Finance & Accounting

What is Record to Report (R2R) Process?

How familiar are you with Record to Report (R2R))? It’s’ a financing and Accounting (F&A) management process that involves collecting/processing/delivering information that’s relevant, accurate, and timely. This provides strategic, operational, and financial feedback about how your company is performing. Your company’s stakeholders then read the feedback and get insights about whether the company’s performance is successful or not. It also helps to determine if their particular expectations were met.

R2R Report Stages                          

The R2R cycle’s groundwork is based on the data processing stage. This is where data that’ critical for creating reports is created. If your company’s data enter team enters records correctly and few errors the remainder of the process happens smoothly. However, in the case that doesn’t happen then there’s a lot of time wasted on reworking and manual intervention.

Throughout the end of the financial period, the company’s finance team and others involved in accounting work receive a deadline. They must complete postings prior to the deadline so the general ledger can be closed and the reconciliation/validating work can start. The data integrity that flows into the general ledger improves and steps are taken to lower the requirement for manual journal entries.

The majority of companies try to finish the closing cycle as soon as possible. However, big companies with legacy systems from the purchase of other companies and complicated internal procedures require a lot of time during the closing. This greatly delays the full R2F process. It’s a continuous challenge for several finance teams to complete the closing cycle on time.

After the cycle is complete the accountants being to reconcile inter-company balances, validate info that will go into financial statements, and perform eliminations. The finance team is aware that the reports it creates must address the needs of internal/external stakeholders.

The reconciliation process is very complex when there are multi-national companies with big operations involved. However, companies try to finish the consolidation work in a short timeframe following the general ledger being closed.

After data is collected/validated/processed the analytical process begins. Several reports are prepared that include various statistics and key performance indicators (KPIs). The reports are sent to internal/external stakeholders^[1]. These include operational heads, senior management, industry regulators, and investor. It’s important for these key parties to receive the information.

Benefits of Efficient R2R Process

• Compliance

After the Great Recession of the late 2000s, one of the results is financial market regulations have become stricter. Companies must meet several more guidelines now. The issue of compliance issues has become a big issue following the various scandals during the era.

Regulators are worried that revenue statements and balance sheets might get manipulated. In an environment where it’s become vital to meet regulatory requirements preparing reports that are accurate has become much more critical.

• Tax Planning

A company’s tax planners calculate estimates based on figures in the reports. They must understand the amount of tax the company must pay and strategies they can use to lower tax liability. These are both important issues for a company to deal with in order to do the most efficient tax planning. Like the old saying goes taxes and death are the two main guarantees in life. So, it’s important to do effective tax planning.

• Strategic Decision-Making

These reports allow senior management to plan the company’s strategies. The report informs operational heads if the teams are meeting targets, and which actions should be taken. In the case of conglomerates, the chief executives use financial reports to pick which subsidiaries they should support or drop.

R2R Tips

General Accounting

• Develop Clear Definitions for Journal Entries

This should be done for standard and non-standard entries. It’s an important step to take and is one of the most important general accounting methods to use in terms of R2R. If you use this basic step it can be beneficial for your company.

• Define Clear Roles/Responsibilities

This should be done for each account reconciliation/analysis that will help to produce the best results. It’s important that they’re both defined clearly in order to avoid possible problems.

• Use Standard Naming

This is one of the most basic yet effective practices your company can use. It’s important to use this method if you want to use the most effective R2R methods.

• Set Clear Decision/Approval Rights

Here’s another effective step to take if you’re implementing R2R for general accounting. Make sure that you use the method consists in order to get the best results.

Account Reconciliation

It’s important for your company to use an effective system for the reconciliation process. This produces results like reducing errors, saving time, and also improves your company’s integrity. When you consider an account conciliation there are various steps you should consider taking. They include:

• Controls That Reduce Issues

It’s important to use controls that reduce issues and other problems for unusual items. It’s a situation you’ll definitely want to avoid in order to make your accounting processes as efficient as possible.

• Develop/Follow Plan for Improvement

This is important to make sure that your accounting team is constantly taking steps to improve the company’s operations. This will help to produce the best results.

• Automating Processes

This is a critical step in order to produce better results since it can help with issues like reducing errors and increasing efficiency. On the other hand, when processes are done manually there’s a greater chance of issues like errors and others.

• Monitor Activities in Real Time

This is another important step to take in order to get more efficiency. If you want your accounting team to be more effective then it’s critical to make sure you’re monitoring activities and also do it in real time. That will help to produce the best results.

• High-Value Analytics

It’s important to use high-value analytics, reporting, decision support and risk identification. This is critical in order to make your company more efficient. They’re basic steps but you should definitely take them in order to make your entire accounting team more efficient.

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