What is Financial Reporting?

Financial Reporting: Ensuring Accuracy and Efficiency through Automation

Financial reporting is a critical task for any organization. Understanding where your actual financials stand in relation to budgets and projections is important to keeping your business on track and in helping to create new projections and budgets. For most organizations there are four key financial statements that present a complete picture of the financial condition and results of a business:

Balance sheet: Lays out the ending balances in a company's asset, liability, and equity accounts at a point in time, providing a picture of what a business owns and owes, as well as how much has been invested in it.

Income statement: Presents the financial results of a business for a stated period of time - reporting on a company’s expenses, revenue, and net loss or income.

Cash flow statement: Describes the cash flows into and out of the organization - its particular focus is on the types of activities that create and use cash, which are operations, investments, and financing.

Shareholder’s equity statement: Details the changes within the equity section of the balance sheet over a designated period of time, providing additional information on equity-related activity during a reporting period. Ensuring that each of these reports contain accurate and timely data is critical for finance teams in order to support decision making - and it takes the right tools to get you there.

Issues with Using Excel for Financial Reporting

When it comes to using Excel for financial reporting - especially where these key reports are concerned - issues with errors are both well-known and widespread. While reviews and workflows have improved somewhat over time, it is estimated that 88% of existing spreadsheets contain errors.

Common Problems with Excel

1. Errors and Inaccuracies: Incorrect entries and miscalculations result in inaccurate reports, eroding trust in the reports themselves.
2. Manual Processes: Reports must be created and recreated manually every week, month, and year.
3. Static Data: Excel reports are created off static data, meaning they do not dynamically update in real-time, so financial reports are out-of-date before they are even complete.

In the end, Excel was never built as a tool to create reports meant to influence how companies plan their financials. When it comes to financial reporting, Excel just doesn’t hold up.

Financial Reporting: The Importance of Automation

The days of manual data entry from one spreadsheet to another should be a task of the past. Finance teams are critical contributors to a business's strategy and don't have the time for manual tasks, not to mention that manual work results in a lot of review and quality assurance to avoid errors.

Starting with Automation

When an organization begins to evaluate financial reporting automation, it can be daunting. CFOs and their teams want to get the most value out of the first tasks and reports they automate. Process mapping, planning, and automated workflows of a financial report take time. Where should the team start?

Certain reports have a cascading effect, resulting in additional wins when it comes to automated financial reporting. Starting with other, lower-level processes can provide a foundation for other key reports.

The Key Reports to Automate and Why

When it comes to financials, four reports stand above the rest: the balance sheet, the income statement, the cash flow statement, and the shareholder’s equity statement. Each of these has its purpose and timing. Automating the balance sheet can yield big returns for the company and the finance team.

Automating the Balance Sheet

The balance sheet represents a company’s assets, liabilities, and shareholder’s equity at a moment in time. However, automating the balance sheet’s creation can mean that moment in time is almost any time. If the data that feeds the balance sheet is provided through integrations with the primary systems that hold that information, this report can represent a moment in time that is meaningful for other reports as well.

By automating data within the assets section of the balance sheet, your cash flow report and shareholder’s equity statement are largely automated as well. It becomes trivial to automate some of the other core reports once the balance sheet’s automation has been mapped and implemented.

Automating Routine Tasks

By automating routine tasks and reports, you will have an accurate underpinning for those key reports to pull from. For example, automation of expense reports can simplify the process for the finance team and provide the foundation for the income statement. By automating indirect and direct expenses, the income statement gains accuracy and removes the manual process of copying the data from spreadsheet to spreadsheet.

Choosing the Right Tools

The key for all of this is to use tools that allow for the automation of these statements while also supporting integration with the core systems of record from where the data can be provided. FP&A software that facilitates integration and generation of key reports will make automating these statements easier and allow the finance team to concentrate on mapping the processes and setting up the automation.

One such software is Centage, recently named a Best Financial Reporting Software of 2021 by Digital.com, a leading independent review website for small business online tools, products, and services. Centage was ranked among top solutions for financial reporting features, integrations, and reports along with customer feedback.

By leveraging advanced tools and automating financial reporting processes, companies can ensure accurate, timely, and insightful financial statements that drive better decision-making and strategic planning.

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