Financial reporting, whether for internal or external consumption, has always posed a significant challenge and incurred substantial costs for finance teams. However, it remains a vital process.
Data insights found in financial reports may have an impact on the value chain and corporate objectives. Less than 1% of unstructured data is ever evaluated or taken into consideration, whereas 50% or less of the latent insight potential of structured data is utilised for decision-making, according to HBR. However, structured data can offer a wealth of useful information for businesses.
Finance teams continue to be a crucial part of the wider business mechanism. They lead the way in reporting, strategic planning, and decision-making. It's important CFOs and Finance Directors have a strong understanding of the data they possess. They must monitor the company's financial health over time, helping to shape its future direction.
4 Tips for improving the financial reporting process
With financial data on hand, the in-depth understanding of your company's performance and ability to compile reports that will aid in forecasting. However, if certain best practices aren't in place, financial reporting may unravel as more data is collected.
Here are some tips you can use to improve this process:
Standardise information collection
To make sure that there is accurate data management and processes simplified, a lot hinges on having data standards which are consistent across the board. One version of truth can be achieved by standardising data format, storage and access.
First, ensure all datasets follow a common structure facilitating their classification and retrieval. This encompasses clearly defined data fields as well as storage protocols capable of handling various types of information without interrupting the process of collecting.
For example, financial information should be stored uniformly in a central database where income statements, balance sheets and other records have standardised formats. In this manner, revenues, expenses, net income, assets, liabilities and equity are arranged in identical fashions through all entries.
Automating data reconciliation and report generation
Automation of time-consuming tasks helps significantly in human error reduction, particularly in financial sectors. With the right tools, data reconciliation and report generation become easier and more reliable.
Through the use of proper tools, a team can see all its financial information from one place thereby eliminating the need for manual data entry and reducing chances of mistakes. Seamless grouping of data into different buckets is made possible by automated systems to ensure that all relevant information is organised properly.
Regular supervision also ensures that automated processes deliver utmost benefits through adjustments; efficiency and accuracy remain intact. In short, automating data reconciliation and report generation has two key implications: reducing human error significantly and bettering productivity plus decision making too.
Accountability in data processing
The team’s financial data should be collected and monitored regularly to ensure accuracy and maintain standards. By establishing regular periods for the collection of information, you can create an environment where accountability is improved thus improving the credibility and integrity of data received.
Get your team into a habit of frequently checking major financial indicators like revenues, expenses, cash flow, as well as budgets. This should be done out of routine rather than occasionally or when circumstances demand it. Regular gathering of data ensures that all are involved in keeping financial records that are both accurate and current.
Focus on accuracy
Ensure that all financial data is accurate and up-to-date. This helps prevent errors and ensures that decisions are based on reliable information. To ensure accuracy in financial reporting, there are several steps you can take:
- Make sure that your data comes from trustworthy and verified sources, such as audited financial statements and accurate financial reports.
- Implement internal controls such as review processes, job segregation, and fraud prevention mechanisms to preserve data accuracy.
- Check your data against other sources and run consistency checks to verify its integrity and accuracy.
- Utilise automation tools like accounting software and data visualisation tools to reduce human errors and improve accuracy.
- Train your team on the importance of correct financial reporting and provide them with the needed tools and resources.
What are the benefits of improving financial reporting?
Here are some key advantages gained from enhancing the reporting process within your finance team:
- Better decision-making: Quality financial reports provide valuable insights into a business's health. These reports can guide important decisions, such as investments or expansions. For example, if a report shows a consistent increase in profit, a company might decide to grow its operations.
- More financial control: Financial transparency helps businesses to better react to their income and expenses. This information can highlight areas where costs could be reduced, leading to a healthier bottom line. An example would be identifying excessive spending on office supplies and subsequently counteracting this.
- Improved compliance: Accurate financial reporting ensures that businesses comply with regulatory standards and avoid potential penalties. For instance, public companies are required to follow strict reporting guidelines.
- Efficient planning and forecasting: With detailed financial reports, companies can better predict future trends and make plans accordingly. For instance, a retail business might forecast higher sales during the holiday season based on previous financial reports and manage their inventory accordingly.
What is clarity in finance reporting?
Financial clarity means having a clear picture of incomings, outgoings, debt, and assets. It enables organisations to have better self-awareness, plan for the future, set goals, and achieve greater financial control/stability.
When there is financial clarity, businesses can make well-informed decisions on how best to allocate its , how conservative/bold to be with its investments.
This is why, for organisations with multiple revenue streams, the best way to gain clarity is to organise and collect everything in one place. Depending on how the business is run, this could include money from sales, services, interest, and investments. It gives a clear picture about company’s profitability and gives clear idea about significant changes.
The finance function is often at the centre of any major strategic move. This is why there can be no room for error in their reporting as their figures paint a picture of ongoing results and trends.
Metrics to measure for clarity in financial reporting
Businesses should monitor agreed upon metrics/KPIs (key performance indicators) on a recurring basis. Financial reports are built around three initial statements:
- Income statement
- Balance sheet
- Cash flow statement
These statements feed into various facets of your company, including tax filings, creditor reports, regulatory reporting, internal reporting, and strategy. However, maintaining the balance between operational, managerial, and financial reporting can be a daunting task.
Key metrics such as gross profit margin, net profit margin, return on investment (ROI), cash flow ratio, and debt-to-equity ratio offer valuable insights into your profitability, liquidity, risk, and efficiency.
Cloud accounting tools also enable real-time tracking of your organisation's health, offering insights into how well you're aligning with your business strategies and values. Automation further streamlines the financial reporting process, reducing the potential for errors.
Achieving financial clarity is vital for any business aiming to thrive amidst the rising UK business failure rate. Regardless of your company’s size, leveraging the right finance reporting tools will be crucial for understanding your numbers in real-time and fulfilling your overarching ambitions.
How to meet finance reporting standards
In order to maintain full financial transparency, you must comprehend what the numbers mean for compliance with the finance reporting standards. Looking at your numbers alone is not enough; you should adjust your business strategy and decisions where necessary as well.
To run a successful and productive finance team, department communication is a must in order to fulfil their roles of transforming complex financial data into easily understood information that guides the organisation through the stormy waters of fast changing economies and markets by mitigating risks beforehand.
Unlike traditional accounting software, Cloud technology goes a step further in financial reporting by providing real-time access to data that can be automated and presented in customisable reports at a mere click of a button.
You don’t have to keep tracking expenses or processing receipts when having real time access to your data. It just means that you can watch your business performance online as it happens through this information availability at any moment.
These powerful Cloud accounting software tools eliminate human error in reporting and simplify invoice and receipt processing, expense tracking facilities to spot any unnecessary subscriptions and reliable business forecasts to help obtain cash for development. These benefits allow for accurate decision-making and ultimately provide you more time to focus on high-value tasks.
What are finance reporting tools?
Financial reporting software is technology used to assist finance teams with the monitoring of their accounting and financial management activities. Automation in financial reporting increases productivity removing the need for manual consolidation thus saving employee’s time.
Financial reports are essential for giving key stakeholders the information they need to move forward. This type of reporting is heavily regulated; therefore data accuracy is crucial. Accuracy is one of the many benefits brought about by automated reporting technology.
Here are some of the other notable benefits garnered from using sophisticated financial reporting tools:
- Efficiency: These tools can pull data from various sources, consolidate it, and generate reports, all with just a few clicks.
- Real-time reporting: Many financial reporting tools offer real-time reporting capabilities. This means you can have up-to-the-minute information about your financial status.
- Accessibility: With Cloud-based financial tools, you can access your financial data from anywhere, anytime. All you need is an internet connection. This is particularly beneficial for businesses with multiple locations or remote teams.
- Security: Cloud systems are more secure and equipped to protect your sensitive financial data.
Choosing your finance reporting tools
Financial reports have to be accurate and completed in line with generally accepted accounting principles for the information they contain to be deemed dependable.
By merging the ease of automation with the potency of artificial intelligence, finance reporting solutions can streamline this procedure.
When choosing your financial reporting tools, here are some factors to consider:
- Ease of use: Look for a tool that has an intuitive interface and does not require extensive training to use.
- Integration: The tool should seamlessly integrate with your existing systems to aggregate data efficiently.
- Customisation: A good tool allows for customisation to cater to your specific business needs.
- Scalability: Ensure the tool can handle increased data volume as your business grows.
How Financials can help you achieve clarity in financial reporting
At OneAdvanced, we understand that finance teams need to translate complex financial data into consumable information to help navigate changing economies and markets and minimise risk. Our financial management software provides finance leaders with one accessible view of their business performance, anywhere, anytime, on a single accounting solution.
Powerful financial reporting meets clarity in numbers of thanks to the core financial management system with functionality built for the future. It enables organisations to manage their multiple business units and view data from across the company, with legislative capabilities.