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Define reporting objectives
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Establish reporting policies and procedures
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Implement reporting systems and tools
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Train and communicate with reporting staff
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Monitor and review reporting performance
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Here’s what else to consider
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Financial reports are essential for any business to communicate its performance, position, and prospects to various stakeholders, such as investors, creditors, regulators, and customers. However, producing accurate and reliable financial reports is not a simple task. It requires careful planning, execution, and monitoring of various processes, systems, and controls. In this article, we will discuss some of the best practices for ensuring accurate and reliable financial reports in the context of corporate finance.
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1 Define reporting objectives
Before preparing any financial report, you should clearly define the objectives and scope of the report. What is the purpose of the report? Who are the intended audience and users of the report? What are the key messages and insights that the report should convey? How often and in what format should the report be delivered? Answering these questions will help you to design and structure the report according to the relevant standards, regulations, and expectations.
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As a strategy consultant, I would like to drive following insights from the P&L always:Top Line:1. Revenue growth in each lines of service / products2. Revenue generated from new customers / market segments 3. Revenue generated from new products / services4. Lead generation - is it growing or flattening 5. What are the correlation of internal and external factors with the revenue6. Based on the trend and current economic conditions, what are the future prospects of revenue7. Revenue achieved from budget/ targets 8. Gross margin / COGS is it in line with revenue (are selling high cost items more) leading to low margins etcBottom Line:1. How much investment made in business development , marketing / R&D / L&D initiatives
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Here are the conditions to have perfect financial report in place: 1. Clear SOPs in place2. Clear accounting polices3. Setting the automatic internal controls 4. All transactions accurately recorded in timely manner5. Completeness assurance: all financial transactions and relevant details captured in the books6. Efficient chart of account7. Regular monthly / quarterly / annually reconciliation8. Tax filling deadline system in place9. Documented audit trail for all financial 10 transactions, including supporting documents10. Implement (automatically) closing procedure 11. Financial statements comply with the relevant accounting standards 12. Ensure consistency in financial reporting practices
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Ensuring accurate and reliable financial reports involves several best practices. Firstly, maintaining strong internal controls and regular audits is essential. Secondly, reconciling financial data across all systems and platforms helps identify discrepancies. Thirdly, having a skilled and well-trained finance team that follows standardized accounting principles is crucial. Additionally, leveraging modern financial software for real-time tracking and reporting enhances accuracy. Lastly, fostering a culture of transparency and ethics within the organization promotes accurate financial reporting, instilling trust and confidence among stakeholders. These practices collectively ensure the credibility and precision of our financial reports.
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First, you need to have detailed balance of Balance Sheet. If every details are correct and can be explained in Balance Sheet (including Bank Reconciliation), then 80% plus chance that your P&L is correct.That and a good SOP for Accounting team and a good filling system.
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Financial Reporting must include an insightful business performance commentary on variances vs Budget and previous year. Progress on Important Strategic Priorities. Working Capital, Capacity Utilisation,Labour Productivity.Cash Flow DSOInventory DaysDPOCCC
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2 Establish reporting policies and procedures
To ensure consistency and quality in your financial reports, you should establish and document the policies and procedures that govern the reporting process. These include the roles and responsibilities of the reporting team, the data sources and methods of data collection, the accounting policies and principles, the calculation formulas and assumptions, the validation and verification steps, the approval and sign-off process, and the distribution and storage of the report. Having clear and comprehensive reporting policies and procedures will also facilitate the audit and review of your financial reports.
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3 Implement reporting systems and tools
Another best practice for ensuring accurate and reliable financial reports is to implement the appropriate systems and tools that support the reporting process. These include the software and hardware that enable the data extraction, transformation, analysis, and presentation of the financial information. You should choose the systems and tools that are compatible with your data sources, reporting standards, and user needs. You should also ensure that the systems and tools are secure, reliable, and updated regularly.
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4 Train and communicate with reporting staff
The quality of your financial reports depends largely on the skills and knowledge of your reporting staff. Therefore, you should provide adequate training and communication to your reporting staff on the reporting objectives, policies, procedures, systems, and tools. You should also encourage feedback and collaboration among your reporting staff to identify and resolve any issues or challenges that may arise during the reporting process. By training and communicating with your reporting staff, you can enhance their competence and confidence in producing accurate and reliable financial reports.
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5 Monitor and review reporting performance
Finally, you should monitor and review the performance of your reporting process and outcomes on a regular basis. You should establish and track the key performance indicators (KPIs) that measure the timeliness, accuracy, completeness, relevance, and usefulness of your financial reports. You should also conduct internal and external audits and reviews to verify the compliance and quality of your financial reports. By monitoring and reviewing your reporting performance, you can identify and address any gaps or errors in your financial reports and improve your reporting practices.
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6 Here’s what else to consider
This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?
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