eBooks
Issue link: https://read.uberflip.com/i/1072023
Driving Performance for Private Equity Firms 4 Decision-making processes have relied, and should rely, on fact-based, data-driven management information. Historically, executives would depend on monthly financial reports and a plethora of other off-line operational reports originating from outside the finance function to monitor the health of the business� Financial reports and other real-time operational data are o en lagging indicators of performance. These metrics, although perhaps lacking precision, may have been sufficiently effective in the past; however, they are less so now because they lag the current cadence of information dissemination and business volatility today� Instantaneous and deeper financial insight is required more than it ever has at any point in history to respond to these challenges� What is required is an analytical approach that enables management to monitor and measure the development of the important strategic drivers and make decisions with confidence. In this whitepaper, we will explore how organizations are transitioning from a periodic, ad hoc reporting paradigm to real-time reporting� The Shortening of the Reporting Cycle and Challenges of Keeping up Traditional financial reporting focuses a ention on results over varying periods of time. The annual financial statements are the universal standard, but have always been presented with the external financial stakeholder in mind. Quarterly financial statements served a similar purpose, but now also include the Board of Directors who commonly meet four times a year to review financial performance. Monthly financial statements have historically been used by management as one of the primary gauges of organizational performance; a er all, most operational issues show up at one point or another in the financials. The preparation of each of these annual, quarterly, and monthly financial statements relies upon a financial close process. The financial close process is designed to achieve an accurate cut-off and validate the balances in the general ledger. The accounting staff will undertake a variety of checks and balances and account reconciliations to ensure financial reporting integrity is protected—but all this takes time� The close process is frequently measured in weeks, and less o en in days. However, intuitively we recognize that the pace of the business no longer aligns to a monthly, quarterly, or annual reporting cycle� Business moves more quickly than this� So, the challenge for finance is to find ways to accelerate the dissemination of information without eroding credibility�