How risky is your signature style? According to the report, "CFO Narcissism and Financial Reporting Quality," a CFO's signature style can predict misreporting. The study suggests that large signatures are linked with "earnings management, less timely loss recognition, weaker internal controls, and a higher probability of restatements".
The report found that the connection between signature size and accounting misstatements is narcissism. Large signatures appear to characterize people who believe that they can "talk their way out of anything". This is clearly not the best characteristic for any CFO responsible for financial reporting.
Nevertheless, this is all really just a fascinating theory. It’s important to take any direct or measurable link between the size or shape of a signature and the actual, risky "narcissism" with a reasonable grain of salt. As an experienced finance professional, I prefer to focus on more measurable and direct causes of risk in finance -- not just the potential psychological outlook of a CFO based on his or her signature. The real proof is in the accuracy and reliability of the financial results.
Under the spotlight
The financial close process is one area CFOs should scrutinize for real improvement. It often includes a vast amount of risky manual effort spread across many different groups of people within the ranks of the finance and accounting teams -- or within a shared service center.
The painstaking and slow manual activities of the close include reconciling, posting and documenting items such as accounts receivable to sales orders. Each of these processes has to be repeated hundreds of times across every entity close -- typically with many people watching and reviewing the numbers again and again.
It’s the repetitive nature of the close and the need for rigorous governance, accuracy and auditability that makes it the ideal core business process to improve. By automating many of these repetitive close processes -- whether they're completed in-house, or within a shared services center or outsourcer -- organizations gain accuracy, speed and reliability that goes beyond the personalities of anyone involved.
Time to Automate
With financial close automation, no CFO has to talk their way out of a tricky misreporting situation, because, chances are, there will never be one. Financial close automation eliminates repetitive error-prone manual activities. It guarantees accuracy and frees the finance and accounting team so that they can focus on analysis of the close figures. With the correct information at hand, it’s far easier to make vital decisions and grow the business -- and less possible for human emotions to enter into the picture.
End-to-end financial close process automation across multiple corporate entities also enforces standardization and compliance cleanly and easily. With automatic documentation of every step, the CFO and wider team have a wealth of audit material at their fingertips, which can be processed to support any regulation or compliance requirement.
Even if your signature style changes every day, with financial close automation you can guarantee the close will be consistent, accurate and compliant. If finance and accounting teams focus their attention on removing risk and effort in the processes themselves, the final sign off on the figures will be a much more scientific endeavor -- not an experiment in personalities. The secret isn't how you sign your name. It's how you get the numbers right.
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Greg Fritsky is Director of Finance Transformation at Redwood Software.