Financial compliance critical for continued growth.....Theuns Holtshousen, Division Business Leader, CaseWare Africa
Favourable financial conditions are key to investors and as more investment and interest turns to Nigeria, investors and creditors want as much financial information and insight as possible – which is why accurate financial reporting is become critical, now more than ever.
What’s more, according to EY Greenfield Foreign Direct Investments (FDI) projects into Nigeria have grown at a compound rate of close to 20% since 2007, positioning it among the 10 countries with the highest growth rates in Africa.
Nigeria has also attracted the most FDI capital and the 2nd most FDI projects in Sub-Saharan Africa over that period, making it one of the star performers in a period in which FDI flows into the region have been fairly robust.
With such growth and investment opportunities, the importance of financial compliance cannot, and must not, be underestimated. Rather these should form the basis of sound financial reporting, especially as Nigeria starts to take its rightful place in the global market as businesses look to infiltrate and expand across the continent
For any business, profitability is important – and when it comes to processes and procedures businesses need to find new ways to improve efficiencies and automate the process – the same can be said when it comes to the preparation of financial statements and reporting.
If they haven’t already, businesses should consider automating these critical financial processes not only for efficiency – but for accuracy, completeness and in compliance with the relevant standards that ensure peace of mind. Automating financial processes reduces potential risks as monthly management reports and the annual financial statements run off the same data through the automated systems, making the entire process easier as there is also an audit trail to follow.
Often, what happens in companies is that their monthly financial reporting does not tie in with the annual financial reporting – as such this is not a true reflection of the business. It also allows financial statements to be done more frequently, though only required once a year – which enables businesses to have a real view of their business health and this information is constantly updated and readily available so that they are able to respond much quicker to business growth and opportunities.
The past decade has been littered with corporate scandals and unfavourable financial market conditions which have highlighted irresponsible business behaviour as well as the need for the better monitoring and control, particularly from a financial perspective. What’s more, with CFOs now required to sign off on all financials, making them responsible for reporting on whether the annual financial statements are fairly presented in accordance with the applicable financial reporting framework, a new level of accountability has been introduced.
In the past, the monitoring and control of financial statements was predominately a document based process or managed with applications that fall outside of the standard business IT applications, such as spread sheets. The problem with this approach is that it doesn’t necessarily decrease the overall risk. Spread sheets can be hazardous and may expose an organisation to unacceptable business and regulatory risks as they are prone to input errors and are normally reviewed in isolation.
Technology and tools that can automate the entire financial engagement and produce quality financial statements may therefore be seen as an alternative to traditional books and spreadsheets – as not only do they enforce compliance with disclosure on audit requirements, but ensures more accurate financial statements and business reporting which is essential for sustained stakeholder confidence and resultantly continued investment.
It is no secret that emerging technologies are continuously fuelling innovation in many industries, and doing financials is no different. As such, the evolution to automated financial report software is inevitable and to realise innovation of benefits like cost, speed and efficiency while balancing requirements – security and compliance, organisations would need to take the leap and utilise this type of software.
And as technology becomes more intuitive, it will continue to address even more pain points and becomes an enabler for financial reporting – changing the way firms operate where it ensures they are both connected and intelligent from a critical financial perspective, and this will be critical as Nigeria continues to grow, diversify and cement its role as a significant African hub.