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Four key ways XBRL can improve your business

DataThe XBRL debate rages on ...

A recent report from Financial Executives International's Committee on Corporate Reporting claims that preparers of financial statements are seeing "no improvements at this time in our internal processes as a result of creating and providing tagged information" via XBRL.

Take some time to clear the initial XBRL implementation hurdles, though, and preparers will soon see plenty of benefits. So says Mike Willis, a partner with PricewaterhouseCoopers and the founding chairman of XBRL International.

Many people see XBRL as an external reporting activity, "when it’s actually designed to solve pervasive process problems," Willis said shortly after the FEI report was made public. "If they agree it’s useful to investors, then they should also agree that it’s useful to CFOs, because CFOs are investors in their own business units."

Willis points to four internal process problems in particular that will benefit from XBRL:

  • Integrating internal systems: XBRL's standardization of business information increases the efficiency of processing that information across internal systems.
  • Assembling and reviewing reports, a largely manual process that can be streamlined by standardizing information via XBRL.
  • Improving data quality.
  • Standardizing information contained in spreadsheets and automating the manual processes of maintaining those spreadsheets.

Willis likes to compare XBRL to the Universal Product Code symbol, more commonly known as the bar code. Viewed with skepticism when it was introduced in the mid-1960s, the bar code is a form of standardization that improves processes for retailers and saves them huge amounts of money. XBRL will do the same thing for companies, Willis says. And the earlier in the reporting process XBRL is applied, the greater the benefits.

"Just like with the bar code, there are economic incentives for moving this structuring of information from the end of the supply chain to earlier locations in the supply chain," Willis said in this MACPA podcast. "When bar codes were first introduced, they were applied by inventory clerks in retail grocery stores. It didn't take the grocery store managers long to figure out that the earlier in the supply chain the bar codes can be applied, the more the business processes could (benefit) from that standardization of information.

"The same thing applies with XBRL," Willis continued. "I think initially, many companies will apply it to their reports at the end of the supply chain, but I think they'll very quickly begin to push it back to their report writers and even the lower-level ERP systems, which will allow many of their business processes to become more automated, more cost-effective and more transparent, and probably produce higher-quality information. That's really how you can apply it, not only to financial statements, but to any kind of information or report that management is trying to generate, either for their own use or for external stakeholder use."

What are your impressions of XBRL so far?

Learn more at the Expo
Willis will discuss XBRL in detail during a session at the first-ever Maryland Business and Accounting Expo, slated for June 17-18 at the Baltimore Convention Center. Get details about the Expo here, then pre-register here.


Bill Sheridan