Become a Competent CFO

Author: None
Publisher:
Publish Date: 2006-07-01
Features:
IV. The Duty of a CFO: Transparent Financial Reporting and Accurate Profit Forecasting
A CFO not only needs to promote the shareholder value concept internally, integrate performance indicators related to shareholder value into the company's strategy, and ensure they are throughout the entire value creation process, but also needs to promptly report the results of their value creation activities to shareholders to facilitate their buying, selling, or holding decisions. This is also one of the key contents of shareholder relationship management and shareholder value management.
At the beginning of the 21st century, some "profit machines" in the United States, such as Enron, WorldCom, Global Crossing, and Xerox, accounting scandals, severely damaging investor confidence. To restore investor confidence, the U.S. Congress passed the Sarbanes-Oxley Act. This act introduced new stringent requirements in financial reporting, accounting industry regulation, and corporate governance. Against this backdrop, CFOs have placed greater emphasis on accurate profit forecasting and transparent financial reporting. EY's report shows that 81% (sample size = 265) of CFOs are committed to providing more accurate revenue and profit forecasts. 93% of CFOs stated that they comply with current Generally Accepted Accounting Principles (GAAP) and relevant external reporting regulations, with no involvement in significant fraud; 58% of CFOs plan to increase the transparency of financial reporting.
In terms of measures to improve the quality of financial reporting and profit forecasting, Deloitte Consulting commissioned ResearChInternational to conduct a survey of CFOs, CEOs, boards, and division managers. 64% of CFOs it is necessary to redesign financial processes (48% of the board, 49% of the CEO, and 59% of division managers agreed), 51% of CFOs (as well as 46% of the board, 49% of the CEO, and 72% of division managers) agreed to investing more in information systems, and 47% of CFOs (as well as 47% of the board, 36% of the CEO, and 44% of division managers) believed that restructuring the audit committee would help improve the quality of financial reporting.
While most CFOs value accurate financial forecasting, some even go further: adopting electronic reporting. Many companies have established internal forecasting and budgeting systems based on web technology, allowing management to dynamically obtain real-time data. Due to the increased volume of information required by shareholders and advancements in data processing capabilities, many internal decision-making information is also useful for external users. Thus, the development of electronic reporting has become necessary, as it can provide more flexible reporting, facilitate information flow, and enable all information users (both external and internal) to access the same decision-making information. In fact, some companies have already begun to explore electronic reporting and its potential applications.
KPMG's questionnaire survey targeting Belgium, France, and Luxembourg found that 23% (sample size = 165) of CFOs have already promoted electronic reporting systems within their companies. P18-19