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SEC Financial Late-Filings: Better Late Than Never…But Not By Much

I’ve dabbled in the stock market for as long as I can remember. This may be an understatement, since I was actually licensed to sell securities during a period of time (but that’s for another story). Somehow, I encountered the unfortunate position of owning a stock which missed their SEC filing deadline. Then the scarlet letter “E” was affixed to the stock symbol from NASDAQ, and the precipitous decline of the stock price ensued. Since I have been reviewing Fast Close software, I decided to investigate just how widespread this late-filing problem was…and this may come as a shock. At the SEC info website I discovered that 846 late-filing notices had been filed in just one month (Nov 3-Dec 1 ’09). So at least I wasn’t alone in my stock picking mishaps. But let’s look at the bigger picture.

The costs associated with late filings can be quickly added up in terms of lost market capitalization (I have seen 25%+ drops after such announcements), but what about the other costs? Clearly, investor confidence is shattered when a company’s management cannot get the results out the door within the prescribed timeline. How could those fiduciaries left in charge have not seen, nor prepared for, such an occurrence? Then there is the company’s entire ecosystem which comes into play. Customers, suppliers and employees all feel the repercussions, and apprehensions, of the late filing fallout. Is extended credit at risk; should we seek out another supplier; should we look for a more stable company to work for?

I am not trying to dramatize the impact. The SEC has determined manageable timelines for corporate compliance. When a breach occurs, watch out below. However, something can be done. One of the top reasons cited for late-filings has been “Delayed Information”. Maybe some of these late-filing companies could benefit from a 1 hour SAP Accelerated Close session. We help our customers aggregate their period-end financial data in days…not months. Best practice statistics show quarterly closes of 3.8 days, with yearly closes at 5.1 days. I may not always pick the right stock, but I assure you I know how to pick the right Fast Close software.

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  • Thanks for the strategic perspective on mission-critical nature of good financial close practices.  Surprises that more companies don’t ensure that there statutory and management reporting processes maintain a standards of excellence at all times.  SAP customers have a significant advantage (better controls, global consolidated reporting out of the box, etc.) Hope to hear how they are using our solutions to reduce errors, risks of restatement, etc.  Great blog Joe!