Process Improvements in Financial Reporting
From software implementation to continuous process improvement, financial reporting processes can be challenging. With so many different stakeholders and compliance requirements, process efficiency is essential. Financial reporting is a complex process full of moving parts, checklists, and criteria. There are many potential pitfalls in this process – from failing standards for documentation to ensuring that the right data has been entered in the correct fields. Without effective methods to monitor and improve your financial reporting processes on an ongoing basis, even the most streamlined system will quickly break down once implemented. In order to avoid these common mistakes when designing your financial reporting processes, you must first understand the challenges involved. This article provides a helpful guide with actionable advice that can help you implement new processes and continue improving them indefinitely.
Understand the reporting requirements
Before implementing any new procedures, it’s important to understand the reporting requirements that you will be reporting on. You will also need to be aware of any existing processes or templates that are currently in place. You’ll need to consider factors like the reporting period, the number of people involved, and the expected volume of data. You should also be aware of any special considerations, such as information security, data privacy, and governance controls. Additionally, you will need to consider the method of delivery and the likely storage format. These details will help you to create a clear picture of the reporting process in its entirety. Once you’ve established a precise image of the process, you can begin to evaluate how technology can be used to simplify the process and improve productivity.
Manage exceptions and deviations
When implementing new reporting processes, it’s important to have a plan for handling exceptions and deviations. These are essentially unexpected changes in the process that are outside of the normal parameters. These deviations can be caused by a number of different factors – from human error to external influences such as system failures. There are three primary categories of deviation that need to be managed:
Data exceptions: Data exceptions occur whenever there is data in the system that doesn’t adhere to the specified requirements. This could be incorrect values, incorrect structured data, incomplete or missing data.
Process exceptions: Process exceptions occur when there is a problem processing the data from one or more sources. This could include data quality issues, system failures, or resource shortages.
Timing exceptions: Timing exceptions occur when data arrives either late or early compared to the specified schedule. This might happen because of an internal delay or external factor, such as a regulatory change.
Automate manual tasks
As you’re managing these deviations, you may need to modify your processes to accommodate them. In some cases, it may be possible to adjust the process manually – but this can be very time-consuming. Instead, you could choose to automate the process as much as possible. Automating key tasks in your financial reporting processes can make them run more efficiently and free up your team’s time to focus on more pressing issues. Technology can help you to standardize your processes, removing the potential for human error and drastically reducing the amount of time required to complete each task. Automation can help you to reduce the time and effort required to do things like data entry, reconciliations, and validation. It can also help to simplify your data-gathering process to make it easier to collect and manage data from a wide variety of sources.
Monitor for ad hoc processes
As you are monitoring for and managing deviations, it’s important to be on the lookout for ad hoc processes too. These are essentially any unexpected additions or variations to the process that are not prescribed in the original workflow. Ad hoc processes can be caused by a wide variety of factors. They might be related to a change in the external environment, a regulatory change, or even a change in the team members’ priorities and responsibilities. Ad hoc processes are important because they can help to respond to and overcome challenges in the standard process. However, they can also introduce inefficiencies if they’re not monitored and managed effectively. Ad hoc processes need to be clearly documented so that they can be standardized, monitored, and reported on appropriately. If they are not being recorded, it will be almost impossible to keep track of and manage them effectively.
Measure performance and usage
By monitoring both deviations and ad hoc processes, you will begin to see patterns in the way that your team works. You can use this data to identify ways that you can streamline processes and make them more efficient. You can also use this data to determine which parts of your reporting process are being used the most and which are being used the least. This can help you to identify problem areas that need to be improved and provide valuable insights into how your team actually uses the system. By monitoring your system’s performance, you can be proactive in managing your reporting process and identifying problem areas before they become a major issue. Ad hoc data can also help you to determine what kind of information your team needs to make more informed decisions. This can help with your data governance process to ensure that the most important data is being prioritized and captured.
Summing up
Reporting is a complex and detailed process that must be executed efficiently if an organization is to meet its goals. If a company fails to meet its reporting requirements, not only do they risk damaging their reputation, but they could also face fines and penalties. To mitigate these risks, it’s important to implement a well-designed reporting process that is optimized for efficiency and productivity. This will help you to identify and mitigate challenges early on and maintain a smooth and reliable process throughout the entire year.