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Many of us see our complicated and stressed personal lives as badges of honour. Companies too seem to think that complex financial processes and systems are something to boast about. Rhys Robinson disagrees with this approach.
It is year-end for your company, and the accounting team started popping rescue remedy weeks ago. It seems that no matter how prepared you are, it is always a chaotic scramble to consolidate the company’s financial results. Someone with a caffeine overload has made an error with some of the formulas; someone else too eager for their lunch break imported the wrong entity data, and things have gone haywire.
No-one owns up to the mistake (their heads would be on the chopping block) and the team must now wade through spreadsheet upon spreadsheet to first find then correct the errors. Failing that, the dreaded consultants have to be called in to try and sort out the glitches and mitigate the PEBCAK (problem exists between chair and keyboard) errors. As soon as the results are delivered to shareholders, the frustration, inefficiency and caffeine-fuelled rage is forgotten … until next year.
The Oxford Dictionary defines complexity as being ‘the state or quality of being intricate or complicated’. The Cambridge Dictionary goes a step further, defining the term as ‘the state of having many parts and being difficult to understand or find an answer to’.
We cannot argue that financial consolidation is complex. Companies are dealing with greater demands for growth and higher profitability, and more time constraints, increasing financial and legislative requirements than ever before. People (all doing their best) tend to make the process even more complicated. But if everyone had a clear understanding and common goal, financial consolidation wouldn’t have to be the pandemonium that it so often is. Is a tangled web of convoluted processes and numbers the only way to see this picture? There is a simpler way.
As Albert Einstein said, ‘Insanity is doing the same thing over and over again and expecting different results.’ Well, then we must all be crazy! What is it about complexity that keeps us so addicted?
Arguably, the most difficult part to improving reporting efficiencies is a mindset change that embraces simplicity.
Simplicity is defined by the Oxford Dictionary as ‘the quality or condition of being easy to understand or do’. To quote the brilliant theoretical physicist again, ‘If you can’t explain it simply, you don’t understand it well enough.’ Sound familiar? Before something can be simplified, it must be understood. That understanding comes with knowledge, focus, real experience and very importantly, a need to change.
Experience has taught us that simplicity is achieved through adopting a ‘simplicity model’ specific to one’s business needs and circumstances. An example of our ‘simplicity model’ consists of the following key elements: methodology, process, people, technology and sustainability.
It is important to find the right mix of these key elements in one’s business environment. We must never stop reinventing the process, learning from and adapting to the changing needs of the times, making things better, faster and ultimately, simpler. Keeping things simple can be your operating model.
With this reasoning, making use of legacy financial reporting and consolidation methodologies and tools is preposterous! Should we be running our businesses today on the financial thinking and systems of yesteryear? Quite clearly the answer is no!
Let’s consider an example of one of these key elements in a typical ‘simplicity model’. Technology, by its very definition, is meant to be an enabler, providing seamless outputs to one’s business and in this instance, reporting needs. It is critical that you choose a solution that is right for your business – one that fits your company culture, maturity and business objectives. It is also important to understand the inter-relationship between these key elements in your environment. In other words, technology has to be adopted by people, who seamlessly have to apply methodology and processes to ensure sustainability through reporting on the organisation’s financial results.
So ask yourself, is financial year-end ‘business as usual’ in your company – or not? If your answer is the latter, surely there’s room for improvement?
Financial consolidation may have complicated elements, but the process of effective management doesn’t have to be. ‘SIMPLE’ is possible:
So let’s have another look at that year-end scenario, this time in a world with simplicity at its core. Financial reporting harmony is achieved, so for your accounting team, it’s business as usual. In this new paradigm, more benefits are clear, such as time savings in the reporting cycle, which translates into further value-driven planning and flawless execution of financial results.
Welcome to the era of true business value with increased intellectual contribution and the ability to continually reconfigure the business and reporting landscape.
AUTHOR |F R (Rhys) Robinson PhD is Executive Director: Strategic Partnerships and Marketing at Infinitus Reporting Solutions