What is VFI?
VFI stands for Verified Financial Intelligence.
Professional services (accountants, lawyers, engineers, doctors and other professionals) account for over $1 Trillion per year of the US economy. Accounting professional service fees add up to over $100 Billion of the $1 Trillion. The product or service that CPAs deliver is very simple, it’s an opinion about financial records. How they create that opinion and the professional standards they are held to are not so simple and involve strict procedures and guidelines above and beyond how CFOs, controllers, and accounting staffs manage accounting for a business operation.
VFI is a category of data that meets the strict professional standards used by CPAs to form opinions about financial activity. VFI is used by opinion and decision makers that require an objective, independent point of view on financial activity. To be considered VFI data, each of these 3 criteria (discussed in detail below) must be met:
- Independently sourced
- 3rd-party verified
- Documented chain of custody
The managers of a business operation are always motivated to show financial performance in the best possible light as to maximize valuation. This of course is in direct conflict to potential acquirers or new investors that want the best possible deal. So how do investors, potential acquirers, and board members establish confidence in management data? They hire auditors as an independent outsider free of any motivation to influence the outcome, other than ensuring accuracy of information. A fundamental requirement to maintain an objective point of view is independently sourcing the information to ensure no one has had an opportunity to alter the data. But how do you know that independently sourced data is accurate in the first place?
At the core of VFI, is the need to verify accuracy. Any independent, objective point of view has to verify data using 3rd-party verified evidence. The most common source of this for financial activity is banking records. As the 3rd party, financial institutions ensure banking records are accurate to the penny. Evidence like this is compared to management supplied data to ensure 100% accuracy. Other type of 3rd-party verified evidence includes but is not limited to blockchain journals, credit reports, and legal filings.
Documented Chain of Custody
The highest data standards that exist are established by the court of law or simply stated, can the data withstand cross-examination in a court of law? In addition to independently-sourced and 3rd party verified, to withstand cross-examination, you must document and prove “chain of custody”. This is a record of where did the evidence originally come from, who has had access to the evidence and have any changes been made. If these records don’t exist or can’t be provided, testimony that relies on that information can be thrown out.
The more rigorous data standards of which professional accountants are held too make it more difficult to innovate and use existing off the shelf software solutions. VALID8 not only considers these data standards but has built an analytics and automation platform using them as core system requirements.