Avoiding Common Data Integrity Issues and Challenges in Finance Teams

In the previous chapter, we learned that financial data integrity management is critical for every organization trying to make data-driven financial decisions and avoid regulatory issues and penalties. That being said, for a finance and data professional, it is important to have the skills to be able to detect and address data integrity issues before they become critical—and even to prevent these issues in the future.

In this chapter, we will build on top of the concepts discussed in the first chapter and cover the following topics to help us avoid common data integrity issues and challenges in finance teams:

• Detecting manual data encoding issues in financial teams
• Avoiding common reconciliation errors and mistakes in finance teams
• Preventing balance sheet data integrity issues
• Handling data corruption and financial transaction data integrity issues in internal systems and databases
...

Detecting manual data encoding issues in finance teams

Despite the advancement of automation tools and systems in these past few years, manual encoding errors and mistakes are still prevalent in finance teams and industries globally. Encoding issues and errors affect the reliability and trustworthiness of the data, making the reports generated using this data unfit for use in business decisions. Thus, it is important that these issues are detected early on to prevent this from happening. Here are some of the suggestions and recommendations to help solve these issues.

Utilizing available tools to check for data integrity issues in encoded data

To manage manual encoding data integrity issues, it is important that the collected data is checked and validated using available tools before it is used. This will ensure the accuracy and completeness of the data before it is analyzed or processed. These checks confirm that the data entries use the correct data type or format. At the same...

Avoiding common reconciliation errors and mistakes in finance teams

A number of problems could arise throughout the account reconciliation and accounting process that would influence the integrity of financial data. Let’s dive deeper into the common reconciliation errors.

Understanding common reconciliation errors

Some of the most prevalent problems in the area of reconciliation include those discussed in the following subsections. Afterward, we’ll discuss how to avoid and prevent these issues.

Unrecorded transactions

Transactions that are not documented in the financial records may cause discrepancies between the financial records and the supporting documents. Simply put, it is essential to ensure that all transactions are appropriately recorded and documented to prevent this type of issue.

For example, a cash sale in a restaurant might not be recorded due to the rush of evening sales when the store is about to close for the day. Another example would...

Preventing balance sheet data integrity issues

In Chapter 1, Recognizing the Importance of Data Integrity in Finance, we learned that the balance sheet is one of the major financial reports that businesses and organizations prepare in addition to the statement of profit and loss and the statement of cash flows. These provide information that stakeholders and decision-makers need to understand the company’s financial position, how a company generates revenues and earns income, and the way the company utilizes its cash in operating its business.

By going through these financial statements, you will be able to familiarize yourself with the business and how it is doing. These reports provide a certain level of information needed to understand the numbers, generate the ratios, and review the indicators that convey how the business is operating. Moreover, this will help you make decisions on which financial and operational levers to pull to improve various aspects of the business...

Handling data corruption and financial transaction data integrity issues in internal systems and databases

System-level data integrity and data corruption bugs can result in a wide range of issues, both minor and severe. A system failure or corrupted file may cause operational delays, decreased productivity, and missed deadlines. Additionally, such incidents may result in violations of data privacy laws and regulations, leading to costly fines and harm to a company’s reputation. Furthermore, errors in application development, such as improper data validation or input, may lead to unnoticed data integrity issues, which may cause inaccurate financial reporting, compromised decision-making, and potential legal consequences. Therefore, safeguarding data integrity must be a top priority for businesses, and strategies should be established to prevent and mitigate the risks of data corruption and related issues.

Note

Let’s talk about a popular example of how system-level...

Summary

In this chapter, we discussed the importance of data integrity as a critical foundation for every organization making financial data-driven decisions. We learned how to detect manual data encoding errors by implementing data validation, conducting data audits, and performing timely account reconciliations. Next, we covered the most common account reconciliation problems and how to avoid them using known procedures and available tools. We also discussed how to prevent balance sheet data integrity issues since the balance sheet is one of the major financial reports that businesses prepare and that stakeholders use when making decisions. Toward the last half of the chapter, we covered how to handle data corruption and data integrity issues in systems and databases using various strategies and solutions.

This chapter gave a comprehensive overview of the complex challenges and issues of various companies and how to address and mitigate them. In the next chapter, we will dive...

Further reading

For more information on the topics covered in this chapter, feel free to check out the following resources:

• Cybersecurity: Another hat for the modern CFO to wear?:

  https://cfomagazine.com.au/cybersecurity-another-hat-for-the-modern-cfo-to-wear/

• BDO and AusCERT Cyber Security Survey Report 2021:

  https://www.bdo.com.au/en-au/services/advisory/risk-advisory-services/cyber-security/cyber-security-survey-reports