In the wake of high-profile corporate accounting debacles around the world, The US Securities and Exchange Commission (SEC) has taken things personally. They are holding chief executives of publicly held corporations around the world personally accountable for the veracity of their financial reporting.

The new regulations leave no room for executives to view their auditors with complacency, assuming that as long as their financial statements comply with generally accepted accounting principles, it doesn't matter if the figures might be creatively engineered to side-step ethical principles, or reality.

The newly enacted Sarbanes-Oxley Act requires CEO's and CFO's of nearly 1,000 public companies to personally certify the 'appropriateness of the financial statements and discolors contained in the periodic report, and that those financial statements and disclosures fairly present, in all material respects, the operations and financial conditions of the issuer.'

Even the most scrupulously ethical executives should be concerned. Can you really swear to the accuracy and integrity of data management processes throughout all the tributary systems that flow into SEC or IAS (International Accounting Standards) reporting? Can you be sure that the legacy accounting tools, proprietary systems are renegade spreadsheets used by various departments are actually supplying valid information that supports a single version of the truth?

As financial transactions have become more complicated, so has the process of accounting for them. Conventional accounting systems, spreadsheets and Enterprise Resource Planning (ERP) systems have not kept place with the financial reporting and analysis requirements of dynamic organizations-especially as global business operates at a faster chip than ever, demands strategic decisions on timeliness that overwhelm pre-Web business models, pressures companies to manage their business from new perspectives-and attaches you good name to the bottom line.
Can there lay and answer that is beyond two-dimensional spreadsheets.. beyond proprietary solutions… beyond transaction-oriented accounting systems.. The Financial Management Solutions from SAS might be the answer. It integrates legacy and point solutions with comprehensive SAS data warehousing, planning, forecasting, analysis, reporting and cost management tools. The result is a unified, performance management approach to financial management that enables financial manages and executives to:

New problems, strict demands for Financial Management

It began with Enron and was shortly followed by other large publicly traded companies worldwide. Auditors uncovered and disclosed suspicious transactions and accounting irregularities in their financial reporting. Suffering from extreme pressure from the market to perform, executives in leading companies had resorted to 'creative accounting' to deliver against forecasts and expectations.

These highly publicized disclosures triggered a tidal wave of layoffs, plummeting stock values, loss of investor confidence, public indignation and inevitably, Federal intervention.

In August 2002, the US Securities and Exchange Commission activated strict regulations and penalties designed to reform corporate accounting, rebuild the economy and restore investor confidence. Corporate executives are now held personally accountable for the integrity of their financial reporting.

The Securities and Exchange Commission published a list of 947 companies whose top officials are required to file sworn statements attesting to the accuracy of the companies most recent annual and quarterly financial reports. If they do so knowing the results are false, they will face fines of up to $ 5 million and up to 20 years in prison or both. September, recently signed accounting legislation requires executives from all 15,000 public firms (including foreign companies listed in US) to vouch for quarterly and annual reports in the future.

The implications for CFOs and CEOs around the world are profound. Executives were already under intense pressure to meet earnings projections and improve profit margins and a turbulent economy… continually find and implement effective cost-reduction strategies… set investment directions to maximize immediate ROI without undermining long-term returns.. explain fluctuations in shareholder value.. and proactively mange erratic performance indicators and market trends.
Now in the US they also to swear under oath that top-level financial reports-calculations derived from hundreds or thousands of originating sources throughout their global organizations-are accurate and have been produced in accordance with generally accepted accounting principles. Furthermore, they are being held to broader disclosure requirements and shorter reporting deadlines than ever. Is it any wonder that with a week to go before the mid-August deadline, only five percent had signed?

Beyond budgeting
In spite of all the advances witnessed in accounting processes since the days of penned ledgers and spreadsheets, popular financial reporting tools are not measuring up to prevailing business challenges. It many typical organizations, CFOs have discovered that accurate financial management and reporting is a time-consuming process that starts with departmental managers dragging their feet submitting worksheets and culminates months later with reports that are now based on outdated data and that have consumed too many of the CFO's waking hours.

In complex, decentralized organizations, financial executives have found it cumbersome or impossible to quickly consolidate financial data from multiple units, ensure the accuracy of that data, predict the impact of business decisions on financial performance and drill into financial data to understand not only what, but why. They have also found traditional rear-view budget tools to be inadequate for making up-to-the-minute strategic decisions.

Budget tools and processes are byproduct of the old commodities-based, manufacturing-oriented economy, where acquiring and protecting capital were the primary value drivers of most organizations. Over the years, budget-based processes permeated corporate structures and were applied to purposes for which budgeting was never designed, such as benchmarking and forecasting in companies that have significant value in tangible assets.

Stretching budget-based processes into financial performance management roles spawns dysfunctional behavior that undermines long-term growth with short-term myopia and seeks to squeeze every penny from budget coffers while ignoring market demands. In a budget-based model, employees adopt an 'us versus them' and 'use it or lose it' or 'gaming' mentality and are encouraged to use creative tactics to match 'actual' and 'budget' figures. Departments are rewarded or punished based on their ability to meet outdated, fixed targets that don't reflect changing conditions or new opportunities.

SAS Financial Management provides the answer, with a client-server and Web-based application suite that:

Courtesy : The DDQ week