Ever wonder how some companies seem to perfect their financial reporting every time, while others struggle with inaccuracies and delays? The secret lies in adopting best practices following the 4Cs – correct, current, complete, and consistent. Ensuring the correctness of every figure builds trust and supports sound decision-making. Keeping reports current ensures they reflect the most recent picture. Completeness means including all necessary information, and consistency involves using the same accounting methods across periods.

This easy-to-follow mantra ensures that the financial statements are reliable and accurate, lending enhanced credibility to the stakeholders. Errors in the numbers can cost you, leading to poor decision-making and fines.

Looking for ways to improve your financial reporting and analysis? Here’s how to do it better

8 Best Practises – Best Practices for Reliable and Effective Reporting

1.Stay Ahead of Regulatory Standards

India’s financial reporting is governed by several standards and regulations, including the Indian Accounting Standards (Ind AS) and the Companies Act, 2013. Compliance is non-negotiable, but staying ahead of regulatory standards gives you an edge. Being proactive rather than reactive can save you from last-minute scrambles, heavy fines and a hit to a clean reputation that could be hard to bounce back from. Regular training sessions for your financial team on the latest updates in accounting standards and regulatory changes can help in maintaining compliance​.

Why it matters: Compliance ensures your financial statements are legally sound and trusted by stakeholders.

2.Tight Internal Controls & Risk Management

Imagine having a safety net that catches errors before they become problems. That’s what practical internal controls do. Effective internal controls, combined with comprehensive risk management, are essential for accurate financial reporting.

ResultLane’s AI-powered tools automate the monitoring of financial transactions and control activities, providing you with scheduled updates and customized reports. This consistent oversight aids in addressing any issues promptly.

Practical steps:

• Segregation of duties: Make sure that one person doesn’t have access or control over all aspects of any significant transaction, especially processes that are easier to modify. For example, the person who handles cash should not be the one who records cash transactions.
• Regular audits: Conduct both internal and external audits periodically to ensure accuracy and compliance.
• Account reconciliation: Conduct detailed reviews of the general ledger (GL) balances on a monthly basis to ascertain their correctness and completeness. This includes month-to-month analysis, year-to-year comparisons, reconciling A/R and A/P, and other balance sheet items. Regular checks help identify discrepancies early, ensuring that all financial records are free of errors and up-to-date, avoiding last-minute scrambling.
• Debt analysis: Perform thorough analysis of debt collection and liabilities to assess financial leverage and repayment capabilities. Evaluate debt-to-equity ratios, interest coverage ratios, and debt maturity profiles to manage liquidity risks effectively. Monitor changes in debt levels and interest rates to make informed financial decisions and optimize capital structure.
• Approval processes: Implement multi-level approval processes for financial reporting to ensure accuracy and accountability.
• Prioritization: Rank the identified risks based on their potential impact and likelihood. Prioritize addressing the most significant risks first to allocate resources effectively. For example, if manual data entry errors are frequent and high-impact, they should be prioritized over less frequent, lower-impact risks.
• Monitor and review: Continuously monitor the effectiveness of your risk management strategies and make necessary adjustments.

3.Leverage Technology for Effective Reporting

Are you leveraging technology to its fullest potential in your financial reporting? The use of it can greatly enhance the accuracy, effectiveness, and reliability of your financial statements. AI can automate documentation, preparation, and reporting, eliminating manual errors and speeding up the processes significantly.

Best Practices:

• Use analytics tools: Financial analytics tools can help in forecasting and in-depth financial analysis, providing a clearer picture of the company’s financial health.
• Cloud solutions: Among other benefits already discussed, cloud-based financial solutions offer real-time collaboration across teams that especially come in handy while reconciliation and consolidation.

Example: Infosys leverages SAP for its financial reporting, ensuring seamless integration across diverse financial operations. Think about how can technology transform your FP&A, and give you a leg up in the competition while simultaneously improving your internal systems.

4.Conduct Financial Analysis

Conducting thorough financial analysis is just as important as maintaining internal controls. Key aspects include preparing common size financial statements for standardized comparisons, conducting flux analysis to pinpoint financial changes, analyzing budget actual variances for alignment with organizational goals, and evaluating both financial and non-financial ratios to gauge performance and market positioning effectively.

Practical Steps:

• Tools and Techniques: Utilize financial analysis tools and software to streamline data processing and generate meaningful data efficiently.
• Benchmarking: Compare financial performance metrics against industry standards or competitors to identify strengths, weaknesses, and opportunities for improvement.
• Interpretation and Actionable Insights: Translate financial analysis findings into actionable insights for decision-makers. Communicate findings clearly to stakeholders to facilitate informed decision-making and strategic planning.

5.Efficient Workflow Management with Checklists and Calendars

Having a detailed checklist of what needs to get done and a month-end calendar with important dates marked is a great way to keep processes structured and makes it easy to adhere to internal standards. ResultLane’s AI automates the maintenance of workflows, documentation arrangement, and reports preparation, while also ensuring proper checks and approvals.

6.Continuous Training and Development

Financial regulations and standards are constantly evolving. Financial reporting is an ongoing process. How do you ensure continuous improvement in your practices? Regular reviews and benchmarking against industry standards can help you stay ahead. Continuous education and training for your finance team are also essential to keep them updated with the latest changes.

Actionable advice:

• Workshops and seminars: Regularly send your finance team to relevant workshops and seminars.
• Online courses: Utilize online learning platforms to keep the team updated.
• Professional certifications: Encourage your team to pursue certifications, which can provide in-depth knowledge and credibility.

7.Maintaining Transparency & Consistency for Ethical Reporting

Transparency in financial reporting builds trust. Are your disclosures clear and comprehensive? Beyond statutory requirements, voluntary disclosures can offer stakeholders deeper insights into your financial health.

Consistency in applying accounting policies is also crucial for reliability. Make sure that the same accounting methods are used consistently from one period to another.

Key points:

• Policy documentation: Maintain clear documentation of your accounting policies and ensure they are consistently applied.
• Reconciliation: Regularly reconcile your financial statements to ensure consistency and accuracy.
• Whistleblower policy: Implement a whistleblower policy to encourage reporting of unethical practices without fear of retaliation.
• Leadership example: Senior management should lead by example in maintaining high ethical standards in financial reporting.

Best Practice: Provide detailed notes and explanations in your financial statements. Use plain language to ensure everyone understands your disclosures.

Example: Mahindra & Mahindra exemplifies ethical reporting through its commitment to integrated reporting, showcasing financial and non-financial performance metrics in tandem with sustainability initiatives. Their annual reports consistently emphasize transparency in corporate governance, aligning with global best practices for narrative reporting.

8.Stakeholder Engagement: The Power of Storytelling via Numbers and Feedback Process

Regular engagement with stakeholders provides valuable feedback. How often do you discuss your financial performance and reporting practices with key stakeholders?

Effective communication with stakeholders ensures that the financial statements meet their needs and expectations. This includes investors, regulatory bodies, and employees.

How to engage:

• Regular updates: Provide regular updates to stakeholders on the financial performance and any significant changes.
• Feedback loop: Establish a feedback loop where stakeholders can provide input on the financial statements.
• Transparency: Be transparent about the financial health and any challenges the company is facing.

Best Practice: Hold regular meetings with stakeholders to gather feedback and identify areas for improvement.

These best practices, when implemented effectively, can help CFOs, financial executives, and managers create financial statements that stand up to scrutiny and support strategic decision-making.

Financial statements are not just compliance documents; they are strategic tools that provide insight into a company’s performance and potential. By taking these above-listed steps, you not only comply with legal requirements but also build a solid foundation for financial transparency and trust.

These steps are tedious when done entirely manually. Transform your financial reporting with ResultLane. Book a demo with us today and see how our AI solutions can streamline and speed up your compliance and reporting financial processes.