A recent article from Intacct called, Traditional Financial Systems: A Long, Winding Road to Nowhere, shared 10 risks or problems associated with using a traditional financial system.
Traditional financial systems typically lack the analytic functionality to support the intelligence needs and speed of business most companies operate. The lack of real-time information hinders management’s ability to apply their knowledge and leadership to its fullest extent, and stunts employee contribution.
To get the actionable information they need, finance organizations are often forced to augment their systems and processes with cumbersome Excel spreadsheets or costly add-on reporting solutions. Although this strategy is meant to support critical planning and forecasting activities, the opposite often occurs. Instead of real-time, accurate intelligence, they get a long, winding road fraught with:
- Delays – The CEO needs the latest consolidated financials. The best finance can do is offer reports that are already weeks old – or reports based on today’s numbers that will be available next week.
- Inconsistency – After distributing reports via email several times, the CEO, CFO, COO, and the board of directors now have five different versions of the same report – each with different versions of the truth.
- Security Risks – Security is compromised when someone accidentally emails confidential reports to a vendor instead of the board of directors.
- Errors – To create reports, the finance staff has to download data from one or more financial systems and aggregate, manipulate, and format the data in a spreadsheet – providing ample opportunity for errors and reducing finance productivity.
- Reduced Productivity – Because processes that incorporate spreadsheets can’t be automated, finance staff has to work overtime to create, format, and distribute reports – and they have to do it over and over again. This wastes staff time and costs the company money.
- Audit Costs – Auditors determine that because key finance processes include spreadsheets, they require closer scrutiny – at a cost of $200/hour. And that’s before they find the inevitable errors.
- Compliance risk – Manually created spreadsheets increase the risk of fraud and Sarbanes-Oxley non-compliance. Auditors examine everything again at an additional $200/hour.
- Increased Software Costs – The controller gets a $100,000 invoice for add-on data warehousing and reporting software – plus an HR request for $100,000/year for IT staff to manage them.
- Complexity – New add-on data warehousing and reporting software requires assistance from an IT staff member to implement and maintain, as well as to create necessary reports – adding to IT costs for every report.
- GAAP Issues – Data in add-on data warehousing and reporting solutions or spreadsheets diverges from GAAP financials, increasing the risk of making decisions based on data that is different from the finance system of record.
You can read the full article here.
For more information about Intacct, click here. And please share this post with those interested in upgrading from a traditional financial system!