Developing effective financial reporting structures and processes

Financial reporting is a cornerstone of any successful business. As a business leader, it’s important to have an effective financial reporting structure and processes in place to ensure that your company’s finances are in order, and you’re making informed decisions.

Financial Reporting

To start developing effective financial reporting structures and processes, first consider the purpose of your financial reporting.

• Ensure that accurate and timely information is available for decision-making and operations.
• Provide financial statement analysis to assist in budgeting and forecasting.
• Comply with legal, governmental, or other external requirements.
• Evaluate the performance of the organization over time.

Each of these financial reporting objectives require different structures and processes to be put in place.

Financial Processes

Once you’ve established what information needs to be tracked, the next step is to create a financial process that will help you capture it. This can include implementing systems for accounting, bookkeeping, invoicing and payroll.

Here are some examples of financial processes that exist within many finance functions:

• Revenue and Accounts Receivable: Clearly define payment terms and credit policies, create processes for invoicing customers and collecting payments.
• Expenditure and Accounts Payable: Understand supplier terms, set up automated payments and track spend to ensure compliance with vendor contracts.
• Inventory Management: Monitor inventory levels, cycle counts or physical stock takes, establish systems for ordering parts and supplies, and determine pricing policy.
• Corporate and Other Taxes: Implement processes for tax reporting, understand current regulatory requirements and ensure timely filing of returns.
• Payroll: Determine procedures for calculating payroll, provide employees with payment options, comply with labor laws related to payroll taxes and deductions.
• Banking & Cash Flow Management: Ensure there is sufficient liquidity to meet obligations, reconcile bank statements, implement banking security, and monitor cash flow balances.
• Fixed Assets: Track capital expenditures, plan depreciation schedules and calculate the value of existing assets.
• Accounting Policies & Procedures: Develop guidelines for recording financial transactions, and ensure accuracy in data entry and reporting.
• Reporting & Analysis: Monitor financial performance on a regular basis, generate periodic reports for internal and external stakeholders, develop actionable insights to identify areas of improvement.

Make sure to establish rules and procedures for each of these processes so everyone in the organization understands their responsibilities. You may with to produce process diagrams and workflows so that everyone can easily understand these systems.

By creating a comprehensive financial reporting structure and processes tailored to your business, you can gain better insight into your company’s finances and confidently make informed decisions that will propel your business forward.

System Requirements

Create a system that works best for your company’s needs. Decide which type of financial reporting is right for you – whether it’s budgeting, forecasting or tracking actuals – and decide how often you will need to report. Consider the cost, complexity and impact of your reporting system before making any changes. For example:

• If you’re looking for a simpler system that is more easily affordable and cost-effective, try using spreadsheets or Xero bookkeeping software.
• For more complex financial reporting, an accounting system such as QuickBooks or Aqilla may be the better choice.
• If you need to report financial information in real-time within a larger enterprise, consider a more expensive cloud-based system such as Sage Intacct or Oracle NetSuite.

Finally, make sure that your team is trained on the new reporting procedures and processes. Assign clear roles and responsibilities, and ensure that there is a consistent process for handling financial data. Create a training plan and set up regular review sessions to ensure everyone understands the new system and knows how to use the data to make informed decisions. By doing this, your business will be well-equipped with effective financial reporting and processes that are tailored to meet your company’s needs.

Summary

Developing a comprehensive financial reporting structure and processes tailored to your business can help you gain better insight into your company’s finances and make informed decisions that will propel your business forward. Decide which type of financial reporting is right for you, and consider the cost, complexity and impact of your system. Train team members on new procedures, assign roles, and review regularly to ensure everyone is on board. Doing this will equip your business with effective financial reporting and processes that can help you reach success.