Best practices for effective financial reporting

Financial reporting can be as tedious as it is time consuming. However, they are essential to the management of the company and to the respect of compliance. It is therefore important to know how to implement best practices and acquire the right IT tools in order to simplify the process. This will allow you to take full advantage of financial information to ensure the success of your business.

What is a financial report?

The financial report is a document that presents information about the financial performance of a company or organization. This accounting information is essential for investors, financial analysts, and all stakeholders to assess a company's financial health as well as its business potential.

In addition, financial reporting can be used to ensure compliance with regulations and accounting standards. Thus, they serve to ensure the transparency of the financial situation and accounting data.

Most of the time, these financial team reports are produced quarterly or annually.

The key elements of a financial report

To create an effective financial report, the accounting department must include a set of key indicators in its document.

In particular, we can cite:

• Balance sheet: statement of assets, liabilities and equity of the company at time T;
• Income statement: It is the net result of the company over a given period of time. Various items are presented such as income, operating costs, expenses, profits, and losses;
• Cash flow statements: They include all incoming and outgoing financial flows.

Why is financial reporting essential for businesses?

If financial reporting is essential, it is because it provides a clear overview of the financial health and performance of a company. This is why investors or creditors are eager for such information.

Without a clear financial report, it becomes difficult, if not impossible, to attract potential investors, obtain loans to support the growth of your business, or comply with regulatory requirements.

Businesses have everything to gain by producing a quality report. Indeed, the various reporting tools provide essential information. Thanks to them, decision makers can make adjustments if necessary, communicate transparently with stakeholders, but also manage their business more effectively.

Best practices to adopt

For effective accounting and management of the company, it is therefore important to produce qualitative financial reporting. By following some best practices, it is possible to meet these requirements.

Accuracy of financial data

First, it is obvious that one of the priorities is to ensure the accuracy of accounting data. In particular, accounting information and transactions must be up to date and each entry must be scrupulously checked in order to avoid any errors.

Consistency and compliance

For optimal business management, you need to be able to compare data from different financial reports. For this reason, these documents must be consistent to access a clear vision of the evolution of KPIs over a given period of time. It is also important to ensure that all accounting data complies with all standards and regulations.

Clarity and conciseness

A financial report is intended for a wide range of audiences. Beyond the accounting collaborator, any individual must therefore be in a position to consult him and immediately enter the data he contains. This means that information should be presented in a simple, clear, and transparent manner.

The relevance of the information

Always in order to ensure clarity in the communication of data, the information selected to be included in the report must be relevant to the target. In other words, you need to remove any data that might weigh down the report and make no sense to the reader in order to design the most comprehensive report possible.

Speed and punctuality

The company manager must be able to quickly access accounting information when necessary. For this reason, financial reports should not be delivered late. Indeed, extended deadlines can lead to a lack of visibility and irrelevant decision-making by management.

Automating reporting

In order to ensure accuracy and speed in the production of financial reports, it may be interesting to consider automating reports. With the right information system, the accounting department can save valuable time and focus on financial analysis to improve business performance.

What are the essential tools for generating financial reports?

Most financial services use accounting software or spreadsheets to design financial reports.

A number of tools can be used for reporting tasks:

• Accounting software: These tools make it possible to monitor financial transactions and produce data that will be integrated into financial reporting.
• Enterprise Performance Management (EPM) Software: Used to plan, monitor, and analyze financial performance. Some tools can automate reporting.
• Robotic process automation (RPA) tools: These software programs are perfect for analyzing financial data and generating detailed reports in a timely manner.
• Strategic intelligence tools: Business Intelligence (BI) platforms are used to visualize data and help with decision making.
• A collaborative platform: An all-in-one tool, useful for all departments, such a platform centralizes numerous needs and makes it possible to record information, organize it, create diagrams or graphs and offers functionalities for presenting relevant data.

The production of the financial report is strategic for a company. That is why nothing should be left to chance during its production. You should follow best practices to ensure data accuracy, clarity, and completeness.

It is also highly recommended to acquire the necessary software tools in order to design reports and present data in a pleasant and transparent manner. In this respect, collaborative suites are interesting because they allow managers, employees and stakeholders to communicate easily and centralize functionalities that are very relevant for financial reporting.