5 Ways To Prevent Financial Reporting Errors

Most businesses have been there when it comes to financial reporting and analysis. After spending hours of precious time compiling date and crunch formulas, you realize that a late-night typo has badly altered your findings. Or, hours too late, you understand one of your colleagues adjusted a formula, sending the team’s spreadsheets into a raging mess.

If these scenarios (or any like them) have never happened to you, then maybe that is because you are spending wasted days double and triple-checking the data, significantly reducing the amount of time you have for the actual analysis. Even if you are working with the best bank for business banking, there is a good chance that your reporting and analysis needs some work.

For everyone’s benefit, here are five tried and tested genius steps that will help you and your firm prevent financial reporting errors. With these tips, there will be no need to sacrifice time and energy that could be better spent on other important aspects of your business.

1. Implement appropriate security features.

While you are probably highly conscious of security measures that prevent cyber-crime and security breaches, you may not be protecting your data from your employees. That is not to say that your employees are involved in nefarious behaviour. But when it comes to financial reporting and analysis, they may modify a formula (either by accident or because their fundamental premises have been altered) which, in turn can radically affect your reports.

Being able to locate typos or accidental alterations can be unnecessarily burdensome and exceptionally time-consuming. Also, if your financial reporting and analysis platform lacks security features, then your spreadsheets and essential data will be laid bare when shared with investors or the broader community.

Therefore, your firm must implement the appropriate security features to prevent these types of financial reporting errors. Implementing these features can be as straightforward as choosing a financial dashboard that provides security features for limiting access, and tracking any modifications.

2. Insert assumptions in their own cell.

One of the most frequent issues with financial reporting comes as a result of assumptions. This is because when it comes to editing a calculation, assumptions are the most frequently edited items. Therefore, when embedded into individual formulas, they turn into a headache.

In order to minimize the chance of a financial reporting and analysis error, insert assumptions into their own cells, and then have the individual formulas pull from that cell. By making this small change, your FP&A team will only have to make a minor adjustment each time the assumption changes.

3. Visualize your data.

Ever since the English statistician Francis Anscombe published his 1973 paper Graphs in Statistical Analysis, the importance of data visualization has become more and more widely accepted in the financial reporting and analysis arena.

In the paper, Anscombe demonstrates how useful (some may say essential) graphs are to all kinds of statistical analyses. The raw data of his four groups seems almost identical and it is impossible to notice any difference. However, upon graphing the data, outliers become easier to spot and discrepancies easier to discern.

No matter what industry you are in, visualizing your data helps you catch potential errors more quickly than if you are merely looking at the raw data. By implementing financial reporting and analysis software that offers quick and easy visual analytics, you can help your finance team move in a visualization direction.

4. Create a defined and consistent language.

Most firms have numerous team members discussing data from various software programs and spreadsheets. This setup can be complicated in itself, but what do you do when each department describes and defines terms differently? This scenario is almost definitely going to create a slew of reporting errors.

Therefore, before you embark on your next round of financial reporting and analysis, you need to schedule some time to create a defined and consistent language that all department members can agree on and implement.

5. Integrate your data into one centralized source.

Studies show that nearly 90 percent of spreadsheets contain some sort of error. If that by itself wasn’t an alarming enough issue, the fact that many small businesses are juggling two or three financial reporting and analysis software programs while mid-level companies may be juggling four to seven should be.

Using a cloud-based financial dashboard is a practical way to ensure that fewer reporting errors occur. Integrating data that can be updated in real time for all users, fed into a centralized source means fewer update delays, less iteration, and more veracity in the data.

In addition to preventing financial reporting errors, if necessary, ensure your business is utilizing cash and liquidity management. Having accurate financial reporting and analysis will impact the growth of your company. Investors, lenders, and managers are always going to look at your firm’s financial statements, using liquidity measurement ratios to evaluate your liquidity risk.

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