The risks of working with inaccurate financial data

Accurate financial data is the bedrock of business success, particularly for small and medium-sized businesses (SMEs). Business Services Associate Director Martin Kerr considers the problems inaccurate or outdated financial data can create for SMEs and the solutions experienced Business Advisors can provide.

The costs of inaccurate financial data

Financial data informs decision-making in every business. That process, however, is founded on the accuracy of the information itself. Inaccurate or outdated financial data can, at best, undermine decision-making. At worst, it can lead to:

• poor investment decisions, missed opportunities and potentially significant financial distress;
• issues around UK regulatory compliance leading to potential investigations, penalties, reputational damage and legal issues;
• the loss of funding and investment as due diligence highlights inaccurate or incomplete financial information; and
• operational inefficiencies due to the time spent reviewing and remedying inaccuracies which might need to be traced back several months or even years.

What are the causes of inaccurate financial information?

Inaccurate financial data typically results from outdated technology and an over-reliance on manual data entry. If desktop accounting and Excel spreadsheets are the foundation of your accounting processes, the chances of inaccurate financial data are high. This is because of the reliance on manual inputting of data and the human error associated with it.   

The most effective solution is to work with an experienced firm of Accountants and Business Advisors to switch to a Cloud Accounting system, such as Xero. By removing the reliance on manual data entry for calculations and reports, Cloud Accounting software reduces the risk of human error. Therefore, improving the accuracy and efficacy of financial information.

Cloud Accounting: accurate data and fewer errors

Inaccurate financial data can also stem from the need for collaboration across teams. Sharing different versions of a spreadsheet or working across multiple backup files invariably leads to errors. Once again, switching to Cloud Accounting can significantly reduce this as all users operate from a shared platform. Thus, removing the need for multiple ‘versions’ of business-critical files.    

Switching to a Cloud Accounting system with the support of an experienced firm like Consilium allows businesses to automate many repetitive tasks manually undertaken with desktop accounting. This simply means tasks like producing recurring sales invoices and processing purchase invoices are automatically completed by the Cloud software. In doing so, businesses can make big efficiency gains and free up finance team members to spend time on more valuable tasks such as collecting money from customers or reviewing data, costs and cashflows.

Interested in switching your business to Cloud Accounting?

Switching to Cloud Accounting may seem intimidating and too time-intensive for busy small and medium-sized businesses. In reality, with the advice and guidance of our Cloud Accounting team, the switch can represent a sound investment in better data, greater efficiencies and long-term cost savings.

To find out how Consilium can help your business join the Cloud revolution contact Martin Kerr to arrange an informal chat. Alternatively, you can learn more about our approach to Cloud Accounting and services for Scottish SMEs.

Follow Consilium Chartered Accountants on LinkedIn, X / Twitter, Instagram and YouTube for news and more business insights.