Never underestimate the importance of accurate financial reporting. As well as making a business look bad to investors and other key stakeholders, it can result in financial loss and attract attention from ASIC and other regulatory bodies.
There are a number of factors affecting the quality of financial reporting – dated systems, lack of communication between business units and poor security can all impact the quality of your reports.
With that in mind, we’ve prepared 7 suggestions for improving financial reporting.
1. Cloud storage
The cloud is perphas one of those things most of doesn’t truely understand. But that doesn’t mean you cannot ulitlse it for financial reporting. Using the cloud storage is quite easy, and typically free if you use programs like Google Drive and Dropbox. You can always pay for more storage on these platforms if need be. Utilising cloud storage in financial reporting is a no-brainer. When you have numerous people all working to provide information, the transfer of multiple spreadsheets and data sources around the organisation can be one of the main factors compromising financial reporting.
Having information in the cloud means that people can easily share and access documents – as well as work on them concurrently from different locations. This minimises the risk of data loss and people working from previous versions of documents.
2. Centralise your information
This follows on from cloud storage. Due to the critical importance of quality financial statements, you should have one final or master file that is the end point for all data in the reporting chain – from revenue analysis to credit check information and debt collection files.
This file should be owned by someone with full accountability (such as the CFO or other financial controller) and that person has the responsibility for checking the data and signing off that it is accurate and final. Accountability in important when it comes to quality financial reporting. It’s important that the person in charge of the accounts understands the guidelines of the business and how to report finances responsibly and legally.
3. Big data analytics
This is one of the most pertinent suggestions for improving financial reporting. Analytics capability is making big data manageable in industries around the world.
In a discipline such as finance – which is numbers-based and deals with large amounts of data from varying sources – analytics (through variance analysis and the like) can make a big difference to the quality of your data, and ultimately contribute to more insightful reports. When you look at financial reporting, it’s important to understand what the figures mean and how they practically impact your business.
Similarly, through descriptive analytics you can run analysis on your previous reports and have the system pick up patterns and causes that you may never be able to see as a human.
4. Embrace technology
This point neatly ties the first three together. Finance is increasingly tech-driven, and businesses who are able to effectively adopt and use leading tech will have a huge advantage over their competitors.
Take the time to stay up to date with the latest financial tech software, systems and updates. Do a little research to work out which tech can benefit your business the most, and get in touch with the distributor and try to implement it in your workflow.
5. Make your people accountable
One of the key factors affecting the quality of financial reporting is people.
Every manager should be confident their people are producing high quality work, by analysing financials accurately and ethically. Increasing transparency can contribute to higher quality work, as clear lines of accountability encourage employees to work more carefully.
Each of your senior managers should know which report items they are responsible for, and be able to easily identify the source of all information to confirm its accuracy.
6. Work in harmony with other departments
Financial reporting involves all departments in a business – even though not all departments generate income, they all have costs associated with them. Enabling proper collaboration between all your departments will contribute to more comprehensive data in financial reports.
It will mean that people will actually check in with each other when they have questions about certain figures or items, rather than adopting a ‘that’s their problem’ mindset. By creating a culture of collaboration you can stress the importance of accurate financial reporting, and greatly increase accountability amongst your staff.
7. Secure your data
Security of information is essential for preserving the accuracy of financial data. While we continue to move down a tech-enabled path, cyber security becomes a greater concern. When even some of the biggest (and most secure) tech companies in the world are suffering from data theft and corruption, businesses of all sizes need to have security protocols in place.
Ensure that confidential documents are not accessible by all staff and that only those who need direct access have it. Speak to your software providers about the security features available with your software – and if they don’t meet your needs, inquire what can be added on – or consider switching.
Next steps
By placing a focus on your systems, your people – and above all – the fidelity of your data, you can substantially raise the quality of your financial reporting. To produce the finest financial reporting, utilise the tools you have at your disposal. That includes new technologies and programs. That may seem daughting at first, but in the long run, they’ll save you time and money.
For more information on improving your financial reporting and strategy using data, download our free eBook The strategic CFO: Enabling data-driven business strategy. Click on the image below to get started.