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 THE STAT 26Percentage of wireless customers who use their cell phones to take picturesMore Vitals
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SEPTEMBER 30, 2003
For CFOs, a Crash Course in Tech To comply with strict new financial-reporting rules, they're turning to systems that can provide vital info accurately and quickly Ralph Packard, chief financial officer of mutual-fund company Vanguard Group, calls his adventures of the past five years "Tour de Finance" -- a play on the world's most challenging bike race, the Tour de France. Packard has been replacing Vanguard's decentralized and somewhat antiquated financial-reporting systems with software from a single supplier that speeds decision-making and cuts costs. "When we're finished, in one or two years, it will all be new," says Packard. "Then," he laughs, "we'll work on implementing next-generation software." It's a familiar refrain throughout Corporate America. Within companies large and small, demand is "greater than it has ever been," says Packard, for better financial information that's available at the speed of a keystroke. Shaken by the Enron and WorldCom accounting scandals, shareholders want companies to provide more granular reporting. CEOs and boards of directors want more data at their fingertips so that they can intercept and fix problems before they hurt the quarterly numbers. And regulators are requiring greater consistency and transparency of financial data. And how: The Sarbanes-Oxley Act, passed in reaction to the corporate scandals of the past two years and set to take effect next summer, will hold CEOs and their chief financial officers personally responsible for the accuracy of their companies' numbers. Execs who mess up could face 20 years in jail. CONTRADICTORY REPORTS. This new reality has registered with CFOs -- especially since many of them are ill-equipped to guarantee accurate financial reporting and forecasting. Indeed, only 9% of companies now characterize their forecasts as reliable, according to research by Hackett Group, an Atlanta-based benchmarking firm that in early summer polled more than 2,000 of the world's largest companies. That's one reason some companies have stopped providing public earnings forecasts in the wake of the corporate accounting scandals, says Rick Roth, Hackett's chief research officer. In fact, Roth argues that even the most basic financial reporting is flawed in many instances. For instance, only 17% of the companies Hackett surveyed have created a consistent internal definition for what constitutes a sale. Thus, it isn't uncommon for companies to end up with internal reports that contradict each other, says John Van Decker, a senior program director with technology consultancy Meta Group in Stewartsville, N.J. To set things straight, corporate financial analysts have to perform tedious "reconciliations" that require lots of time and money -- resources that corporate finance departments increasingly don't have. That situation is about to get more complicated. Sarbanes-Oxley will require companies to notify the Securities & Exchange Commission of material events, such as a late payment from a large customer, within two business days. Today, some corporations appear not to be aware of such events until the end of the quarter. And only 11% of the companies in the Standard & Poor's 500-stock index now meet the Sarbanes-Oxley requirement that they file their earnings reports within 35 days of the end of a quarter (vs. the 45 days that has been stipulated until now), according to a recent survey by Parson Consulting in Britain. "CFOs are walking a very tight rope," says Renee Lorton, senior vice-president and general manager for financial-management solutions at software company PeopleSoft (PSFT ). NEW CLOUT. Increasingly, these execs are turning to technology for help. They're buying packages that allow them to collect data consistently across their organizations, from the usual suspects -- SAP (SAP ), PeopleSoft, and Oracle (ORCL ). They're also buying software that helps them do better data analysis and planning from those three companies plus Hyperion Solutions (HYSL ). And they're trying out forecasting software from one of the 100 or startups that have entered that red-hot market. One primary goal of customers and software suppliers alike is to avoid the miscues that so far have attended the implementation of finance software. Installations of enterprise resource-management (ERP) systems, which are used to consolidate the recording of all the financial transactions in a company, still run more than 50% over-schedule and -budget on average, according to market researcher Gartner. That's a problem when you consider that, on the high end, such systems can cost hundreds of millions of dollars. One thing that has changed already -- no doubt in part because such software is so expensive -- is that the CFOs, instead of CIOs, increasingly have final say over their companies' tech budgets. In fact, at many companies, such as technology service provider Unisys (UIS ), chief information officers now report to CFOs, who are becoming as well-versed in technology as they are in debits and credits. And for good reason: "If you don't understand technology today, you don't understand business," says Louis E. Lataif, dean of the Boston University School of Management. That's why his school's MBA program now offers a joint degree in business and information systems.
BW MALL
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