Enterprise financial reporting can be as tedious and time-consuming as balancing your checkbook (remember when you had to do that?). We don’t question it enough. Is this time-consuming task really making a difference for our businesses? Baruch Lev recently addressed this concept during a discussion about his new book, The End of Accounting, with CFO.com. The short answer to whether or not tedious financial reporting is effective? No.
The long answer is that there’s a more relevant representation that is less cumbersome and more meaningful. Many reporting processes have been turned on their heads by those who dare to question why we continue to do things the same way when there are better solutions. Lev is right. The old models of reporting really don’t work anymore. In an age where we live by the adage of “move fast and break things,” why are we still stuck with slow, inflexible reporting systems that are really not getting us anywhere?
If you’ve been following along, you already know my love-hate relationship with Excel. Like the cumbersome task of manipulating data in Excel and shuffling through pages of financial reports, standard reporting is not really helpful for realistic predictions or investment decision making. Don’t get me wrong, there’s still value in having these reports (Lev also believes this), but not for determining key performance indicators or economic risks.
According to Lev, CFOs already know about the existence of irrelevant financial reporting. Voluminous financial reports, that are retrospective in nature, don’t provide enough window-like information for future gold-digging opportunities or accurate business predictions.
Yet for many, more non-standard information, more data, more charts, more graphs, more, more, more… to supplement the magnificent but existing irrelevant reports, is adding a hazy fog to the supposed open market, safe-reporting mechanisms required for public consumption, and investment valuation decisions (would you like more paper with your paper?).
Instead of all this over-reporting, Lev suggests streamlining the entire process, sifting out the filler financial information to extract only the data you really need into a one- to two-page summary report. In other words, making the process of financial reporting less of a process.
While this brings greater relevance to hefty financial reporting, I’d take it a step further. Rather than producing another report, no matter its relevance, we should consider truly industry specific data and comparative results summarized in a friendly, non-technical reader’s fashion. Moreover, we should insist on this simplification of Wall Street and return the power of investing to the people.
Fear not, accountants, we really wouldn’t be killing our industry. We’d be making it more efficient and simpler. Accounting shouldn’t be a special language that only a select few understand. If we’re thinking about investments, business performance or economies, standardized and regulatory reporting is ineffective. Today’s financial reporting is only a small portion of the bigger picture of which we should all be trying to simplify. How and where can you start to see the next generation of reporting? Well… I suggest starting with an integrated performance management soltution.