Knowing More: Accountants Delivering More Value with More Information
An article on CFO.com titled “What Does Sustainability Really Cost?” discusses the need for accounting and finance professionals to collect, analyze, and report on business data which is not always represented in the financial statements. In many ways, this speaks to operational and other elements of the business, visible only with a closer look and through a deeper understanding of the operations and the many and varied factors which impact them.
Integrated financial reporting, which combines financial reporting with reporting of intangibles and other off-balance-sheet factors, needs CFOs’ support, investors say.
The focus of the article is one of sustainability and the ability of a business to maintain operations, profitability, and growth over time – and an integrated reporting approach which more fully describes this information, as well as elements relating to business risk and corporate governance. In order for investors to fully understand the business health or the risk of investment in the operations, it takes looking beyond the balance sheet into operational metrics and detailed performance and supply chain data which is not often fully available in high level financial reports.
“..added material information will make investors a happier group. A more comprehensive approach to reporting would help investors more easily determine a firm’s ability to generate future cash flows, says Ian Ball, chief executive officer of the International Federation of Accountants and chair of the IIRC working group for integrated reporting. “Financial reporting on its own isn’t any longer telling us enough about a company to really understand its prospects,” he adds.
In recent years, about 80% of a company’s value was on the balance sheet, which contrasts to about 20% today, notes Ball. The reversal stems from the burgeoning presence of intangible assets among corporations. “If you’re trying to figure out whether a company’s worth investing in, you’ve got to understand the other 80% to understand the company,” he adds.
Deeper and more informative reporting on the business performance, as well as the data supporting the continued ability to perform at such levels and under what conditions, is what businesses owners need whether they recognize it or not. Many business owners and managers believe they have the information necessary to make daily decisions, yet find their resources lacking when it comes to obtaining financing or meeting challenges posed by various unforeseen events.
Whether the economic environment is “friendly” or not, small businesses will turn to their banks to secure lines of credit and get funding to smooth out bumps in cash flow and availability. Getting credit is always a challenge, even in the best of times. When the economy stalls and times are tough, getting the necessary cash to support the business gets even tougher.
Bankable: Giving Small Businesses Credit http://wp.me/p2hGOJ-c1
Implementing dashboard analytics and other reporting tools is not always the initial answer, because part of the underlying problem may be that the right data is not being collected, or is not accurately accounted. Developing a complete picture and providing an accurate and informed analysis of the data requires getting the right accurate data. This is often where the process starts, ensuring that the systems in use benefit not only the work, but the information and reporting needs of the business as well.
When speaking to accounting professionals about the additional valuable services they could be providing to clients by using these KPI reporting tools to identify additional consultation and advisory services clients need, the feedback I generally get from the professional is that “you have to get the numbers right, first”. It seems that, even with the ready availability of powerful and affordable software solutions to run the business, accounting and finance still tends to be an afterthought for many business owners. Relegated to the back-office, and being an after-the-fact recipient of transactional data, accounting is still viewed by many as a “necessary evil” of doing business rather than an area of potential strategic advantage.
Working With the Right Numbers: Financial Data Analysis Requires Accurate Financial Data http://wp.me/p2hGOJ-9y
When the information systems in use appropriately support operational requirements of the business, the necessary data may be more easily collected for analysis. This is where accounting professionals should help their clients, to improve the quality of data available for analysis and for integration into financial systems. It is through this attention to operational process support, getting the right tools in front of the user to support their job function and tasks, which will allow the collection of detailed information about the operations, and which ultimately provides the basis for a great deal of insight into the business.
It is in the interaction – of people, data and systems – where better technology-supported collaboration with the client should be established. In many cases, this means focusing on improving the client system and the accounting process will benefit as a result.
Accounting Online and Outsourced Accounting – Focus on Enabling Your Client http://wp.me/p2hGOJ-bU
Accounting and finance professionals wondering how to increase their earning potential from the existing portfolio of clients should look more closely at the operational and managements aspects of the businesses rather than focusing solely on tax return and financial statement preparation. The value to the client is far greater and has a more direct impact when it helps in the performance of daily activities and provides support in overcoming challenges in cash availability, financing, and other issues business owners regularly face. Know more about the client business, and the information you both gain provides the foundation to deliver greater service and tangible value.