. This is because demands will increase when it comes to declaring:
- The financial health of the company based on current knowledge and expectations for the future;
- Accurate reports of operating results and cash flow; and
- Financial statements to reflect economic and business reality, helping investors make decisions.
Let’s look at some elements a company needs to consider as it grows in size.
It starts with the people
While technology is key to generating accurate financial reports and gaining real-time insight into the business, getting it right starts with putting the right team in place. Such a team will start with an appreciation for the role of accurate data and robust reporting in compliance and in making sound financial decisions.
Financial controls and checks are essential, including segregation of responsibilities so records can’t be manipulated. Different team members should initiate, approve, record and reconcile transactions, while an organisation could put fail-safes in place in areas such as inventory management by adding a third-party review.
Executives running a business that is growing in size and complexity may consider regular audits, even if they don’t breach the thresholds that trigger a required statutory audit under the Companies Act. Undergoing an audit shows a commitment to transparency and may help management pick up discrepancies and inefficiencies overlooked by the internal finance team. It can also help build confidence among lenders, investors and other stakeholders.
Mitigating complexity with analytics
A growing business will be presented with multiple data sources and disparate solutions that may well not integrate, causing poor communication and collaboration. The finance function may still be working with spreadsheets. It takes time and energy to consolidate and summarise this data—and it might be out of date already when the report is compiled.
Managers can’t use this static data to develop forecasts and create ‘what-if’ scenarios, which are crucial in understanding the drivers of success in the business. It may well be worth investing in an analytics solution that can improve the organisation’s ability to gather, organise and analyse its data. The business will want to be able to:
- Connect and analyse financial and operational data through automation – With the ability to connect to data and analyse it, executives can start building a repeatable and reliable process that leads to automation, increasing the speed and reliability of analytics.
- Consolidate multiple entities – Consolidating data imports across multiple entities provides up-to-date information that will ensure forecasting and planning is accurate.
- Generate self-service reports – Instead of forcing reporting through IT, it will pay to empower business users with software that offers strong analytical capabilities, allowing them streamline to analysis without any reporting delay.
With all the uncertainties and unknowns businesses face in our complex world, causal relationships are difficult to track and it’s hard to decide whether a course of action is right or not. With analytics, a team can get to the right data to build a quality picture of what’s happening in the organisation. This reduces complexity by providing a single, real-time version of the truth.
Conclusion on business reporting and complexity
Dealing with complexity is not simply about predicting the future or reducing risk – it’s about continuously adapting and learning at speed. Businesses need structure and conditions that push adaptability, learning and creative problem solving, and they must encourage an environment where pooled intelligence is allowed to flourish. And an ability to communicate in real time, giving expert individuals the right information when they need it.