Finance & Accounting

5 Critical Close and Reporting Process Issues to Watch Out For

Closing/reporting are important to a company’s financial accounting and its bookkeeping. Ledger balances are journaled entries that are tallied and passed. Meanwhile, accounting books get reconciled. The accounting entries that different departments make help to prepare things like balance sheets, income statements, and other regulatory reports.

They’re distributed to all departmental heads and chief executives of a company. They’re then added to the company’s portal so all workers can view it. Regulators receive a copy of their reference/records. These financial records are critical for things like internal decision making and performance evaluation. They also required in terms of regulations. So, it’s important to make sure they’re done correctly. This can help to avoid potential problems for your company, which is something you’ll want to do.

Like any process that’s affected by each department in a company/organization and the results have big effects the financial close/reporting process also includes several issues. So, it’s important for your company to be aware of them in order to get the best results. The opposite will happen if that’s not the case so it’s a situation you’ll want to avoid.

Platform Compatibility

Big companies and particularly multi-national one’s store data on several platforms. This is especially the case when they’ve taken over companies. Compatibility that happens between platforms is frequently a matter. This results in data getting infused with various errors, which delays the closing process more. This is a situation your company will want to avoid so it’s important to take steps to do that whenever you can.

Coordination

The process needs data from the various departments and each aspect of the functions of the company. When that situation happens the process becomes chaotic, which is a situation your company will want to avoid.

Some manager submits info on time while others don’t. In addition, sometimes the info is submitted on time but in other situations, the info is wrong/incomplete. The financial teams then have to find the departments and submit the correct info prior to the due date. This can cause a lot of potential problems. So, it’s important to avoid coordination issues whenever you can. It’s critical because it can help your company to run smoother.

System Upgrades

Today’s companies implement system upgrades very often. The data doesn’t always feed precisely from one application to another one. Errors are conducted in mapping accounts/ charts. There can be confusion about who’s responsible for maintaining the company’s reference data. Another possible mix-up is whose permission is needed prior to making changes to static data.

Old-school people in companies who don’t adjust to new systems quickly/easily can have a tough time pulling out extracts, reading old records, and entering data into the system. Record duplication is one of the many issues your company will want to avoid. It’s a real/major problem and can always cause problems with the process of closing. When data is input manually the problem becomes worse. So, it’s important to take steps to avoid the problem as much as possible.

Wrong Approvals

It’s common for a company’s journal entries to be submitted without the correct approvals. This is a problem. Entries are submitted with the wrong code or incorrect headings, for example. Another common issue is debits/credits are put on the wrong side. Accounting entries are submitted without the right documentation needed to justify them.

There are times the reconciliation teams aren’t detailed enough in their process and the errors aren’t caught. This is another problem. Another common problem is the entries against any last-minute transactions are submitted incorrectly or aren’t submitted at all.

Another issue is the figures in international transactions are calculated using wrong exchange rates. Various countries could submit financial figures at different times of the day. Another option is to use various templates. This is an important issue to take up in order to get the best results.

This is an especially important issue today since factors like multi-national companies, e-commerce, and others result in more international orders. As a result, it’s important for the process to be as smooth as possible for the buyer and seller. That includes various accounting processes that are involved.

Make sure to use R2R effectively to avoid a lot of potential pitfalls involving international sales.  This is critical in order to improve your company’s processes and especially ones related to sales/accounting.

Updating

There are some companies that are careless regarding being update with the newest regulations. This is a problem since financial regulations are often changed so it’s important to know what the latest ones are. In addition, there’s more public scrutiny today so it’s another issue to consider. When books aren’t prepared based on the newest guidelines it can result in major internal/external issues. That’s for the accountants and also chief executives. So, it’s an important issue to consider.

It’s important to know about these possible pitfalls when using R2R. It can certainly be effective for various companies to implement. However, as with other systems, it’s important to do it in the most effective and efficient way. That includes avoiding possible issues/problems that can result from using bad practices. Those are situations you’ll certainly want to avoid.

The process is always complicated when processing accounting so it’s important to deal with any issues as much as possible and avoid them when you can. This is critical in order to avoid various issues. The key is to identify possible problems before they happen so you can deal with them prior to them happening. It’s important to learn from previous issues, list problems and learn from the lessons. This is critical to solving problems during the next time.

The financial reports must be correct. In the case they are it can result in various problems. That includes bad decisions, unhappy regulators, and investors getting the wrong picture. Those are situation your company will want to avoid. The key is to fix accounting issues as quickly as possible. You might want to consider a third-party company to help with the process in order to prevent problems.