6 Best Practices for Record-to-Report Process

Narendra Kumar

14 Dec, 2020

The Finance and Accounting (F&A) process include various components. One of the most important ones is Record to Report (R2R) forms. This provides critical insights into the company’s strategic, financial, and operation components.

This provides many benefits It helps to provide in-depth ideas about the performance of your company. It involves various complex processes including collecting/converting/supplying data to stakeholders who want to know whether or not their expectations were met. In addition, the data helps companies to evaluate and make improvements. This includes various factors like Financial Closing & Consolidating, Master Data Maintenance, and General Accounting.

Regulatory bodies/analysts expect companies to review account books in less than one week and release earnings statements in a month. Regulations that are industry-specific and more financial reporting have put a large burden on the reporting process of today’s companies.  As a result, it’s important to consider these issues in order to get the best results for your company.

Various regulations require that companies provide extra/complex data in a timely manner. A recent study found that nearly 45% of companies require 11+ days to finish their monthly financial reporting. Meanwhile, one-fifth of them required 15+ days.

Due to companies having pressure from various sources this can only be achieved by following the top practices of R2R. It’s critical to adjust processes to changing market trends and stay ahead of the competition. Finance and Accounting (F&A) outsourcing experts that are experienced, resourceful, and responsible can help provide the help companies need in order to manage the processes of financial reporting. It’s why it’s an excellent option for your business.

R2R Service Challenges

Prior to finalizing data, many researching/correction issues rise up, which can have a big effect on the report’s accuracy? There are several issues but here are some of the main ones:

• Allocation Setup Errors

These happen when dependent data that’s based on past transactions and all following transactions are wrongly created/posted. They must be done accurately and future updates of the allocation formulas should be restricted. This is an important step to take in order to avoid possible issues.

• Data Posting Errors

These can happen due to problems related to the feeder system that result from them being set up in the wrong way. The errors can be fixed by changing data at the source system when companies have a corporate policy. This is an important issue because it’s critical to fix any issue related to data posted.

• Ledger Reconciliation Processes

This can result in results that are unexpected. After the first financial statement is created some strange activity might be highlighted through consolidating activity. This is important information to know in order to make sure your company is using the most effect R2R processes.

• Ledger Reconciliation Processes

These can be very complex and also time-consuming. There can be various problems in establishing the true ownership/responsibility of an account. This can result in the GL reconciliation process becoming delayed and complex since journal entries that aren’t approved might be conducted to accounts that are sensitive.

Suspense accounting and having know-how about the volume of transactions affecting the accounts can help the management team n planning reconciliation and also resolving problems in a timely manner. This is important in order to deal with the issue as efficiently as possible.

• Master Data Maintenance

Companies have complex/master data errors as a result of not understanding fully the effects of master data change. More complications happen when daily transaction processing, as well as master data maintenance, aren’t properly segregated. That’s why it’s an important issue that should be dealt with effectively. If that isn’t done then it can result in situations your company will likely not want to deal with. That can cause a lot of problems.

Practices for Effective R2R Process

• Account Reconciliation

A reconciliation process that’s efficient/effective can help to save time and lower errors. Make sure to use the right processes to achieve those goals. Implement unique controls that help reduce issues and identify items that are not familiar. Automate the process. Implement different activities like reporting, risk identification, decision support, etc. use an effective plan then implement it well.

• End of Month Process Reporting

There are various steps to take. Close process activities by using workflow solutions. Carefully maintain contact details of service providers, stakeholders, and other important parties. Deliver accurate reports including internal/external ones.

• Taxation

Here’s another important issue to consider in order to get the best results. Make sure that tax filing is done on time and effectively. This will help to add credibility to the company. Do tax planning in a strategic way. Use the latest tech. Make sure the company is aware of the latest tax rules/regulations.

• General Accounting

This is critical for any F&A process. It’s important for financial info to be reliable/accurate. So, it’s important to take the right steps in order to make sure that’s the case. Use concrete decision/approval rights. Clearly, define standard/non-standard journal entries. Use clear roles/responsivities for each account reconciliation/analysis. These are all important steps to take.

• Fixed Asset Management

There are various steps to take. Automate the process of real-time asset activates/depreciation changes. The system must meet tax requirements for tax authorities. Use an automatic link to connect the corporate tax system. Use barcode scanners to link physical inventories at regular time intervals.

• Inter-Company Accounting

Which steps should your company take? The process documentation should be maintained in a standard/simple way. Automated recompilation tool. Establish KPIs in a way that covers all parties involved. Develop and stick to all escalation processes. Issues like KPIs must be reviewed on a regular basis through meetings.

It’s important for knowledge and awareness to be used in the process of R2R. This will help to result in your company using more timely and accurate financial reporting. It’s highly recommended to get advice and support form an expert to get the best results. It can also help to avoid potential problems, which is something your company will want to do.