CFOs face ever-changing accounting and regulatory requirements, including a significant number of 2016 compliance deadlines. Finance departments in general are under constant pressure to produce more information under accelerated deadlines. The volume of available corporate data and users is increasing like never before. Common to all is the need to pull together data from many sources on a timely basis to produce consistent, error-free reporting to monitor business risks and to meet all compliance deadlines.
Compliance as a Top Concern
In Grant Thornton's Summer 2015 CFO Survey, regulatory compliance was number five in the top six concerns on the minds of CFOs surveyed, while 45 percent said increasing compliance costs presents the biggest challenge to growth. Thirty-one percent said their number one challenge is keeping up with the volume and complexity of regulation. In Deloitte's 2015 CFO Signals Survey during their third quarter, nearly 40 percent said regulatory activity and changes are a top concern, with the highest in Energy Resources (50 percent), Financial Services (71 percent) and Healthcare/Pharma (75 percent).
What are the 2016 Compliance Deadlines?
Compliance areas vary by company, industry and geography. Here are some common ones that CFOs must address, and all include existing and proposed new requirements:
• Federal and state regulation — environmental, energy, employment and insurance
• IRS, state, local, international tax — returns and payments such as income, gross receipts, franchise, property and payroll and all other reportings like W-2s and 1099s
• Affordable Care Act (ACA) — requires new (2016) reporting and disclosures to employees and the government (IRS) by employers and carriers that offer group health coverage
• Financial reporting' FASB's U.S. GAAP; IASB's international financial reporting standards
• SEC and PCAOB public company reporting and auditing requirements
• Sarbanes Oxley Act of 2002
• Dodd-Frank Wall Street Reform and Consumer Protection Act
• ERISA and Department of Labor
• Capital and lending
Technology Is Critical
Automated reporting can make a huge difference in compliance effectiveness. Errors and oversights are more likely with an accounting close process that relies on manual efforts — spreadsheets as well as multiple systems — and lacks standardized procedures. Technology is evolving so quickly, and CFO teams should work with IT to implement solutions.
Consistent, high-quality data is needed for effective reporting. Ideally, a consolidated work flow should link all the various work streams together across an organization, using the same data. The finance function must collaborate with internal teams that have the data and may need to educate them about why this is important.
A typical reporting infrastructure will include financial reporting (GAAP and or/IFRS), tax (state, local, federal, international), human resources management, budgeting and forecasting, Enterprise Resource Planning, Customer Relationship Management and Business Intelligence. The challenge is to maintain and update those areas as standards and laws change. Technology solutions should be easy to integrate and modify as well as scalable for growth. Information access and use must be controlled. Risks associated with privacy, confidentiality and data security are major concerns of CFOs and regulators. There must be a plan for system backups and disaster recovery, along with record retention requirements for various regulators.
It's Not Just About Year-End Reporting
Year-end is clearly the time of year when CFO spend extra time and energy on reporting and regulatory compliance. But it is critical to have a corporate culture that stresses compliance all year, with effective systems, committed management and boards as well as internal controls over financial reporting. Staying on top of monthly and quarterly accounting, ensuring controls are functioning, planning for ongoing regulatory deadlines and working with outside accountants and advisers throughout the year will ensure that the right information is delivered to the right users at the right times.
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