Change is the only true constant in the business world. In today’s digital era, increasingly complex technology and business regulations has become the norm. For any growing company, the need to adapt to these complex changes is imperative—it’s either that or perish. While all employees have their own battles they must face, the CFO and accounting team members are fighting to meet standards, brave regulations, and comply with rules in order to protect themselves and their employees from potential liabilities and financial penalties.
For a growing company, however, workload increases and complex regulations can lead to financial challenges and compliance disasters. Here are 5 compliance nightmares for CFOs and ways that these disasters can be avoided or assuaged using streamlined entity hygiene.
Missed Reporting Deadlines
Labor legislation, industry regulation, and reporting requirements can change by the day. These types of important reporting deadlines become even more complex and convoluted when a company has multi-jurisdictional subsidiaries and employees working in various locations. When you miss these important reporting deadlines, your company may incur applicable penalties and increase risk of other liabilities.
By investing in a software with a built-in compliance calendar, a missed reporting deadline disaster can be avoided altogether. A cloud-based compliance calendar can be accessed and updated anywhere and keeps track of all relevant deadlines, helps you pinpoint a particular compliance status in every jurisdiction, and ensure your entities remain in good standing across the board.
Failure to Comply
Even if you make a reporting deadline, there’s no guarantee that your entities will be deemed in good standing. All too often, CFOs are faced with disasters of failing to comply with industry and legal standards. This can not only lead to penalties but cause reputational damage to the organization. For instance, potential stakeholders may feel less comfortable investing money into a business that does not prioritize compliance regulations.
When it comes to your business, the one you have worked so hard to build, it is a reality that failure is simply not an option. A lack of automation is one of the most common issues plaguing companies that fail compliance regulations. Having a cloud-based entity management system can allow CFOs to oversee governance and compliance performance and remain audit ready.
In order to remain compliant, CFOs must be able to access data and reporting processes across all subsidiaries and teams. Yet, many CFOs find that inadequate visibility into reporting processes means that sourcing and controlling the quality of financial data across all reporting entities is much more difficult. This leads to an increased risk of missed reporting deadlines and failure to comply.
With a cloud-based entity management system, CFOs will be able to increase visibility into compliance calendars, reporting deadlines, and compliance statuses into one centralized database that can be accessed from anywhere around the world. This prevents data silos that result from scattered and disorganized information.
Lack of Modernization
A company’s CFO holds an invaluable role, but this person can’t do everything on their own. Even with smaller sized companies, a CFO will often rely on an accounting team with financial tasks such as compliance deadlines and data collection for reporting purposes. With modern technology in the form of a cloud-based entity management system, the CFO should have overhead of all of this information and employees should feel as though their time is valuable with the resources provided to them.
When accounting teams do not have this type of modern reporting technology, however, they may be stuck performing manual tasks that take up valuable time and resources and reduce company morale. These scenarios often lead to compliance disasters because information is scattered, employees feel undervalued and overworked, and overhead for the company’s CFO is low.
We touched on this a bit earlier, but one of the worst-case scenarios facing CFOs and compliance teams is the possibility of asset impairment. This occurs when a company’s carrying value is written down to its market value, and the loss is recognized on the company’s income statement in that accounting period. A loss caused by an asset impairment is visible to shareholders and can deter future investments because it shows the company’s internal processes for asset protection is lacking.
Athennian Can Help
As you can see, financial disasters can erase all of your company’s hard work and put you back at square one. The good news is that, with the right entity management system, you can avoid such disasters while saving your time and resources. Using a software that maintains compliance reminders, organizes company information into digestible format, and allows for company wide visibility will ultimately help your company’s CFO and accounting team remain up-to-date with necessary deadlines and compliance regulations in real time.
At Athennian, we believe that streamlined entity hygiene is the key to long-term company success and scalability. To learn more about the entity management software that we offer, request a custom demo with an entity management expert.