A survey commissioned by BlackLine found that nearly half of Australian executives are not confident in identifying financial data inaccuracies prior to reporting. Also, 80 per cent of Australian business leaders and finance professionals claim their organisation has made a significant business decision based on inaccurate financial data.
Financial Data Survey
Blackline, a provider of cloud-based solutions for the financial industry, commissioned a survey of 102 Australian C-suite executives and finance professionals in companies with more than $20 million. This survey has revealed that nearly half of respondents are not completely confident they can identify financial errors before reporting results. The research found that there is evidence of a disconnect between C-suite respondents and finance professionals when it comes to confidence in the accuracy of financial data. Also, eight in 10 respondents believe their organisation has made significant business decisions based on inaccurate data. Many identified this as a hidden problem, with nearly one third stating concern over errors that they know must exist, but of which they have no visibility.
The recent Banking Royal Commission in Australia has recommended criminal charges for financial firms that fall short with their reporting, highlighting the importance of having accurate financial data wherever possible.
“Australian companies can no longer operate with uncertain financial data,” said Claudia Pirko, Regional Vice President Australia and New Zealand, BlackLine. “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.”
Survey Highlights
Misplaced C-suite trust in the numbers:
- 57 per cent of total respondents still claim to completely trust the accuracy of their own financial data in general, there is a significant discrepancy between the views of the C-suite and that of finance professionals.
- 81 per cent of C-suite respondents claimed to completely trust the accuracy of their financial data, only 32 per cent of finance professionals said the same.
Many organisations are betting their business on inaccurate financial data:
- 92 per cent CEO respondents think that either they themselves or their CEO has made a significant business decision based on out-of-date or incorrect financial data.
- 71 per cent cite that this has definitely occurred in their organisation.
Low confidence levels in ability to spot errors to ensure accurate reporting:
- 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.
- 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.
Counting the cost of hidden inaccuracies:
- 94 per cent C-level respondents agreed that if inaccuracies in financial data were not identified prior to reporting, the impact would be negative.
- These negative impacts included significant reputational damage, an impact on their ability to secure additional investment, and increasing debt levels with more than a quarter fearing fines and jail time.
Accepted margins of error worryingly wide, despite recognition of pressure to close the accuracy gap:
- 23 per cent of respondents acknowledged that the acceptable margin of error with accounts is decreasing in today’s technology-driven world.
- Despite this, 37 per cent indicated that their organisation still wouldn’t consider $2 billion of accounting errors reported in their financial statements as material.
According to the research, CEOs are making business decisions on numbers in which they are confident, but the people preparing the statements and reports are not. The result is a heightened and unnecessary level of risk for many large organisations.
The implications of this are potentially severe. They include not only the financially negative impact of strategic decisions based on inaccurate numbers, but also the repercussions of failing to comply in an ever-expanding regulatory global business environment.
For more information about this survey, click here.
