Eighty per cent of Australian c-suite executives and financial professionals claim their organisations made significant business decisions based on “inaccurate financial data,” according to a BlackLine survey.
Human error (29 per cent), multiple data sources (36 per cent), a lack of automated controls (39 per cent), and clunky technology (27 per cent) are the main contributing factors for their lack of trust, according to the results.
The survey results are timely given the recent Banking Royal Commission in Australia has recommended criminal charges for financial firms that fall short with their reporting. The survey results should also serve as a wake up call for CIOs in terms of planning and implementing IT management of financial data systems and solutions.
The survey asked over 1,100 global c-suite executives and finance professionals in large and midsize organisations (102 Australian c-suite executives) to establish accuracy confidence levels in financial data and perceived impact of errors on business.
Results show an overwhelming acknowledgment that inaccurate financial data has negative implications both externally and internally. It also shows many organisations continue to be challenged by human error, ever-increasing volume of data sources, as well as outdated technology.
Overall, survey results show many organisations are betting their business on inaccurate financial data. Nine in 10 (92 per cent) of CEO respondents think that either they themselves or their CEO has made a significant business decision based on out-of-date or incorrect financial data.
Seventy one per cent said this has definitely occurred in their organisation. Meanwhile, about three quarters (77 per cent) of respondents said that a company they’ve worked for had to restate their earnings due to inaccuracies in financial data that weren’t identified prior to close, the survey shows.
Only 17 per cent of respondents agreed that they could trust that their finance team/CFO had identified all errors to ensure they are reporting accurately.
Nearly all (94 per cent) c-level respondents agreed that if inaccuracies in financial data weren’t identified prior to reporting, the impact would be negative.
These negative impacts included significant reputational damage (36 per cent), an impact on their ability to secure additional investment (35 per cent), and increasing debt levels (43 per cent), with more than a quarter (26 per cent) fearing fines and jail time, the survey says.
Additionally, many large organisations are constantly having to fix financial errors in their accounts, the survey reveals. In almost one in five (19 per cent) of cases, c-suite respondents said it takes up to 10 days per month for their organisation to identify errors and make adjustments, potentially wasting as many as 114 days each year.
Meanwhile, 23 per cent of respondents acknowledged that the acceptable margin of error with accounts is decreasing in today’s technology-driven world, the survey says.
Despite this, 37 per cent said their organisation still wouldn’t consider $2 billion of accounting errors reported in their financial statements as material.
“Australian companies can no longer operate with uncertain financial data," according to BlackLine regional A/NZ vice-president, Claudia Pirko.
"Increasing regulatory oversight is set to arise from the Banking Royal Commission recommendations and more financial transactions, from superannuation payments to mobile commerce, are happening in real time which suggests the need for real time data accuracy.”
Pirko said having total visibility over financial information enables business leaders to make better strategic decisions and reduces risk.
“This research would suggest that many Australian business leaders may be making business decisions based on inaccurate data so we need to improve the quality of our financial data before it is acted upon.”
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