To achieve relevant & faithful accounting records and financial statements, businesses must have appropriate financial closing and reporting processes in the whole accounting cycle. The poor execution of this process especially by small and medium-sized organizations will lead to inaccurate and irrelevant financial statements. With decision-driving insights in the financial statements, businesses can make decisions that represent a faithful representation of a business organization’s financial position and activities. For ensuring the proper recording of transactions and events, businesses must measure all transactions and account balances accordingly.
To ensure this businesses must go through the following procedures:
Trial Balance Preparation
Identification, collection, and analysis of accounts information for adjustments
Application of Final Trial Balance for preparation of financial statements
Formal closing of accounting records for the period
This article is aimed at businesses for acknowledging them of closing and reporting process that they should consider. OURS GLOBAL’s Record to Report outsourcing services ensures collection, processing, and presentation of accurate financial data for compiling operational feedbacks over organizational performance to effectively inform Financial Management and other stakeholders.
Following are the Twelve Closing and Reporting Issues That Your Businesses Must Consider:
1. System Upgrades
Business operations are always subjected to time-to-time system upgrades very often. The business data thus transferred from one application to another doesn’t happen appropriately with errors across mapping accounts/charts. Creating confusion over the responsibility for the maintenance of the company’s reference data, more mix-ups are prone as prior permissions are required for making changes to static data.
Also, older employees find it hard to be compatible in adjusting to newer systems that easily creating tough scenarios in pulling out extracts, reading old records, and addition of data into the system. The issue of record duplication that businesses face is an imminent issue that must be avoided. This major issue always leads to problems with the closing process. The problem of data input increase to worsen as it is critical for businesses to initiate appropriate steps for eliminating such problems as much as possible.
2. Wrong Approvals
Businesses always struggle to pass journal entries without the correct approval process. Incorrect headings and wrong coding lead to Debits and credits written on the incorrect side. Businesses must always ensure passing accounting entries without appropriate documentation for justification. The reconciliation professionals without a thorough verification process fail to identify errors. There are also chances for errors in entries among last-minute transactions and failure in the submission of the right documents. There can also be errors while making international transactions without appropriate exchange rates. As each country submits financial data at different times and chances are they use different templates. this is much more critical as multinational companies, eCommerce, and others commit to international orders and a smooth buyer-seller is critical as this includes innumerable accounting processes. Businesses must choose R2R to effectively eliminating potential pitfalls. This approach can improve the whole business operations but also the ones related to the sales/accounting process.
3. Platform Compatability
The storage of data over multiple platforms is much common in large and multinational businesses. These are much more prominent in businesses taken over by others. Often the compatibility becomes an issue leading to an infusion of data with errors further delaying the whole closing process.
4. Coordination Issues
The closing and Reporting process involves the collection of data from all the departments and every channel of the company’s functionalities. During the same scenario, the process is prone to becoming much of a hassle that all business organizations can avoid being in it. To add with some managerial staffs fails to submit informatization on time. Adding to it, some information that is submitted can be wrong or incomplete too. Businesses must also direct their financial professionals to submit correct information prior to the due date avoiding potential problems. This can be critical for businesses to eliminate coordination issues for the smooth running of business operations.
5. Overdependency over Keyman
Businesses sometimes trouble themselves in having the appropriate number of professionals for the Closing and Reporting processes. Without the proper awareness over the development of the whole process and how it gest the data from the system into another database, businesses can lead themselves to dependency over such tasks too. This overdependence will tarnish the whole business if the particular professional leaves the company or even attend a single day making the whole process disruptive.
6. Inaccurate & Untimely Submission of Management Reports
Passing Journal entries without proper approvals is common in businesses. The management reports can be gone outdated even before being subjected to proper analysis. Businesses must guide their financial team in making manual adjustments before publishing appropriate solutions that solve the financial control issue.
7. Myriad of Spreadsheets
Businesses must have proper guidelines in distributing spreadsheets to the management team, line of business owners, relationship managers, and branch managers. With proper methods, businesses must nullify the variation of spreadsheets to ensure smooth Closing and Reporting Process.
8. Minimum Financial Performance Management
Businesses always struggle for intelligent insights with meaningful intelligence derived from the data withheld in the core banking system. With appropriate intelligence, businesses can have the capability for monitoring the trends in the individual product lines for measurement of product profitability, for construction of branch balance sheets, and income statement for measurement of business performance of the branch against the target. With information staying at the core data system, businesses can just get it out and compile for the set of management reports from time to time.
9. Lack of Control over Financial Reporting
Having incompatibility of the financial department to analyze the financial reports on a day to day basis increases the number of surprises and investigations at the month-end. Curbing up a significant amount of time from the month-end close process prolongs the monthly management report generations from a couple of days to ten or fifteen. Incorporating financial performance software and Banking BI applications for supporting business owners, branch managers, and account officers helps in the compilation of bank performance ratios supporting them in performing bank balance sheet analysis in a uniform perspective. Result-driven financial performance software helps businesses in improving financial performance, cutting down costs, and making result-oriented decisions.
10. Inability to Access Real-time Data
The finance teams of businesses that deal with a large number of expense reports find it difficult for spending time effectively while executing the monthly closing process, giving way for the occurrence of errors. As the closing process requires data from varied departments and every aspect of the company’s functions, this becomes chaotic. For closing the books for the month, finance teams are required to identify the right information such as lost receipts & other documents from the right people.
11. Lack of Standardization across the Business
Undefined business operations and the number of people involved in the company spending sprouts up new issues. Sales and Marketing teams, product managers, and other business units send things for ending up variance in the business information presented. While some employees slack their complete expense claims, others put them in email attachments, whereas use corrected forms or just download them online. When each employee takes varied techniques for doing their ways, these lead to problems. Thus it is advised for businesses to standardization of such processes in the right way across their operations.
12. Inefficient automation
Inefficient automation of Closing and Reporting Processes will make problems in the first place but proper automation of the same avoids finance teams relying on manual work and even use physical paper ledgers. Thus automation is never a complete solution because, without proper implementation, it will still result in plenty of problems and manual fixes. With data collection being an amalgam of automated processes, manual and spreadsheet-based processes, businesses must drive proper adjustments, reclassifications, and reconciliations for blending the manual/spreadsheet/automated functions. This can also be time-consuming and much problematic for complying with local and head-office accounting requirements. Businesses can’t hope to automate the whole closing and reporting process if they have involved manual and manipulatable steps earlier in the chain.
The closing/Reporting process can be critical for a business organization’s Accounting and Bookkeeping operations. Varied departments make accounting entries for the preparation of balance sheets, income statements, and other regulatory reports for further distribution among departmental heads and chief executives. Such financial records are critical for internal decision-making and performance evaluation as per regulations. Eliminating all potential business problems, such insights influence the financial close/reporting process which faces several issues that are listed above. Thus it is critical for businesses in having comprehensive awareness of these issues for garnering the best results. OURS GLOBAL’s Closing and Reporting Outsourcing Services helps businesses in the achievement of optimum business value using entrepreneurial approaches with the application of a high-level Accounting Process and automation competency as per current and future business requirements. Ping us right away!