Optimizing the record-to-report process: A PEX Network guide

PEX Network speaks with industry professionals from the British Council and NuLeaf Naturals to uncover key challenges and best practices for optimizing the record-to-report process

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Adam Jeffs


Record-to-report (R2R) is a management process utilized by finance and accounting professionals which involves collecting, processing and presenting financial data in a timely and accurate manner. The process involves documenting all financial transactions within an organization (record) and producing financial documents (report), such as balance sheets, audit reports and budgeting reports.

The R2R process generally involves four stages:

  1. Transaction recording – All transactions within an organization must be recorded and processed in line with accepted organizational accounting principles. The accuracy of financial data in this stage is key and will determine how smoothly the rest of the process flows.
  2. Closing cycle – At the end of a fiscal period, finance and accounting teams are given a deadline to ensure that all financial postings are completed in time for the closure of the general ledger. This stage can be challenging, particularly for larger organizations.
  3. Consolidation – All approved and posted transactions must be systematically sorted, which involves collecting, validating and mapping transactions.
  4. Reporting – In the final stage, reports such as income statements and balance sheets are generated. They offer a number of statistics and key performance indicators that provide visibility on the financial activity of an organization.

The R2R process is critical to enable strategic decision-making, accurate tax reporting and compliance with regulations and standards. The consequences of poor or inaccurate reporting can be costly and have a significant impact on internal financial processes such as budgeting and forecasting. An inefficient R2R process is also time-consuming for accounting and finance teams who attempt to reconcile financial data throughout the organization.

In light of these damaging consequences, an optimized and efficient R2R process is a ‘must-have’ for organizations. This PEX Network guide will highlight the challenges of an inefficient R2R and how to overcome them, along with valuable tips for R2R best practice.

The challenges of an inefficient R2R process

The consequences and challenges of an inefficient R2R process will vary in nature and impact across organizations and industries, and may not always immediately point to inefficiencies in the overall R2R process. Identifying these issues is essential in order to begin optimization of the R2R process.

Inaccurate data

One of the most significant challenges of inefficient R2R comes in the form of inaccurate financial data, which can be responsible for a range of knock-on effects within an organization, such as increased risk of non-compliance, missed reporting deadlines and lengthy audit times. Ian Kelly, vice-president of operations for medicinal CBD supplier NuLeaf Naturals, believes that one of the most significant consequences of inaccurate data is that it can lead to poor decision-making, higher taxes and even accusations of fraud.

“Inefficient record-to-report processes lead to incorrect data, which can lead to bad strategic decisions,” explains Kelly. “It can also stunt growth. For example, over-reported profits will result in higher taxes, while under-reported ones will affect the company's valuation. Many companies have been accused of being fraudulent because of their faulty financial processes.”

Kelly points out that there are solutions available to ensure that financial data is recorded accurately, and points to automation as a method for ensuring this.

“Investing in automation can reduce inaccuracies in recording, as technology like artificial intelligence negates human errors,” he notes. “The greatest benefit of artificial intelligence technologies is the ability to create beautiful reports in record time – it is a huge timesaver.”

Inefficiency carries downstream

Inefficiency in the R2R process will not just impact the practitioners directly involved with it, as it will carry through into downstream processes and affect efficiency and productivity across an organization. Vaishali Mittal, global finance process owner – record-to-report at the British Council, an international non-profit organization, agrees that any inefficiency in R2R can have significant effects on downstream processes.

“Inefficient record-to-report can lead to rework, increased processing costs and delayed consolidation and reporting,” remarks Mittal. “It can also cause challenges for integral sub-processes such as allocations, reconciliation or reporting, and render them inefficient and ineffective.”

According to Mittal, the solution to combatting inefficiency starts with strong governance and clearly defined processes and regulations. Mittal believes that process and sub-processes that are involved with R2R should be transparent, integrated, standardized and unidirectional at an organizational level.

“You must embed strong governance in and around record-to-report culture, with clearly defined accountability and responsibility,” advises Mittal. “This can help to ensure effective risk assessments and controls adherence in the closing period, and facilitates efficiency in many areas including reconciliations, settlements and evaluations.”

Key benefits of streamlining the R2R process

One of the primary benefits of optimizing R2R processes is that it will directly counter the recording of inaccurate data. When R2R processes function smoothly and are supported by well-defined standards and regulations, it facilitates accurate recording and reporting of financial data. Kelly notes that this will have another profound benefit in that it will enable informed, data-backed decision-making.

“A streamlined record-to-report process can help high-level strategic decision-making and will help managers understand what is working and what is not,” explains Kelly. “This will enable them to scale processes that are working and kill processes that are bleeding resources while utilizing key insights to reduce tax liabilities.”

Mittal supports this assertion, noting that aside from enhancing decision-making capabilities, a streamlined R2R process can facilitate faster closing and reporting, improve compliance and provide faster and more accurate insights. This can help an organization deal with unexpected changes and even remotely manage closing and reporting stages with cloud-based solutions and virtual interactions. Mittal believes that this contributes to effective financial accounting, consolidation and reporting, and enables smooth and efficient audit completion.

R2R best practice

Despite the frustrating and expensive nature of R2R inefficiencies and challenges, there are always ways to ensure that the process is as streamlined and as hassle-free as possible, some of which have been discussed in this guide. In order for practitioners to be confident that their R2R process is operating as efficiently as possible, it is important to look toward industry best practice.

British Council’s Mittal believes that minimizing localized procedures, such as manual data entry, and ensuring that processes are standardized across the organization are a strong start., It can also be beneficial to assign and promote “super users” and “champions” who are tasked with reinforcing these processes, best practices and guidelines throughout the organization.

Mittal also advocates an effective master data set up and utilizing analytical tools to produce an insightful dashboard, which she believes can increase the capability and efficiency of the existing resources. She explains that in doing this, organizations are able to derive more insightful information from financial reporting.

Even when strictly adhering to industry best practices, errors and issues are still possible in even the most streamlined R2R processes. NuLeaf Natural’s Kelly advises that practitioners should keep a close watch on KPIs so that any issue can be nipped in the bud before becoming too costly or difficult to handle.

There are a number of headache-inducing challenges that come with an inefficient R2R process. By following the advice of the experts featured in this guide, brands have the opportunity to streamline this process and avoid financial risks while freeing up resources for other value-adding tasks.