Q.Why do Investors and creditors need to know the state of their investment - where their money went and where it is currently and of course, how it is doing?
A. For any investor, knowing the state of your investment and the resulting growth is critical. When investing in a company, the financial health is of major importance to investors as they rely on accurate financial information to ensure everything is done above board and the information provided can be trusted.
This is one of the reasons for driving a global standard for financial reporting - International Financial Reporting Standards (IFRS). Having a global standard allows investors easily understand and interpret financial results, as well as compare performance to a variety of companies. Up to now countries have had their own version of generally accepted accounting principles, also known as GAAP. This therefore, allows firms to report their financial statements in accordance to the GAAP that applies to their region. For an investor this complicates it as they have to understand each standard. How can corporations be compared based upon their financials? As a result, the creation of a global reporting standard makes sense. As such, IFRS was developed and supported by the International Accounting Standards Board (IASB) which dictates how certain transactions and events should be reported in financial statements, based upon principles. In line with this, IFRS has been adopted by several African countries to date over the last few years.
As we live in a global village, this enables investors in - for example Germany – who have adopted IFRS as a single financial standard – can look at financial statements for a company in Nairobi and understand it due to the standardisation of annual financial statements according to IFRS. Investors and creditors need to know the state of their investment, indentify future growth areas and of course mitigate risks. Having solid financial reporting ensures shareholder confidence, which in itself can also have positive repercussions in terms of drawing in additional funding and investment, which also can spill into raising the company’s profile and transparency. Having a sound financial reporting process also allows for continuous updates and regular monitoring – which of course not only ensures an accurate view, but makes accurate decision making possible.
Q. Are there any economic benefits to reliable stats and accurate financial reporting?
A. Accurate social and economic stats including growth rate is crucial information for making the right long term decisions as to whether to invest or not in a company. Similarly to IFRS, International Public Sector Accounting Standards (IPSAS) are issued by the IPSAS Board for use by public sector entities around the world in the preparation of financial statements. The recent financial crisis revealed substantial shortcomings in public sector financial reporting practices, and therefore emphasised the need for comprehensive, reliable, and timely financial reporting by governments. As such, establishing and disseminating high quality accounting standards for the public sector are critical to help bring about the towards greater fiscal transparency.
Q. It is one thing to have good reporting but another to have accurate reporting. In 2010, for example, Ghana's statistical service announced it was revising its GDP estimates upwards by over 60%, suggesting that in the previous estimates about US$13bn worth's of economic activity had been missed. As a result, Ghana was suddenly upgraded from a low to lower-middle-income country. How could the country be among the poorest in the world one day, and find itself amongst aspiring middle income countries the next? What does your company do to curb the ‘doctoring’ of statistics?
A. This is also predominantly not our space. However, Government should invest in tools to ensure compliance and accuracy where they are able to attain reliable reporting and high quality standards that ensure correct and ethical reporting and disclosure. In a way IFRS protects companies and firms from financial crisis – as such, following guidelines and rules allows companies to be aware of their financial standings and prevent the business from going into a financial dilemma overnight – and the same process and outline should be applied not only from a private company perspective, but certainly from a public sector space
Q. What technologies/solutions are available to manage the business finances – providing full real time analysis and forecasts on financials?
A. In order to focus on driving business strategy, business require financial solutions that provide full real time analysis and forecasts on financials that can be integrated with any accounting system and can easily produce a complete management pack.. And while certainly there are a few of these on the market, when considering the various options, businesses should be looking at a platform that can provide:
•A monthly management report pack including an income statement, balance sheet and cash flow statement compared against budget for the month, quarter and year as well as prior year is ideal. This is important if you want a real view of how your business is growing – and make strategic decisions based on accurate data
•Reports providing you with a 12-month trend analysis will not only give you a holistic view of your profit and loss over a period, but will give you additional insight like sales or expense trends and how these trends are affecting your profit. This will allow you to plan better for the coming year.
•We all know cash is king, so a cash flow forecast is key to managing and planning for this essential aspect
Moreover, it is crucial that these technologies/solutions integrate your reporting standards and comply with the various reporting standards accordingly.
Q. What is the importance of risk management and compliance with various legislations and regulations to drive ethical growth?
A. There is a growing need/trend where African countries are slowly following global financial reporting standards to aid in the ethical business standards and compliance regulations. Compliance is critical as it drives the right rules and provides a basis for establishing outcomes of reviews according to a classification. Additionally, owing to subjectivity and the drive to meet intended objectives, international best practices - financial management and compliance - play a vital role in ethical and accurate reporting to ensure everything is done above board and the information provided can be trusted.
Q. What does CaseWare do with SMEs?
A. CaseWare software is used by auditing firms who provide backbone audit and accounting support and business advisory to SMEs to guide their business growth strategy and ensure they comply with their related standards. As such, this guidance ensures that they are able to drive the right behaviour at the source and make adjustments to strategies accordingly. Furthermore, CaseWare has also created solutions for SMEs to help them manage their business finances more easily.
Q. Which SMEs have you worked with in Africa? In which areas specifically?
A. CaseWare have been working with several SME auditing firms across Kenya, Zambia and Botswana, where they too handle the auditing practise for fellow SMEs.
Q. What are the rates of your services and goods? Can African SMEs afford the cost?
A. CaseWare is specifically designed to assist auditing and accounting firms with all aspects of an accounting practice. As such, though it is an affordable investment users do receive a good return on investment as the solution pays for itself where clients are able to complete auditing and financial reporting processes in less time and ensure compliance, and from an auditor perspective this means that the integrity of work is at a high standard and given the efficiency they have the capacity to take on additional clients – which drives business growth.
Q. Your products promote a completely paperless environment, allowing accountants and auditors worldwide to conduct engagements entirely onscreen, with no need for hard copies of anything. How does this work in rural areas where there is a challenge of electricity?
A. Yes, it’s important we offer the right solution to a client’s needs. In Africa where we often experience low internet connectivity this too can pose potential concerns to clients. However, it is for this reason we created a hybrid solution where CaseWare offers both an online and offline solution that caters to the accountants’ specific requirements. In this way, if they don’t have access to internet they are able to complete their engagements with the specially formatted software solution that suits their requirements, and once they are able to connect again they are able to upload the necessary files and changes.
Q. Standards vary from region to region - what in your view are international standards? How do you harmonize your operations with various regional requirements?
A. Yes, though more African countries are adopting IFRS as a reporting standard to ensure common global language in line with business. Initially this was only applicable to financial institutions and listed companies, however it’s becoming more prevalent in business affairs as these common standards ensure that a company’s accounts are understandable and importantly equivalent across international boundaries. Moreover, international standards are critical when companies join into a trade agreement as this brings technological, economic and societal benefits. It aids to harmonize specifications of products and services making industry more efficient and breaking down potential barriers for international trade – as there is a set understanding of the financials and standing for trade and investment opportunities.
Q. In which other countries does CaseWare operate?
A. CaseWare is used globally in over 130 countries. In Africa CaseWare currently operates in all English speaking countries across Africa that comply with IFRS and IPSAS regulations.