Money Matters

[Webinar] Audit-ready financials: The way to reconciliation

There is a natural tension between auditors and their clients. It’s the job of the former to ask hard questions, while the latter would much rather attend to the significant demands of running their businesses.

Despite the World Economic Forum’s demotion of the South African auditing profession from #1 in the world to #49, auditors still perform a critical role in protecting our public interest. These were the sentiments of Jordaan Burger, VP Finance, Sage Africa, Middle East, and APAC, during a recent webinar held to explore how modern finance teams can maintain audit-ready financials.

“In the end, that two-page audit report is relied upon by lenders and shareholders to make decisions which, in turn, impact the business. So, it’s important that we as finance professionals do everything possible to make it easy for auditors to give us a clean opinion,” said Burger.

In doing so, the hope is that we not only reclaim the reputational ground we’ve lost in the global auditing community but also strengthen the relationship between auditor and client.

The way to reconciliation

Historically, audits have been time-consuming because of fragmented, manual accounting processes and record keeping. Inaccurate or incomplete information – most often the result of inadequate systems rather than malicious intent – is the root cause of many an auditing rift.

“Not long ago, there were instances where the auditor would choose to build consolidated statements from scratch rather than use the confusing spreadsheet the business had complied,” recalled  Burger.

But the rise of accounting software, automation, and cloud-based services has improved the working lives of finance professionals by reducing rote tasks in favour of strategic ones and making it easier to maintain audit-ready financials. In other words, technology can be a catalyst for a better, more effective relationship between client and auditor.

How tech is making the audit easier

During the presentation, Burger discussed four areas where he sees tech having the most significant impact in the accounting profession and, by extension, its auditing counterpart.

1. Revenue

This is the starting point for audit-ready financials. If revenue recognition is faulty, those cracks will show throughout the statements. Build your revenue recognition principles into your product codes or service contracts using the likes of milestone billing. Once those codes are included on an invoice, revenue is automatically recognised according to rules embedded in your software.

2. Accounts receivable

By building up a history of customer payments and holding it into perpetuity, you’ll have the record you need to not only keep on top of outstanding invoices but also to justify the provisions you’ve made for non-recoverable debts or lack thereof.

3. Consolidation

Excel spreadsheets used for consolidations can be hugely complex and time-consuming to ensure accuracy. Accounting software now enables real-time consolidations inside the product, negating the need for manual interventions.

4. General efficiencies

Real-time dashboards and automated reports that accounting software makes possible can give finance professionals the time and means to focus on gleaning insights from their numbers, providing invaluable support in the realm of strategic business decision-making.

How to make an auditor happy

Burger offered the following advice for those looking for a smoother, more efficient audit experience:

“Digitise your workflows to give the auditor comfort that your accounting checks and balances are robust. This could potentially reduce the amount of time they need to spend on substantiative testing of your transactions. If you have made assumptions or used estimates, tell the auditor upfront so that you avoid time-consuming scrutiny down the road. And close your accounts at month-end in an efficient manner, that will make you better prepared at financial year-end.”

His final recommendation was to embrace the use of cloud-based accounting software. According to Burger, it comes packaged with many benefits, ranging from real-time access to insightful financial data to solid cybersecurity measures to improved disaster recovery capabilities.

Critically, the use of cloud-based services can also improve the audit experience. It will allow you to give your auditor read-only access to the data they need to perform their audit. With the right software, your auditors will be able to drill down into every transaction, all the way to supporting documentation, without you needing to lift a finger. Assuming you’ve got nothing to hide, that’s good news for everyone.

Get into a rhythm

In the second half of the webinar, Bradley Wentzel, CFO of Douglasdale Dairy, provided pragmatic insight on how he and his finance team make sure their financials are audit-ready when the time comes.

“The longest our bank account goes without being reconciled is three days. And that’s usually over the weekend,” said Wentzel.

The theme of daily and monthly scrutinising of journal entries and general ledgers, getting into a so-called ‘rhythm’, shone through in his analysis of what it takes to maintain audit-ready financials. In addition, he emphasised the need for robust controls at multiple checkpoints in the accounting process to ensure nothing is missed.

He also stressed the importance of communication between the finance team and the rest of the business. If the former knows what the latter is doing – around planned CAPEX or OPEX, for example – it’s more likely that the proper accounting process will be put in place the first time around, mitigating against potential bottlenecks down the line.

When asked for his closing comments, Wentzel offered the following helpful advice: “Make sure you choose an audit partner who understands your business. The audit process will flow better if they know what you’re trying to achieve. In that guise, an audit can actually be a value-add experience for your business.”

Weigh your options carefully

Reflecting on the bigger picture, Jordaan acknowledged that implementing a new accounting or payroll system is always a big decision.

“It’s a commitment that requires a long-term mindset, substantial investment, and planning. One of the key considerations is whether the potential software provider’s technology integrates well with the other systems you’re using in your business. Be sure to also consult your peers about which service providers they’re using, how happy they are with their service, and what the system implementation entailed.”

Like Wentzel, he pointed out that collaborating with auditors, particularly around how to leverage their analytical software to provide a more seamless audit process, is the route to stress-free, efficient encounters between client and auditor.

That would be a turnout for the books.

Webinar: The benchmarks for audit-ready financials

In this webinar hosted by CFO South Africa, Jodaarn Burger (VP Finance, Sage AME and APAC) and Bradley Wentzel (CFO of Douglasdale Dairy) share advice on how finance leaders can improve the financial preparation process, avoid common pitfalls, follow best practices for automation and controls, and ensure a “clean” opinion from your auditor. 

Watch now