What is financial governance?
Financial governance refers to the way a company collects, manages, monitors and controls financial information. Financial governance includes how companies track financial transactions, manage performance and control data, compliance, operations, and disclosures.
What are the risks of poor financial governance?
The risks of poor financial governance include fraud, misappropriation, material errors, regulatory penalties, poor decision making and reduced stakeholder confidence.
What does financial governance mean for your organization?
Financial governance in action are the policies and procedures companies use to manage business data and ensure that data is correct.
Financial governance includes:
- Internal controls
- Financial policies
- Internal and external audits
- Workflow
- Financial controls
- Data tracking and validation
- Data security
Why is financial governance important?
Good financial governance ensures financial data is correct.
When organizations place controls on financial data, you can be sure finance teams are using the correct version of data to complete reports, budgets, plans and other financial documents. Controls can include:
- software that maintains the data structure and formatting.
- a single data hub for all information that houses real-time and historical information.
- a system that validates data upon input.
- a system that includes an audit trail and log so that you can track who did what to data, when.
- a single system for all financial processes from close-to-disclosure.
Financial governance is key to producing compliant regulatory reports and disclosures.
Financial governance includes the ability to stay on top of compliance requirements, such as IFRS and GAAP updates. Good financial governance means that your company is collecting, calculating and presenting financial data according to regulatory rules.
As a result of sound financial governance, budgets, plans, models and forecasts are more accurate.
Since financial governance results in more accurate information, the documents that executives use to craft strategy and dictate direction are based on a more solid sense of the business’ financial reality.
Financial governance results in a faster close and expedites the completion of other financial processes.
By using standardized workflows and by automating time-consuming processes, the Office of Finance can work to complete financial processes faster and with more confidence. When administrators can see where contributors are in the process, there are fewer bottlenecks and missed deadlines. When performance management software automatically inputs and validates data, finance doesn’t have to worry about manually keying in data or double, triple or quadruple checking it.
Financial governance results in clear ownership and accountability.
No report is an island. Financial governance means being able to view the entire lifecycle of data and where that data appears. It answers questions like, “Who did what to it, when” and “Who’s accountable for this report and this figure.”
Financial governance allows organizations to identify risks faster.
With frequent monitoring and controls put in place, Finance can identify when financial information signals business risks.
How to improve financial governance?
- Use a centralized, unified corporate disclosure management software.
- Keep up to date on all compliance regulations.
- Automate financial data and controls.
- Conduct frequent risk assessments.
- Conduct internal and external audits.
- Use a single data warehouse for all corporate data.