Tough Times for CFOs

By Brian Gregory, Director, E-Business Marketing, Oracle EMEA

For example, the SEC recently published proposals extending the scope of the Regulation Fair Disclosure that will require companies to disclose financial information more quickly and at greater depth. Influential organisations such as Standard & Poor are following quickly. In May S&P announced that it will be changing its system for examining corporate earnings reporting to reflect the true cost of doing business, including charges such as options, restructuring costs, pension fund contributions and goodwill.

The current climate is dictating that companies unable to provide detailed information quickly and accurately are being penalised by the investor community and credit providers. In some cases this could result in companies being charged interest rates twice or three times that of their competitors. Furthermore, the last five years have seen investors increasingly becoming interested in ethical policies, brand value and customer relationships as measures of corporate health. Should companies be expected to change their accounting procedures to reflect these more non-traditional determinants of shareholder value? In some cases, they will have to by law.

Accounting shifts like these are a CFO's worst nightmare. At a recent Financial Executives International (FEI) conference, Qwest Communications' treasurer Scott Berman said, 'It's unbelievable the types of questions bond investors and equity investors are asking and the answers that they want today, compared with a year ago or two years ago.'

To help industry cope, FEI established a Task Force of chief financial officers from member organisations including Pfizer, J. P. Morgan and General Motors to develop 'reforms aimed at strengthening financial management, reporting and corporate governance.' The Task Force's first report in March 2002 points to the need for companies to modernise their reporting and move toward voluntary disclosure of additional management performance indicators using web-based reporting techniques.

What many investors, governing bodies and, indeed probably some people on the Task Force, do not realise is that most of the world's businesses share an essential problem when it comes to providing financial transparency. They simply cannot get the required information together quickly. Essential financial data is squirreled away in separate offices, separate departments and separate branches in a variety of computer systems using different data storage methods and principles. Finding it, aggregating it and reconciling it - let alone auditing it for accuracy and best practice - is a very time-consuming job. If the process was easy, companies wouldn't need two painful weeks to close every quarter. They would just hit the print button.

Only now is technology becoming available that can close the two-week gap and the encroaching regulation shifts. Software is now available to allow companies to conduct a daily review of all their financial data either at the macro-corporate level or deeply granular to a specific country or even a specific office. These tools promise to be a revelation for CFOs, internal and external auditors alike.

One example of such tool is provided by Oracle and is built into all of its business software. Daily Business Intelligence is an intelligence layer, which acts as a window to the business, providing up-to-the-minute performance reports from various parts of a company. They key to its success is that it only views into one global instance of all financial data regardless of location or department. For companies that can execute on this kind of consolidation, the payoff is enormous.

Daily Business Intelligence supports the need for companies to monitor their position against key performance indicators on a regular and, increasingly, real-time, basis. It's not strictly an audit tool, but if you were an auditor, you would derive comfort that management could receive up to the minute reports on KPIs that allow them to monitor the financial state of their business.

In line with the current climate and FEI recommendations, Daily Business Intelligence can be applied to non-traditional determinants of value so that a CFO can view items like the progress of a marketing campaign, energy efficiencies, the response times to customer queries or trends in purchases from any region. Imagine being able to provide an accurate global headcount and real-time figures on cashflow.

Tools like Daily Business Intelligence can obviously help alleviate the pain of sifting through massive reports but more importantly they should satiate the hunger for transparency and accuracy that has emerged from the Enron affair. A CFO can also be alerted when a critical KPI is met so the business can communicate its success. Not only would that please an auditor but it would also give shareholders something to cheer about.