Imagine a phone with all the latest bells and whistles. It’s got caller ID, voicemail, speed dial, call forwarding, message alerts and just about everything else you could possibly want.  But there’s one thing missing:
a dial tone. Suddenly none of those other things matter. If you can’t make calls, none of the advanced features have any appeal. In fact, if there’s no dial tone, chances are these other functions won’t work either. The role of finance in a company isn’t much different. While finance may perform sophisticated pricing analyses, participate in high-level strategy and advise management on critical decisions, it can’t effectively play these roles if it doesn’t fulfill its core mission. If there’s no dial tone, nothing else matters. For finance, the dial tone is protecting and preserving the assets of the company. It’s compliance with reporting and control requirements. It’s accurate and timely financial reporting. Finally, it’s closing the books efficiently and monitoring the integrity of financial information. In a word, stewardship. But you’d be surprised how many companies aren’t getting a consistent dial tone. And you’d be shocked to find out why. The number of financial restatements has quadrupled since 20011. In a few high profile cases, such as Enron and WorldCom, these restatements involve fraud. But most of the time, the problems are more basic. Perhaps there aren’t enough technical accountants who understand how to make complicated accounting judgments. Or honest mistakes are being made during cumbersome manual processes (often heroically done by sleep deprived staff late at night or on weekends). Often it takes so long that not enough time is left to analyze the data before the press release. Or finance doesn’t have firm control of critical financial data. Maybe the financial system is outdated or there are simply too many systems. In other words, it’s likely the failure to execute the basics. The stakes have never been higher. Thanks to Sarbanes-Oxley and other legislation, the rules are more complex. Timelines are getting even shorter. Investors are demanding better disclosure and regulator scrutiny has increased. If there’s no dial tone, there’s no credibility. Nobody’s going to ask finance to advise on strategy if you can’t reliably execute the basics. And they’re right: If you can’t generate a consistent dial tone, you probably don’t have the people, processes and systems to be of much use as an advisor. The dial tone is a prerequisite for finance to become a true driver of value. People expect you to get it right. They expect it to be timely and error-free. And they expect it do be done without last-minute heroics during every closing cycle. Getting the dial tone right should be the easy part of your job. So why is it still such a frequent problem? The culprit is often underinvestment in finance. (More about that next month.) Until recently, the focus in many organizations has been cost-reduction. Many companies put so much effort into initiatives to squeeze costs out of the finance department, that they ended up crippling one of the most important functions of all: stewardship. Now they’re paying the price. Other CFOs simply took their eyes off the ball. Consider the case of one technology company that recently brought in a new CFO. He was brought in to clean house – to fix the less glamorous controllership functions. But instead, he spent most of his time on roadshows, talking to investors. Of course, that’s part of finance’s job too, but remember, accurate books are the dial tone. After neglecting his stewardship role long enough, mistakes and restatements inevitably surfaced and this CFO lost his job. This doesn’t need to happen to you. If you’re having trouble getting dial tone in your organization, there are a few important steps to take. Imagine how much more you could contribute to your organization if you didn’t have to worry about a grueling death-march every quarter to simply close the books. What if you had more time to analyze the information and be a catalyst for strategy execution? Imagine how much more value you could add to your organization. And how much more valuable you would become. It all starts with the dial tone. If you don’t have the stewardship right, if you don’t have a steady dial tone, go get one. 1 CNNMoney.com, March 3, 2006 This publication contains general information only and Deloitte Consulting LLP is not, by means of this publication, rendering business, financial, investment, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte Consulting LLP, its affiliates, and related entities shall not be responsible for any loss sustained by any person who relies on this publication.
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