Part 5 in the “Continuous Accounting Action Plan” series
We’ll get straight to the point: “Real-time” is a very popular term in the world of reporting and analytics. Timeliness of reporting can deliver real returns to the business. As the ACCA highlighted in Understanding Investors: The Road to Real-time Reporting, 70% of investors said companies reporting in real time are better positioned to attract investment, and 73% indicated that companies who report faster have more mature corporate governance.
But “real-time” reporting and analytics can mean many things to many people. Data in an organization is often in silos due to traditional technology restraints, and different departments have different data needs. Automating, centralizing, and standardizing data is key. Reducing the amount of data replication will get you closer and closer to “real-time” access to meaningful data.
What is “meaningful” data?
You need to think about your requirements and where “real-time” can become “meaningful.” I have not met anyone who had a requirement for a “real-time” annual report, in that each time the report is opened, it reflects the current balances in the general ledger. Much financial reporting is at a given point in time, so while “real-time” sounds great to at IT person, an accountant knows there is a time and a place for it.
Speeding the production of financial statements is a pretty common requirement. Getting access to information sooner allows for better decisions and the ability course-correct sooner. This can be done by pushing the financial close reporting and disclosure to the limit in terms of speed without sacrificing quality. In this case, it’s more about squeezing inefficiencies out of the reporting and close cycle. Typical industry benchmarks in this area point to the top quartile closing about twice as fast as the bottom quartile, while maintaining strong close checklists and controls. (This is important, as the ACCA also noted that nearly half of respondents said that the difficulty of instituting effective controls to ensure accuracy is a barrier to acceleration.) And faster closers do it without scaling their accounting staff as a percentage of revenue – by increasing productivity, not headcount.
Faster reporting through a more efficient close cycle
Throughout this blog series and our “Continuous Accounting” series last year, we have explained how to break down your close process into consumable steps and identify “quick wins” and “big wins” to improve your process. At the backend of the close, assembling the board package, and disclosing the financials, the keys to success include stronger integration between systems of record and systems of reporting and close. Shifting close checklists away from spreadsheets, identifying manual tasks like copying and pasting reports, and reducing the reliance on manual account reconciliations are just a few examples.
In a nutshell, financial reporting can be accomplished faster if so many financial close tasks – intercompany eliminations, journal entries, reconciliations – aren’t crammed into the close cycle. It’s not just about making many of those more efficient with period-end; it’s about processing them “as-they-happen” rather than simply left to month-end. And this has an important implication on reporting that we’ll cover in the next blog.