Improving Financial Reporting Accuracy

Updated 19th June, 2023.

Getting your financial reporting correct is crucial. However, not everyone is a business accountant, and it can be hard to understand what this means or what to include. Read on below for more information regarding what financial reporting is and how to ensure accuracy.

What is Financial Reporting?

Financial Reporting is a way to look at your company’s financial health by documenting and analysing financial activities. At a minimum, your financial reporting should track revenue, expenses, liabilities, and profits. From this, you can learn if you are on track, what areas are draining your resources, and potential changes to ensure your business’ monetary well-being.

Several financial statements will help you get the information you need. These include:

• Balance sheet
• Cash flow statement
• Income statement
• Statement of retained earnings

Accuracy in Financial Reporting

As with all things in your business, your financial reporting needs to be accurate to be effective. But what benefits will your company receive if you have accurate financial reporting?

Among other things, accurate financial reporting will:

• allow you to determine and implement efficient payment cycles
• build trust with investors and stakeholders
• diminish the chance of errors
• enable you to make plans
• maintain your standing as an ethical company
• reflect good financial oversight
• support your budget-setting decisions

A crucial benefit of accurate financial reporting is that it will not attract attention from regulatory groups, including the Australian Securities and Investment Commission (ASIC).

Ten Ways to Ensure Financial Reporting Accuracy

1. Take Advantage of Cloud Storage – While all types of businesses widely use the cloud, some companies do not take advantage of the many ways the cloud assists in the day to day operations. By using cloud storage, numerous employees can access documents and work on the latest versions of them at the same time, regardless of location. Additionally, cloud storage reduces the risk of data loss.
2. Maintain One Centralised File – You will want to ensure an endpoint and a master copy of your information. All the data that moves through your information funnel needs to be collected in a single location owned and checked off by someone with full accountability. It is vital that this person (frequently the CFO) fully understands how to report the information and the guidelines surrounding its use.
3. Ensure All Departments are Working Together – To ensure accuracy, all departments have various costs and need to add their data to financial records. To make sure this happens, allow for the most straightforward system of collaboration possible. Additionally, reject the attitude that departments are separate when they are all a part of the same team.
4. Use Internal Controls – By creating a system where reviews and approvals are necessary, and duties are separated, you build checks and balances into your operations. This will help eliminate errors by putting another set of eyes on essential data.
5. Create a System for Regular Reviews – When checking for accuracy is an automatic part of your processes, you can significantly reduce the number of errors in your financial reporting. A part of this should include reviewing documents and financial statements for accuracy and completeness. Additionally, this system will ensure the correct classification and recording of transactions.
6. Turn to Automation – The world of finance is increasingly technology-dependent, and this can simplify your financial reporting. Use automated calculations and checks whenever possible to dramatically reduce the chance of errors. At the same time, have advanced security measures in place and ensure data is always secure.
7. Implement an Evaluation Process – Be sure you are keeping up with the latest changes by reviewing your company’s financial reporting processes. You should also test for potential weaknesses in your financial management standards.
8. Arrange for Additional Training – Creating opportunities for professional development will keep your employees up-to-date on new products in financial reporting and refresh their memories regarding best practices and the finer points of reporting accuracy.
9. Build a System of Accountability – One of the best ways to ensure mistakes or omissions do not occur is to ensure that every member of your team is accountable to another member of the company. Additionally, make clear what constitutes a strong performance within your business. Creating benchmarks helps to spot room for improvement and opportunities for extra training to help identify underperformers.
10. Seek Expert Advice – Build a solid relationship with your accountant or business advisor. These are the experts who can ensure better financial reporting. You can turn to them for evaluations of your processes, and they can offer specific suggestions of ways to ensure accurate financial reporting. Additionally, their expertise will help spot threats as well as opportunities for growth and improvement.

Corporate accountants must follow best practices and stay up to date with changes in the field. If you are concerned about the accuracy of your financial reporting, or if you are struggling to do it all yourself, reach out to M2 Corporate. Our experts are diligent, proactive, and detail-oriented; you can be sure that any potential issues will be identified and repaired. You can feel secure knowing your financials are reliable and accurate.