The Messine Institute think tank of finance experts has just published a second report entitled “L’excès d’information financière nuit-il à l’information financière ?” A good question! Is financial information degraded by its sheer volume? What appears evident is that the complexity of financial data is becoming a serious obstacle to the understanding of financial statements.
Enterprises produce increasing volumes of data. The complexity of their processes and the need to comply to normative and regulatory requirements inevitably lead to more complete and voluminous reports that shareholders, investors and analysts find it difficult to grasp. Quantity does not necessarily mean quality! The Messine report cites a KPMG study in June 2014 that estimates the average size of international groups’ annual reports: 165 pages and increasing by 3% per year.
How can we assure better transparency in this deluge of financial data? And, above all, how can we create value by aiding strategic decisions?
A single leitmotiv: give meaning to financial information
The imposed standards and the mass of non-financial inputs are hardly conducive to reducing financial data volumes. For this reason, the Messine Institute believes enterprises must strive to restitute information better and thereby increase the value of their financial statements.
It puts forward four possible ways of giving more meaning to this information:
– Re-examine laws and regulations to uniformize them, avoid redundancy and improve clarity for financial staff.
– Employ new technologies to communicate and distribute financial information, in particular real-time updates.
– Include a preface in reference financial documents. This should state the management’s strategic vision, analyze the past financial year, forecast growth and define medium- to long-term objectives.
– Organize annexes by subject, simplifying and clarifying them and including more visual tables and graphs.
Financial data quality also depends on the people who produce it!
The Messine report looks primarily at the difficulties of financial statement readers. But it’s clear that we also need to give meaning to the work of the auditors, consolidators and other staff who actually produce the financial information. It is vital that they understand the data they produce and input; they must be well informed and able to comply with all standards and financial procedures! Yet they too are impacted by the flood of financial and non-financial data and by new instructions they must assimilate.
To help these people throughout the financial processes, Shortways proposes its “Shortcuts” virtual assistant that operates at the very heart of their business software. Shortcuts boosts their ability to enter financial information of optimal quality by explaining procedures, operating instructions and applicable standards and rules.
To find out more: http://shortways.com/solutions-metiers/solution-finance