By Tom Hagenaars, Partner - Digital Transformation,
Ayan Patel, Senior Manager - Digital Transformation and
Steven Zikeli, Senior Manager - Capital Markets and Accounting Advisory
Business shifts accelerate the need for technology
Companies undergoing transformative business/market changes must constantly be reevaluating their existing systems and processes. This includes what’s referred to as “last mile reporting”, which focuses on managing all aspects of the close and reporting process. These systems automate the collection of data across disparate sources (e.g., ERPs, spreadsheets) and report both financial and non-financial information to stakeholders.
We are seeing several types of business changes that are triggering companies to implement new technologies that will automate the last mile reporting process. However, technology alone is not enough. Additionally, having trusted advisors with expertise in accounting, financial reporting, ESG reporting, tax, and technology is also crucial to drive implementation success.
Our team of capital markets and accounting advisory professionals have helped companies face the following business changes head-on through the implementation of disclosure management tools:
Capital market requirements
As companies raise capital - for example, through bank financing or private equity - often these come with increased financial reporting or management reporting requirements. Disclosures may need to be more robust than in the past (e.g., US GAAP or IFRS reporting), or reporting deadlines may be more aggressive (e.g., 45-60 days after quarter-end). Private equity firms may want more timely insight and financial data than firms are accustomed to reporting on.
Public company readiness
As companies evaluate the potential for a future public offering (through traditional IPO or SPAC merger), they must grapple with the significant uplift in financial reporting requirements needed to operate as a public company. Investor-grade financial reports will need to be created in a short period of time.
Global expansion
As companies grow and enter new international markets, there are increased statutory reporting requirements under several bases of accounting. Each country may have separate reporting requirements that are different from the consolidated financials. Additionally, growth achieved through acquisitions often results in several different ERP instances that must be manually aggregated and harmonized before financial reporting can take place. Acquisitions also present unique accounting and reporting complexities that must be addressed.
Data tagging requirements
Listed companies across several countries are required to file their financial reports under electronic XBRL formats, for example XBRL SEC (in the US) or ESEF (in Europe). Companies must tag individual data items in financial disclosures in a standardized format to allow for easier comparability across companies. This requires the use of tagging technology or external third-party service providers.
Non-financial reporting
There are transformative changes coming as regulators begin enacting climate-related disclosure requirements. There are several reporting frameworks that companies will need to be in compliance with depending on their operational footprint. For example, SEC requirements and the Corporate Sustainability Reporting Directive (“CSRD”) will require enterprise-wide updates to data gathering, analysis, and reporting, as well as tagging the data in XBRL.
Cloud transformation
Many companies have partially or entirely migrated to cloud technologies. Many cloud ERPs stop short of addressing the last mile of financial reporting. As firms invest in these areas, it is helpful to identify the gaps in technology and fill these upfront.
How reporting expertise and technology can help tackle these changes
Digital transformation and enablement across the reporting process is foundational to overcoming these new challenges. The use of disclosure management tools has been a key technology solution to satisfy regulatory requirements, build trust in your financial and non-financial reporting, and optimize internal processes to free up the accounting and finance functions for more analysis and insight.
PwC has helped many companies select and implement tools that enable them to maximize the following benefits:
Real-time data connection: Aggregating financial and non-financial information from various source systems and making it directly accessible.
Cloud-based: Enabling easy and efficient collaboration among internal and external stakeholders. Beyond technology, cloud is an opportunity for companies to increase agility.
Tagging capabilities: built-in support for data tagging and creating a clear audit trail.
Flexibility: tools that can adapt to new reporting requirements and various output formats (XHTML, slide deck, document).
Built-in controls: Builds trust in the process, ensures accuracy and completeness of reporting, and compliance with the applicable regulatory standards.
Translation and design: Ability to translate reports into multiple languages, and create user-friendly designs that are ready to publish.
When implementing any disclosure management or reporting tool, it is imperative that the underlying reporting frameworks and regulatory requirements are understood from the start. Therefore, firms can maximize the value achieved by engaging with accounting and reporting advisors. PwC has strategic alliances with several technology providers that allow us to work side-by-side during the selection and implementation phases. We have a deep understanding of accounting and financial reporting frameworks (e.g., US GAAP and IFRS) as well as non-financial reporting frameworks (e.g., ESG) and can help identify potential data/disclosure gaps. Our team has significant experience in helping companies as they raise capital or engage in M&A, and the accounting and reporting challenges that come with this growth.
Contact us to learn more.
