In today’s data-driven business landscape, financial reporting and accounting demands are becoming increasingly complex. Especially for companies that are growing, new markets, new product lines and new stakeholders mean there’s a heavy reliance on finance teams to interpret large amounts of information. Finance teams are feeling the squeeze: not only are they navigating a more complex landscape, but the expectation is also for improved financial reporting, too — less errors and better quality. Add to that the need for speed: to stay competitive, financial reporting departments are facing tighter monthly and quarterly timelines.
In spite of the need for better and faster, hurdles inevitably stand in the way of reporting quality. For one, a great number of large companies use multiple reporting systems. In fact, a recent study by EY revealed that more than 65% of large companies have more than five legal entities, and most of them use more than six different reporting systems. Many times the reporting systems used to report these processes do not meet modern reporting requirements. Furthermore, many companies do business abroad and reporting standards may vary across each entity — encompassing a range of standards such as US GAAP, IFS and others.
There’s good news in all of this, though: tougher demands breed more efficient habits. In the past few years, I’ve found that with a few modifications to your existing processes, you can make an enormous impact on the quality of your financial reports. In this blog, I’ve narrowed it down to five relatively simple secrets that speed up the reporting process and create more reliable and accurate reports.
1: For improved financial reporting, scrutinize (and always question) your inputs and outputs.
This is perhaps the single most important step of all, yet it’s often lost in the shuffle. It starts with clearly defining the objectives for your financial reports and determining the desired results. What data is being requested? What will it be used for? And why is it needed? From the start, finance teams should align with report users regularly to clearly understand all desired outputs – and only then can you truly optimize what’s going into your report. For example, is there data that’s being requested on your reporting template that no longer applies? Often times, reporting requirements change and the data that’s requested is no longer valuable (or even looked at). By evaluating your inputs and outputs on a regular, ongoing basis, and aligning that with the constant changes of reporting requirement, you can ensure your reports capture only the necessary, critical information that’s needed for your business.
2: Use simple templates that are common and consistent across all businesses.
In short, the more you can standardize and simplify your reporting template, the better. Let’s say your template is used across 50 different organizations or business departments – well, that means it must be understood and interpreted by 50 different people. Tune up your template to make sure you leave little to no room for interpretation – I’d suggest stripping it down to the basics, ridding it of any perceivable frills (color coding, extraneous instructions, etc), and using just one template across every department or organization.
Also to enforce consistency, add in automated processes wherever necessary. In many cases, this can be done with simple dropdowns to prepopulate data. Follow that up with simple, clear-cut instructions on what you’re asking for from users. For example, your template could take users through a series of dropdowns – they would select the time period (Q1, Q2, etc.), select a business area, and so on. Those selections would then prepopulate additional data, which would be followed up with clear instructions, such as, “If variance is greater than 10 percent, please explain the main drivers. If variance is less than 10 percent, leave blank.” This creates a data flow that is clear, consistent and easily interpretable. It also reduces any extraneous inputs that are not beneficial to the business.
3: Consolidate information in a way that is easily accessible to everyone.
Finance departments may get dozens of spreadsheets from different departments, and also be tasked with reporting on big data. After that, it’s important that all of them are consolidated into one master report. During this consolidation, be mindful of how your information is organized – the more commonalities, the better. (For example, are there common key drivers across all departments?)
Ultimately, you want to organize your information into ONE master location/file that is easily accessible by multiple users and departments. In many cases, an enormous amount of time is spent by users trying to access the master report and find what they need – so the less manual you can make this process for users, the better. Being aware of this during its creation will save an enormous amount of time for your organization and for those who need to regularly access the reports. For this, you can implement shortcuts like macros, formulas and other workbook functions (using Microsoft Pivot, for example). Additionally, reporting tools, such as XLReporter, can provide useful functions to improve data accessibility – so if an input changes at the last minute, a user can simply hit “refresh” and the entire spreadsheet will automatically update.
4: Sync up your organization’s financial functions.
Many organizations have separate teams assigned to different financial functions: namely financial planning and analyses (FP&A) and financial reporting. While those teams serve separate, critical purposes, internal departments (such as marketing) are still be required to provide different sets of information to each team — a process that is not only inefficient, but frustrating.
To avoid this, you’ll need to increase collaboration among your finance teams to synch up on the data that’s being collected. Evaluate and share with them to identify redundancies and overlaps, then implement new ways to streamline your processes, whether through team meetings, increased communications, synching up timelines, involving managers or executives, and so on. This collaboration requires ongoing effort (and ideally, someone to champion that effort) — but it’s vital in helping to reduce duplicative requests and internal frustration.
5: Create a formal, auditable workflow.
When collecting data to produce your financial reports, it’s best to have a systematic review process in place. Naturally, when multiple users enter data into a spreadsheet, mistakes are made. By integrating a step-by-step, auditable process, where information is reviewed and signed off on by managers, employees are more accountable for the data they’re providing. Not only that, but you have more eyes on your data to catch mistakes. This is especially important today, as the SEC accelerated its filing deadlines for 10Q and 10K reports and at the same time, revelations of corporate financial irregularities have prompted investors and analysts to scrutinize financial information more aggressively and penalize companies that delay or restate earnings. A formal sign-off process (which can be automated through some type of project-management tool or software solution) can have a huge impact on data accuracy, and thus, the quality of your financial reports.
Need more help with improved financial reporting?
All in all, you don’t need to spend millions for improved financial reporting. Simple changes here and there really make a huge difference – and most of the time, this is done by evaluating the processes you already have in place and refining them. (I will note, however, that along with these 5 simple suggestions, it’s also critical to evaluate your technological systems to make sure they are equipped to keep up with reporting requirements that change over time.) Remember, if you need help optimizing your process and getting your financial reports on the fast track to better quality, please don’t hesitate to contact 8020 Consulting at (855) 367 8020.
About the Author
Irene Verdiyan has over 10 years of finance and accounting experience in the entertainment industry. She began her career at New Line Cinema in the finance group. Following she joined G4 Media and transitioned to Comcast Entertainment Group. Prior to joining 8020 Consulting, she held a Finance Manager position at NBCUniversal. Her expertise includes FP&A, budgeting and forecasting, month-end close, reporting and corporate consolidation. She is a Northern California native, however spent 10 years living in Los Angeles. Irene holds a Bachelors of Business Administration degree in Corporate Finance and Business Analysis.
Categorized in: Financial Reporting and Accounting