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Increasing investor trust: Why it matters and what you can do about it

Terry Smagh
— 1 minute read

Think your company enjoys the complete confidence of its financial backers? If so, you may be in the minority. Here in Australia and around the world, high-profile misreporting and fraud scandals have seen investors grow ever more sceptical about goings-on behind the scenes and in the back office.

Terry Smagh

These happenings don’t just damage the bottom line. They can have a deleterious effect on the perceptions of shareholders and stakeholders; leaving them questioning whether the organisation they’ve invested in is being managed properly.

Shareholder scepticism 

Many investors already enjoy a mindset best described as sceptical. A global survey carried out by BlackLine in 2019 found the majority of institutional investors believed companies did not use financial statements that presented an accurate and realistic view of their accounts. 

A damning 80 per cent of survey respondents stated that they believed finance departments employed legal but creative accounting tactics to dress up the accounts for their benefit.

It’s a far cry from the “digital confidence” in business processes which EY global performance improvement finance leader Tony Klimas has identified as critical to the maintenance of growth and shareholder return, in today’s uncertain business climate.

“With the uncertainty that exists today from all the change we’re experiencing, investors and capital markets in general like surprise disclosures and restated financial statements less than ever,” Mr Klimas notes. “In fact, they are quick to penalise companies that have these problems.”

Why information is key to rebuilding trust

Once lost or diminished, shareholder trust can be difficult to regain. Identifying vulnerabilities and risks, and putting stronger controls in place to address them, should be part of the long-term solution for businesses seeking to repair damage – and to avoid incurring it. 

Ongoing reassurance can also be provided in the form of up-to-date, granular data which allows decision-makers, investors and stakeholders to better see how an organisation is performing in real, or near real, time.

The significant time lag associated with conventional accounting processes and solutions has made this a tall order, historically. Reports and accounts tabled weeks, months and even years after the period of time to which they correspond give scant reassurance that an enterprise is being run properly, and is compliant with relevant standards and legislation, in the here and now.

A growing number of Australian enterprises are addressing this issue via the implementation of cloud-based, enterprise financial platforms which facilitate unified, automated and continuous accounting, reporting and close practices.

A means of embedding automation, control and period-end tasks within day-to-day activities, continuous accounting enables the rigidly date-bound accounting calendar to mirror the broader business, in the present.

It’s a digital era approach which can be employed to deliver real-time financial intelligence; something that has value for business leaders and shareholders alike.

Time to act

While times and technologies continue to change at warp speed, one thing hasn’t. Investors have long been loath to back companies whose reputation for integrity and financial control is less than stellar. Conversely, those which consistently demonstrate effective financial management find it easier to access external funding, and maintain the confidence of the shareholders that provide it.

Against this backdrop, a solution that boosts the speed and accuracy of your financial reporting may prove an investment well worth making.

Terry Smagh, senior vice-president and general manager, Asia Pacific and Japan, BlackLine

 

Increasing investor trust: Why it matters and what you can do about it
Terry Smagh
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