According to the Securities and Exchange Commission (SEC), more than 350 companies listed in the Fortune 500 still do not provide enough analysis in financial disclosure. While regulatory scrutiny of accounting practices is at an all-time high, corporate accountability and timely, detailed financial disclosure still evade most companies.
However, an increasing number of public companies are relying on software to help meet rapidly changing compliance requirements. Organizations using business performance management solutions, for example, are poised to not only comply with new requirements for improved accountability, visibility and confidence in financial reporting, but also operate more competitively.
Companies with best reporting practices such as Wachovia, Sola International and Zebra Technologies are using the software to meet new reporting requirements and speed both the consolidation and internal certification of results. This could lead directly to competitive advantage since companies that shorten the reporting cycle and release financial results sooner than their industry peers achieve an average 15.5 percent premium on their price/earnings ratio, according to Parson Consulting, a financial management consultancy, "Investors favor companies that disclose financial information in a timely fashion as a sign of well-run financial operations," said Rick Fumo, senior vice president, practices of Parson Consulting. "Our study demonstrates that many companies will need to make some changes to provide enhanced accessibility of financial information."
In its February 27, 2003 report, "Summary by the Division of Corporation Finance of Significant Issues Addressed in the Review of the Periodic Reports of the Fortune 500 Companies," the SEC said that 350 of the Fortune 500 companies failed to meet full disclosure requirements. According the SEC, "we selected a substantial number of companies [more than 350] for some level of further review."
Governments worldwide continue to increase the requirements for corporate reporting, resulting in reforms such as the Sarbanes-Oxley Act of 2002 as well as IAS 2005. These laws demand more detailed disclosures, additional certification of financial results and faster financial reporting. Based on SEC filings, Hyperion estimates that businesses will spend an estimated $1.5 billion dollars complying the latest reforms. Business performance management software can ease the burden because it enables greater speed and accuracy in consolidating results based on critical data integrated from systems throughout the enterprise for a single version of the truth. This ensures that all executives utilize the same facts and metrics, resulting in greater confidence among CEOs and board members and a common understanding of business performance and expectations.
As part of the Sarbanes-Oxley Act, CEOs must now provide additional, personal certification of corporate earnings results. One way that companies manage this task is through internal, cascading sign-off of performance data. Users may find that this process is more efficient with business performance management software, as it provides powerful process management and detailed, centralized consolidation so that all managers can quickly review data and resolve any issues or questions prior to approval.
Governments are also increasing requirements to report corporate results faster than in the past. Over the next three years the reporting deadline for 10-Q quarterly reports will shift to 35 days from 45 days, and 10-K annual reports from 90 days to 60 days. For large, global organizations consolidating financials can take weeks as each region and division submits results, which are then rolled up into a centralized report for review and error checking. Business performance management software users are finding that having a centralized system, accessible to global managers via the Web, can often shorten the consolidation process by several days. This allows managers to spend more time focused on analysis of key performance indicators rather than gathering data, meet the new reporting deadlines and make better, faster business decisions.
Register or login for access to this item and much more
All Information Management content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access