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7/26/2002
05:36 PM
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Priority: Integrity

CIOs have a role in protecting companies from financial mismanagement.

Twenty-year CPA Todd Boyle, who works with organizations to develop technology standards for financial reporting, goes a step further: CIOs should join CEOs and CFOs in signing off on financial reports, he says. But not everyone agrees. CIOs don't have responsibility for the integrity of the data, Zebra's Witcherch says. "They're responsible for the integrity of the system."

At the least, CIOs should use their expertise to help business executives provide a richer accounting of their earnings and expenses to investors--and do so more quickly, too, says Jakob Holm, a portfolio manager at Bay Isle Financial LLC. Today, many companies take weeks or months after a quarter's close to issue reports; without sophisticated reporting systems, business managers can spend too much time collecting, analyzing, and reconciling departments' results. "If you have good IT systems, you can issue more information when you release earnings," Holm says. Many companies, such as General Electric and IBM, have increased the amount of data they release to the public.

Some CIOs advocate establishing committees comprised of IT executives and finance managers. That way, the IT department can learn what financial managers need from software and provide updates on new software capabilities that might improve data accuracy.

Such committees would make it easier to spread the word, for instance, about recent upgrades from financial-reporting vendors such as Hyperion and Cognos Inc. that let companies develop rolling budgets, giving them better visibility into their spending trends and revenue streams.

Fossil Inc., a Richardson, Texas, watch and fashion-accessory retailer, has been using Cognos Finance applications for about a year to develop an 18-month rolling profit-and-loss forecast. Starting with this year's March quarter, the financial applications have helped the company provide Wall Street with more accurate quarterly earnings forecasts, finance manager Christopher Lee says.

Software vendors are getting an earful from financial managers about features they'd like. Hyperion customers are asking for expanded "executive dashboard" capabilities that trigger alerts when key indicators--such as day's-sales-outstanding, deferred revenue, and operating expenses--are out of line, chief marketing officer Nazhin Zarghanee says. Increases in capital expenses and depreciation at a time of decreasing operating expenses, for example, mean that cash isn't tracking against capital use, a warning that action may be necessary.

Transparency is key in other ways, too, says Tim Bradley, executive VP of operations at financial software maker Adaytum Inc. Customers want tools that will let them bring real-time financial reporting to all operating levels of their companies, he says.

Ultimately, CIOs must remember that they have a responsibility to shareholders every day, Cendant's Kinder says. They must make sure they're spending wisely on tech projects, financial or otherwise, to help companies meet business goals. "If a company doesn't continually do its due diligence to make sure that the money spent is producing expected results," he says, "that's the greatest form of a lack of integrity."

-- with Rick Whiting

Photo of Larry Kinder by Seth Kushner

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