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6 Best Practices for Record-to-Report Process

6 Best Practices for Record-to-Report Process

6 Best Practices for Record-to-Report Process

Regulatory bodies and analysts expect organizations to review their account books in less than a week and release their earnings statements within a month. Industry specific regulations and the ever increasing Financial reporting has put huge burden on an organization’s reporting process.

Regulations such as Basel II, Basel III, carbon footprint reporting among many others, mandate that organizations disclose additional and complex information in a time bound manner. A research conducted by KPMG has established that around 43% of organizations require at least 11 days to complete their monthly Financial Reporting whereas 20% of them needed more than 15 days. With pressure on organizations from various quarters, the only way this can be achieved is by following the best practices of Record to Report. The key is to adapt the processes to the changing trends in the market and stay one step ahead of your competition. Experienced, responsible and resourceful Finance and Accounting outsourcing experts can provide you the assistance that you need to manage your financial reporting processes.

Challenges Faced in Record-to-Report Service:

Before finalizing data, a lot of researching and correcting issues crop up which have a huge impact on the accuracy of the report. Some of these issues include:

    • Data Posting Errors:

      These can occur due to problems with the feeder systems resulting from them being wrongly setup. The errors can be rectified by changing the data at the source system in compliance with the corporate policy.

    • Errors in Allocation Setup:

      These can occur when dependent data from previous transactions and all consequent transactions are incorrectly created and posted. These must be done accurately and further update of the allocation formulas must be restricted.

    • General Ledger Reconciliation Processes:

      These can turn out to be quite complex and time consuming. There can be problems in establishing the account’s true ownership and responsibility which can lead to GL reconciliation process getting prolonged and complex as unapproved journal entries might be done to sensitive accounts. Using suspense accounting and having the knowledge about the volume of transactions that are affecting these accounts can really help the management in planning the reconciliation and resolving the problem in an efficient manner.

    • General Ledger Consolidation Processes:

      These can lead to unexpected results. Once the initial financial statement is generated, some unusual activity might be highlighted by the consolidation activity.

    • Master Data Maintenance:

      Organizations face complexity and master data errors due to incomplete understanding of the impacts of master data change. Further complications arise when daily transaction processing and master data maintenance are not appropriately segregated.

6 Best Practices for a Successful and Robust Record-to-Report Process:

A survey by KPMG found that more than 50% of the organizations are working hard towards releasing their financial statements within 7 days. To achieve this goal, organizations can implement the best practices within the following Finance and Accounting processes:

  1. General Accounting: 

    General Accounting is the mainstay of any Finance and Accounting process. For financial information to be reliable and accurate, the following best practices can be implemented.

    • Cultivate the usage of standard naming conventions.
    • Standard and non-standard journal entries must be clearly defined.
    • A concrete decision and approval rights must be established.
    • For every account reconciliation and analysis, clear-cut roles and responsibilities must be defined.
  1. Account Reconciliation: 

    A reconciliation process which is efficient and effective can save a lot of time and decrease errors. The best practices which can be followed here include:

    • The process must be automated
    • Unique controls must be implemented that helps in reducing issues and proactively identifies unfamiliar items.
    • Various activities such as reporting, decision support, risk identification and high value analytics must be implemented.
    • Real time monitoring of activities
    • To achieve improvement, an effective plan must be developed and followed dutifully.
  1. Fixed Asset Management: 

    Organizations can save a huge sum on taxes through depreciation deductions by having a comprehensive fixed asset management.

    • For the asset activity and depreciation charges to appear in real-time on the ledger, the process must be automated.
    • The tax requirements of every tax authority must be met by the system.
    • The corporate tax system must be connected through an automatic link.
    • Bar-code scanners must be used to conduct physical inventories at regular interval of time.
  1. End of Month Process Reporting: 

    The following best practices can be implemented for end of month process reporting:

    • A single instance ERP must be used.
    • Process activities must be closed by employing workflow solutions.
    • The contact details of stakeholders, service providers and other relevant parties must be carefully maintained.
    • Accurate reports, both internal and external, along with financial close calendar must be delivered.
  1. Inter company Accounting: 

    For organizations which own subsidiaries in various locations, intercompany accounting becomes extremely crucial as it helps in eliminating errors.

    • The end-to-end process documentation must be maintained in a standardized and simple manner.
    • The reconciliation tool must be automated.
    • The Key Performance Indicators must be established in such a manner that it covers all the involved parties.
    • An escalation process must be developed and adhered to.
    • KPIs and other issues must reviewed regularly by conducting meetings.
  1. Taxation: 

    Filing tax returns on time increases an organization’s credibility in the eyes of the regulating bodies and authorities.

    • Tax planning must be carried out in a strategic manner
    • Latest technology must be utilized.
    • The organization must be aware of every latest tax rules and regulations.

Knowledge and awareness of these best practices for Record-to-Report process would help in more accurate and timely financial reporting for organizations. Taking the help of a Record to Report outsourcing expert would ensure that this process could be managed efficiently, without being diverted away from core business goals.

Also Read Related Articles:

Sl.No Article
1 What is Record to Report (R2R)
2 5 Critical Close and Reporting Process Issues To Watch Out For
3 Benefits of Outsourcing Real-Time Accounting / Financial Reporting

For information on how Invensis Technologies will deliver value to your business through Finance and Accounting Outsourcing Services, please contact our team on US +1-302-261-9036; UK +44-203-411-0183; AUS +61-3-8820-5183; IND +91-80-4115-5233; or write to us at sales {at} invensis {dot} net.

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