Your guide to buying an SEC Compliance Software - a 7 point checklist

by Anuradha | August 10, 2018

 

Your-guide-to-buying-an-SEC-Compliance-Software-7-point-checklist

Out of the many things a CFO is responsible for, complying with the SEC tops the list. Being one of the most important yearly tasks, it directly comes under the purview of the CFO and compliance teams.

The overall SEC reporting process is a very time bound activity with strict deadlines to be met for filing; therefore it is important that the process right from document preparation until filing is done in an efficient manner. One can imagine the complexities of a financial report preparation- many disclosures and many numbers that need to be accurately reported. Out of the numerous complexities and challenges in the overall filing, the SEC compliance process can be a huge deal breaker in terms of time and cost.

To make the job easier, companies invest in a software to assist with their AFS as well as SEC compliance filing in the XBRL format. Apart from pricing, here are a few must haves that a CFO should consider to make a software buying decision.

   1. iXBRL ready product

In early 2016, the SEC had announced a voluntary filing program encouraging companies to file in the iXBRL standard. From a company’s perspective, it is very important for the compliance team to know if their existing process is equipped for the upcoming iXBRL mandate.

Towards the end of June 2018, the US SEC mandated to make Inline XBRL (iXBRL) as the official format for digital financial reporting. This will replace the dual formats of XBRL and EDGAR HTML and will henceforth be the single format that companies will need to file with.

Being one single format, iXBRL brings in efficiencies in the review process since filers need to review only one document, considerably saving time and cost.

  

 

   2. A Cloud-based, Collaborative, Single Source platform

With the reporting process itself being so lengthy, there may be one or many authors to the financial report but many stake holders who review and provide their comments. There may also be a lot of back and forth and revisions before the document reaches a final stage. Added to this, updates would need to flow through HTML, XBRL and any other output file. One can imagine the amount of time it would take for one change to reflect suitably in different output files.

Having a cloud-based platform solves many of these problems. Multiple members can work on the document; even if a single user is working, it would support assistance in the form of XBRL tagging so that there is just one document in place which guarantees visibility and control over the document.

It would be a good idea to always check if the software that you want to look for has a single-source feature i.e. make updates at one place for all the respective output files having the latest content flowing in seamlessly without any issue.

   3. Spreadsheet and Linking Feature

It all traditionally started with each number in the document being keyed in. Not only was this time consuming but highly erroneous too. There was no way to even identify the mistake. A simple example could be totaling errors which can be present in a financial report when a number reported does not add up correctly. Having a spreadsheet utility in the document authoring platform is a huge time saver wherein-
 
  •     Numbers can be keyed-in the spreadsheet which would reflect in the document
  •     The use of formulae to make sure totals are correct
  •     There could also be checks added in the spreadsheet to make sure the numbers are also ticked and tied (e.g.: The value of assets minus liabilities should always be 0). 
  •     The use of the cross tab/cross cell formula to make sure that the number reported at one place is also reported correctly in another part of the document 

   4. Product Support and Customer Service

Even when the product scores a 10/10 on every parameter such as UI/UX, ease of use etc.; it is very important that the product support and customer service is equally good too.

Most product companies today try to introduce a ‘Do It Yourself’ model. With complexities like filing with the SEC and setting up a document each quarter, the need of having a good team of product support and customer service can be of utmost importance. Hence it is imperative before signing up with any product/service provider you check-

  •     If the product support and customer service comes as a part of the overall offering or if you need to pay additionally
  •     How does the support mechanism work – what entails as a part of support
  •     Are there any limits, restrictions on support timing, staffing etc.


   5. Roll forward feature

Creating a financial report each quarter is no easy task- especially when you have two documents- HTML and XBRL; both to be submitted on the very same day. A huge time saver would be to have a roll forward feature where the document can be automatically rolled forward for the next reporting period along with updating dates both in the document and in XBRL too. How easy would it be to just change dates of a June report to September within just few minutes!


   6. Review and Commenting

A cloud based solution has the advantage of having one document on the cloud but the overall review and sign-off process is better managed than any other process that is prevalent today. The main things to look for in the review process are the following.

Document Review:

  •     Ability to review the document from the platform itself and raise comments/change requests from the platform for other users such as the support team
  •     Ability to track what has been reviewed and what is pending to be reviewed so that the ones that need immediate attention can be flagged.
  •     Ability to create versions of the document on the platform and compare different versions
  •     Ability to generate quality output files in a timely manner

XBRL Review:

  •     Ability to review tags
  •     Ability Run XBRL validations
  •     Ability to generate SEC Previewer- this would actually show how the XBRL looks like when filed with the SEC


   7. SEC updates and market needs:

Apart from many other updates, the SEC does a yearly revision of its US-GAAP taxonomy. It only allows the latest version of the taxonomy to be used, but recommends companies that comply with the same. It is always important to know and understand how quickly your SEC compliance software is updated to meet with the latest revisions and requirements aligned with the SEC and how it is ahead compared to other products in the market.

Another significant introduction by the SEC is the In-Line XBRL (i-XBRL) which was announced in June 2016. IRIS CARBON® already caters to the UK and Ireland markets where iXBRL is the mode of filing and therefore it will be very easy to update the platform with the US-SEC requirements.

We believe this 7 point check list will be useful if you consider changing your software. From our experience handling customers who have signed-up with IRIS CARBON®, these have been some major aspects that clients experienced.

If you think you might be interested in knowing more about IRIS CARBON®, feel free to write to mailto:anuradha.rk@irisbusiness.com