Financial reporting is a crucial factor for stakeholders and investors in tracking the performance of a business and plays a vital role in decision-making. It’s usually prepared by accountants and CFOs quarterly or yearly. It’s also a regulatory requirement for companies to file their financial reports.
Financial reporting is evolving, and below are the trends shaping the landscape of financial reporting in 2024: Stay ahead of the curve by exploring emerging trends in financial reporting, such as ESG reporting, digital transformation, AI integration, and real-time analytics.
ESG Reporting for Sustainable Practices
There is an uptick in demand for the integration of non-financial information, such as ESG, into financial reporting. Investors and other stakeholders are requesting sustainability reports to deeply understand the impact of the company’s business activities on the environment and society and to assess the risks and opportunities companies face, or what benefits they are getting. Sustainability reporting plays a pivotal role in convincing skeptical stakeholders and investors that a company’s activities are safe and beneficial.
Apart from stakeholders and investors demanding to know the company’s sustainability activities, there are also many regulatory requirements for companies to disclose more information on their ESG strategies. You can find more information on ESG reporting for sustainable practices in the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence (CSDD).
Digital Transformation in Reporting Processes
There is a requirement that companies in the European Union adopt digital transformation in reporting processes. This can involve collecting, organizing, evaluating, or collating large amounts of data from different sources and disclosing it in the management report. This will pose a challenge to many companies, but it presents opportunities for those who get it right. According to CSRD, management reports must include sustainability information such as intra and inter-departmental water usage, human factors in the supply chain, CO2 emissions, etc.
With digital transformation in reporting processes, businesses can benefit in the following ways:
- Optimization of existing company processes, which presents more opportunities for the company’s strategies and operations.
- Automation and standardization can improve the quality of sustainability reporting, reducing the burden on the company’s resources.
- Sustainability reporting also provides transparency to stakeholders and investors on the company’s actions on social or climate-related matters.
Digital transformation won’t make all data available, but data collection and their sources must be carefully vetted and standardized. Interdepartmental teams like data engineers, environmental technologists, and social experts will be required to provide reliable data sources.
AI Applications for Data Analysis
As a company’s data grows, it becomes harder and more time-consuming to retrieve data. With the help of AI applications, companies can access and extract large amounts of data in less time. AI data analysis uses different artificial intelligence methods to gain valuable insights from a vast amount of data.
Some of the techniques AI uses to retrieve large amounts of data are:
- Machine learning algorithms follow certain patterns and make predictions on large datasets.
- Neural language processing, which extracts insights from unstructured text data.
- Deep learning uses neural networks to recognize images, time analysis, etc.
Because of its ability to extract and analyze large data in less time, companies, especially, are using AI and automation to create financial reports. With automation, financial reporting is now easier than before since businesses are using technology to analyze their financial data, which minimizes human error, delays, and inefficiencies. As a result, AI is helping businesses improve accuracy and efficiency in financial reporting since companies can spend less time creating and filing financial reports.
Real-time Analytics for Informed Decisions
With real-time analytic tools, you can easily access, analyze, and interpret large financial data with a click of a button, providing valuable insights for informed decision-making. Real-time reporting gives you an edge in monitoring key financial data and tracking business performance, which is crucial in making informed decisions for business planning and operations. Also, real-time analytics help businesses evolve with changing market conditions and seize more opportunities as they arise.
Enhancing Stakeholder Engagement Through Interactive Reporting
Interactive reporting tools present financial reporting in a visually appealing and interactive format, enhancing stakeholder engagement. With data visualizations, interactive dashboards, and customizable financial reports, stakeholders can gain insights into financial data and use that data to make informed business decisions. Interactive reporting also provides transparency and accessibility, which enhances trust and partnerships between companies and stakeholders.
Takeaways
Embracing emerging trends in financial reporting can revolutionize how businesses collect, analyze, and report financial information. With trends like AI applications and automation to ESG reporting, organizations can make informed business decisions, enhance sustainability, and promote stakeholder engagement in the banking and finance sectors.
To learn more about our company and how we can help your businesses embrace these trends and transform your financial reporting practices, schedule a conversation.