Record to report is the process of providing business enterprises with a strategic, operational and financial feedback to give a clear understanding of how the business is performing. In this process relevant and accurate information is collected, transformed and delivered to all the stakeholders of the business enterprise providing valuable insight into whether their expectations have been met. Record to report may seem simple at the outset but it requires considerable efforts. It is one of the few processes that are scrutinized by auditors from outside the company who draw inferences about the various controls that are in place at the time of financial close and reporting cycle.
To provide an accurate picture of the enterprise’s performance, the record and report process must be robust and technology enabled. This also helps the top management level executives to take effective business decisions. A robust record to report process has an added benefit of freeing up critical financial resources which can be used for value-added activities. It also helps business enterprises to focus on strategic opportunities and manage its growth agenda. By streamlining and optimizing the record to report process, business enterprises can maintain creditability in the financial community through accurate and timely regulatory submissions. According to KPMG, only 24% of business enterprises are able to close their record to report cycle in six days and only 28% complete it on a quarterly basis.
The overall accounts of the enterprise are usually stored in a nominal or general ledger managed by a comptroller, the preparation part of which is covered by and the steps involved in record and report process. The record to report function is not involved in the processing of transactions but rather aggregates existing data from computer systems so that a meaningful performance report can be prepared for the management.
Here are the key steps involved in Record to Report process:
In large business enterprises data is usually extracted quarterly or on annual basis when financial reports have to be created. But data that is present in an enterprise is unstructured which presents few challenges. Business enterprises will find it extremely difficult to flourish without the variety of data that is extracted from various resources in multiple formats. A large percentage of data in enterprises is unstructured and out of reach of enterprise applications. This ill-conceived data can impair the decision maker’s ability to decide on important business opportunities. Therefore, specialized tools must be used for value extraction and analysis.
Before any of the extracted data can be analyzed the data has to be collected in a systematic manner so that an accurate and complete picture of the information extracted from different sources can be achieved. Collecting data can be a tedious process but narrowing the data down to the exact type can be quite helpful. Data collection can be done at different intervals which suits the purpose of the management of the enterprise. An advantage of financial data is that the data type is usually the same; the measurement is made in money. Moreover, financial data of a business enterprise will be available only at a handful of locations.
Just extracting and collecting data does not guarantee the accuracy of the data. It has to be validated to ensure there are no errors. Business enterprises must have a robust data validation program to ensure that a correct set of data is utilized to create an accurate report. This also saves a lot of time and money. Benchmarks which are based on datasets use that data that is received to confirm if the collected data is same as the data extracted from the system. Errors that occur include duplicate observations, multiple records within the same time period and change in values.
Generation of Voucher:
A voucher is defined as a written record of a particular transaction. It can include goods that are purchased, services rendered and other expenses. A voucher is used in the accounts payable department in the pre-numbered form so that the business enterprise’s internal control over payments to its service providers and vendors can be enhanced and standardized. The data which is validated has a number of such transaction details which have to be noted down in the form of vouchers.
Voucher Posting to General Ledger:
In this step, accounting entries are created from the vouchers. But before transferring a voucher to a general ledger, it must be associated with different accounts. All accounting lines are created by the posting process. The creation of the voucher accounting lines is purely based on the various distribution lines in the voucher entry. Inter-unit document sequencing numbers are also assigned during the posting process.
Generating Analysis Account Trial Balance:
After the vouchers are posted to the general ledger, the details of the account balances in them are provided by the trial balance report. These reports are quite helpful when it comes to identifying expense posting concerns or missing entries during closing. To ensure that all accounts are accurate, a trial balance report must be generated before closing.
In the accounting parlance, usually an ideal ERM system or IT platform is needed for effective presentation of data management needs. But various factors such as changing information needs, complexity, legacy systems and so on means that for the preparation of accurately formatted reports, a dedicated team is required to effectively carry out the various steps involved in record to report process. A highly coordinated and disciplined record to report process from start to finish can help business enterprises to enforce a close calendar and deliver clear communication. It also acts as a platform for monitoring key performance indicators (KPIs) which allows enterprises to take important business decisions.