South African enterprises are in the midst of a significant transformation, accelerated by the Covid-19 pandemic and the ongoing digitalisation of services and processes.

By Bulela Mgobozi, finance business lead at Syspro EMEA

Given the key role digitisation has had on the way organisations conduct their electronic transactions and financial reporting, the role of the chief financial officer (CFO) role in ensuring compliance and good governance has never been more important.

In the past, the role of the CFO has been about ensuring accounting and reporting of past activities and booking transactions appropriately. Today, the role of a CFO covers several areas and responsibilities, from financial information and reporting to controlling costs, reporting on efficiency and performance and most importantly, compliance.

Listed entities have a further requirement from the Johannesburg Stock Exchange (JSE). This is a result of the introduction of paragraph 3.84 (k) of the JSE Listing requirements in December 2019, effective for issuers with a year end on or after 31 December 2020.

At the crux of this new listing requirement is for the CEO and CFO/FD to attest on a prescribed statement on the effectiveness of financial control over financial reporting period.

The CEO and the CFO/FD must make a positive statement, under their names and signatures, in the annual report, that obligations relating to the internal control environment have been met.

Every day, thousands of business transactions are processed, highlighting the growing importance of internal financial controls within an organisation. Fraud and economic crime rates remain at record highs, impacting companies in more diverse ways than ever before. PwC’s Global Economic Crime and Fraud Survey highlights that for enterprises, fighting fraud is becoming a core business issue, largely due to the scale and impact of fraud in today’s digitally enabled world.

Non-compliance with regulations, fraud and inefficiencies are just some of the challenges that CFOs, financial directors, and procurement teams face. Detecting fraud amid vast amounts of data and processes supported by most enterprises can be challenging.

Alarmingly, 77% of South African organisations have been victims of economic crime and fraud in the past 2 years, with 49% of incidents perpetrated by internal employees.

CFOs and financial managers within South Africa are faced with a diverse and challenging operating environment. So, how can they better prevent and identify fraud within their organisation and what technologies can assist them?


Technology bringing financial control to CFOs

As opportunities for fraudulent activities have evolved with new digital processes, so has the technology to detect and prevent them. Innovations such as artificial intelligence (AI), robotic process automation (RPA), and blockchain have all been seen as tools that can and will assist in identifying fraud in various ways.

In the past, a financial transaction had multiple hand-off points that could result in failed transactions making real-time transaction reporting nearly impossible. However, with an Application Programming Interface (API), technology applications such as Syspro 8 can integrate directly into the bank’s processing system. This allows transactions to be processed in real-time rather than duplicated across various business channels such as procurement and finance.

Absa’s research has shown that direct integration of payments into an ERP reduces time spent on banking by 80% over online banking channels. Organisations that are uploading batches of payment files into online banking systems can reduce the opportunities for employees to manipulate beneficiary and payment instructions, thus preventing internal fraud.

With the addition of the SmartPay process, organisations further strengthen their financial controls, providing users with real-time access to payment, statement, and account verification services.


The future of financial processes

Both public and private sector organisations have large budgets to manage, and it is important to operate efficiently, effectively, and most importantly ethically. The financial costs of fraud and inefficient processes are obvious and can be easily measured, however, the reputational damage can be the greatest cost to an organisation. Accusations of budget inefficiencies or wasteful spending decrease confidence within any business, which only makes it more important to ensure resources are used in appropriate and compliant ways.

Technology has shown its ability to simplify business processes that are normally cumbersome and people-intensive, which is why organisations must embrace these technological innovations. Corporate boards expect their CFOs to be more analytical, strategic and have broader insights about the future of the organisation. Therefore, the tools CFOs need should enable them to connect to data sources across the organisation and generate dashboards of actionable insights, with the ability to drill down into key performance indicators.

Companies have increasingly implemented ERP systems to achieve greater process effectiveness and efficiencies and have the availability and use of information to make decisions. An ERP application is the foundation of the operations of a business, and with API and reliable financial controls, organisations can prevent internal irregularities, fraud, and other risks to their organisation.