By Prince Osuagwu
Nigeria joined other counterparts in the World business community, January 1, 2012, in the adoption of International Financial Reporting Standards (IFRS).
However, reports are that barely six months after, many companies still face challenges of complying with the requirements of that law, particularly, that of closing, reporting and filing their financial accounts accurately.
50 Nigerian companies were included in a global survey of 1123 medium to large organisations conducted in April 2012, to establish their level of investment in, and use of financial close, reporting and filing software systems. The results of the survey will show that while Nigeria invested heavily in all three areas of the process little more than two years ago, companies today do not yet have adequate control of their systems.
The survey also shows that most companies anticipate the cost of reporting to rise over the next five years, and that 40% of those interviewed believed their job was at stake if there were errors or deadlines missed.
The report released Thursday, from Oracle and Accenture revealed that companies in Nigeria are not following the global trend of investing in financial reporting systems intended to improve their close, reporting and filing processes, leaving businesses with ineffective solutions and a lack of visibility, quality and confidence in their financial data.
The research report, titled “Challenges of Corporate Financial Reporting,” highlighted that businesses were unable to fully understand the cost of their financial reporting, with 74% of finance professionals unable to identify the total cost. Unfortunately this percentage is remarkably higher than the global average of 60%
The report suggested that a lack of investment in proper software and an over-reliance on spreadsheets and e-mails increases costs and results in ineffectual financial reporting and missed key deadlines.
The report surveyed about 1,123 finance professionals in large organizations in 12 countries, including Nigeria, South Africa, the UAE, UK, USA, Germany and Russia.
The report also highlighted that businesses in Nigeria recognize the need to invest in new financial reporting systems to address efficiency challenges. 80 % of surveyed companies have made changes over the last three years to their close, filing and reporting processes. Meanwhile, only 18% have invested substantially in at least one of these three areas over the past 12 months, the lowest in the survey along with the Middle East.
•Insufficient, Ineffective investments: Whilst 16% of businesses in the survey have invested in just one of the three financial reporting phases (close, reporting and filings); only 2% have invested in all three.
It noted that 68 percent of spreadsheets and 36 percent of emails are heavily used to track and manage reporting on a daily basis.
•Increased costs and uncertainty: 28%of finance teams claim to have seen their costs rise across the financial close, reporting and filing processes.
Importantly, the situation is so opaque that managers across the finance function are unable to fully understand the financial impact/cost implications of managing and publicizing their company’s financial results. 74% of Nigerian respondents admitted they did not know the total cost of managing and publicizing financial results, whereas 60% of companies globally confessed that they were unable to put a figure to the cost.
•Persistent challenges: Due to inadequate reporting systems, the majority of businesses reported that they still face significant problems with financial reporting. 88% of respondents admitted that they have inadequate visibility of reporting processes as compared with 68% globally, while 82% of finance managers reported that they find it difficult to control the quality of financial data across the course of their reporting, highlighting that additional
attention should be paid to performance management.
•Decreased effectiveness: Despite the challenges presented by unreliable and opaque data, finance teams are sanguine about how effectively they can do their jobs. 72% of finance managers feel their effectiveness is limited in some way by data analysis-related issues, most admitting they did not have adequate visibility of reporting processes. Failure to meet formal reporting deadlines was most common in Nigeria, with 32% of businesses indicating that they have
missed statutory filings.
•Addressing the challenge: Encouragingly, businesses are intending to take steps to improve financial reporting methods, with 86% of companies likely to make a significant investment over the next five years, an approach which may address many of the challenges they currently face, and bring their reporting processes into line with their performance expectations. 38% of businesses are due to overhaul all three phases of reporting, a slightly lower percentage
than the global average (46%)
Evaluating the report, Vice President EPM Product Marketing at Oracle, Mr John O’Rourke, said that “it is clear from the report that businesses are well aware that financial reporting needs to change. The good news is that many are doing something positive about this by investing in new reporting systems.