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10 Reasons Your Financial Reporting Is Too Slow Or Inaccurate
Saying your financial reporting is important to your business might be the biggest understatement of this still young century. Slow or inaccurate reporting creates a cascading effect that impacts all of your stakeholders, both internal and external, as well as the overall health of your organization.
Like it or not, from your bankers to compliance, auditors to decision-makers – and pretty much everyone in between – the long list of people and entities either dependent on or affected by your reports can be enough to make you want to escape. However, assuming you’re not quite ready to pull the trigger on that new career as an ice sculptor or lumberjack, your best course of action is to make your financial reporting as smooth, fast, and efficient as possible.
That’s where Embark enters the picture, a vast font of wisdom to help you in your financial reporting efforts. As the following list demonstrates, there’s usually a reason why your reporting is either too slow, inaccurate, or both. So take your time with these ten reasons why your financial reporting might have developed a hitch in its giddyup, and transform your reporting from a liability to an asset.
1. Migrating Data
Does a data dump from your general ledger to Word or Excel, sometimes with a stop in a BI tool between them, seem like an entirely good idea, especially when you can migrate data directly from your GL to a reporting system? Nope. There’s just too much that can go wrong, from transposing data to flat out skipping vital pieces of information. Granted, this is not an example of deliberate sabotage or even ineptitude but, as your stakeholders will attest, that doesn’t matter.
Inaccurate financials stemming from human error cause delays, restatements, and a general sense of uncertainty that Wall Street, the SEC, your bankers, and even your own wallet don’t appreciate. As we’ve said in the past, there are much better reporting systems in today’s marketplace rather than the 1992 cutting-edge technology you might be using to create your financial reporting package.
The same general thought rings true when printing out a report from your ERP and then hard entering the data into your report creation tools like Word and Excel. As additional entries come in, you’ll have to keep entering that data into your draft financial statements. Manual entries unnecessarily expose your reporting to errors, when a comprehensive solution links data and reports to eliminate those susceptibilities. Embark prefers WDesk from Workiva, but we encourage you to research financial reporting systems on your own to make a fully-informed decision that’s best for your enterprise.
2. New System Implementation
Speaking of reporting systems, taking the plunge and investing in a new system is a critical first step that we applaud you on, assuming you’ve chosen wisely. However, picking the best solution for your specific needs is only the first step as plenty can go sideways during implementation.
When you’re moving from one system to another, take the proper steps to ensure data validity throughout the process, mapping everything ahead of time to make it as seamless a transition as possible. Rather than using hard cutoff dates between your old and new systems, parallel processing between the two can help you avoid reporting delays if any hiccups arise. Likewise, establish timelines while implementing your shiny new reporting system to help you stay on schedule.
3. No Post-Close Review Process
It’s hard to improve on your closing and reporting process if you don’t take note of what needs improvement in the first place. In other words, your reporting will remain slow or inaccurate without frequent post-close reviews that identify any inefficiencies and resolve them so they won’t continue in the future.
Think of such a review as a postmortem on your closing process, where your team gets together and discusses what went right, what could be better, and streamlines everything going forward. This doesn’t have to be an elaborate or drawn out session, perhaps a team meeting every quarter or so, so you can continue to refine your closing. A post-close review is especially important for any guidance updates or business changes, making sure your closing stays on track.
Look at your financial reporting process as if it’s your car. No matter how silky smooth it runs today, you’re still going to want to periodically change its oil, rotate the tires, and swap out the air filter going forward. Entropy takes hold of everything at some point, whether it’s your car, health, or financial reporting, slyly shifting from order to disorder unless you put the breaks on and stop the erosion. Like changing the oil in your car or going for an annual physical with your doctor, a post-close review is a critical tool in preventing your reporting process from slowly but surely coming apart at the seams.
4. Waiting for Data
Not everything in your reporting drastically changes – or even changes at all – between periods. Many accruals, for instance, are very predictable, as are several AP items. Don’t hold off on your reporting process waiting for your internet service invoice when you already know what it’s going to say. Likewise, if your electricity invoice comes in after close every month, put it on an accrual checklist. You can also run depreciation and amortization earlier once all the additions have been added. The point is, get those items out of the way and devote your time and attention to more dynamic, risk-oriented data points that will require more effort from your team.
5. Being Reactive Instead of Proactive
In a similar vein, it always makes sense to look down the reporting road and anticipate events, transactions, and guidance changes that will require more of your time. When your financial reporting director is plugged into management decisions and made aware of upcoming events or transactions well ahead of time, the entire reporting process becomes smoother and faster.
Put differently, your perspective should be proactive rather than reactive on the reporting front where, as an example, you’re contacting the involved attorneys in advance of a significant transaction. This way, you’ll have the information you need rather than scrambling at the last minute to pull your reporting together. A proactive stance is particularly critical when dealing with disclosures or any other area you might be unfamiliar with, giving you plenty of time to do any necessary research and avoid delaying your reports.
6. Version Control
Having everyone on the same page, both literally and figuratively, seems like common sense but, unfortunately, many organizations still struggle with version control in their reporting process. Rather than emailing a document from employee to employee, where file naming becomes a crapshoot and no one knows exactly where anyone else stands, a comprehensive reporting system removes those unwanted variables and allows everyone to work from the same centralized document.
Aside from version control, a sound reporting system can also link information from different databases or reports, automatically updating whenever new information comes around. This is yet another instance where eliminating manual entries only speeds up your reporting while also improving accuracy.
7. Improper Staffing & Work Prioritization
Just like any department within your organization, accounting needs the right people in the right positions for everything to run like a well-oiled machine. Everyone from your financial reporting director on down must be well-equipped to handle the rigors of the job, especially when an important transaction is on the horizon.
Now we’re not saying that you need to rapidly expand your accounting department simply because of an upcoming transaction, but you should certainly have your accounting ducks in a row. Naturally, having your friends at Embark in your mental Rolodex when you need to quickly ramp-up your accounting knowledge and skill set can certainly come in handy, but that’s not a permanent solution.
As a matter of day-to-day operations, including your reporting processes, always align your talent with the position, trying to avoid placing your employees, teams, and enterprise itself in peril through misaligned skill sets. Likewise, be clear with assignments and timelines so everyone functions as a cohesive unit rather than a disjointed effort that inherently lends itself to inaccuracies and inefficiencies.
8. Data Inconsistencies
Nothing creates storm clouds over your operational waters like data inconsistencies, even when minor or inconsequential. As an example, maybe you’re rounding your figures in your disclosures, resulting in data that is a single digit different from those in your financial statements. While that difference might be immaterial in practice, the reality of those slightly differing figures can make you look incompetent and ill-prepared.
Subtotal and cross reference data checks embedded within your reporting process can help you save face and make sure all of your numbers match. These checks are a simple but extremely beneficial control that pays dividends as your reporting becomes more complex and dependent on information from a variety of sections or separate reports.
9. Manual Edits and Comments
Let’s say there’s a transaction coming up for your organization, so attorneys are constantly involved in your reporting, reviewing various documents and reports to ensure compliance and accuracy. Rather than printing out your reports, giving them to the attorneys, having them make edits and comments by hand, and then turn them back into you for revisions, plug the attorneys into your reporting system to make the process both faster and more efficient.
This best practice is useful for the many different stakeholders involved in the reporting process. Again using WDesk as an example, an organization can provide unlimited users with extremely specific access to databases, documents, or even particular portions of documents. For obvious reasons, this is much more efficient than handing out dozens of PDFs and then tasking someone on your team with distilling all of the edits from different users into a single cohesive document.
As a slight aside to this point, bringing third parties into your reporting process can help identify inaccuracies and inefficiencies that might otherwise slip through the cracks. As the old saying goes, two pairs of eyes are better than one, so a third-party could very well spot gaps in your control environment, processes, or talent that could slow down your reporting process or impact its reliability.
10. No Administrative Coordination
Sometimes, even with the most advanced and efficient reporting systems, workflow can bog down. However, you can prevent much of that by simply coordinating your workflow. For instance, when you have multiple people requesting the same report that already takes a fair amount of time to generate, a logjam is inevitable. With a bit of forethought, though, everyone can still have access to the reports they need without delaying the entire process.
Placing a frequently used report in a shared drive gives your financial reporting team the information they need while avoiding disruption in workflow. You can even ask IT to populate the most current version of that report every morning in the shared drive, so everyone knows they’ll have a clean, updated report to work from each day.
As you might’ve noticed, most of the reasons your financial reporting might be too slow or inaccurate stem from your people, systems, or controls. Devoting sufficient attention to those three components can greatly improve the speed and reliability of your financial reporting. With such high stakes involved – debt covenant defaults, restatements, a loss of confidence from the public and your stakeholders, to name just a few – investing in these key elements of your reporting process can pay dividends for your entire organization well into the future.
None of this is reason to feel blue over your reporting, however, because there are plenty of solutions in the marketplace that can quickly overhaul your financial reporting and have you right as rain in no time. We mentioned how effective WDesk from Workiva is in streamlining the entire reporting process, so that’s a very good place to start, but it’s in no way the only solution out there. Find the reporting tools that suit your company’s specific needs and don’t be afraid to take a deep dive into your own product and vendor research. And of course, you always have Embark’s expertise and experience to rely on for additional guidance and support along the way.