Record to Report Outsourcing: Timely and Accurate Reports

Data is your company’s most valuable resource; financial data is the first amongst equals when it comes to data types. But the value of data, any data, depends on how you can untap its potential. Structured, unstructured, or data in its rawest form is useless as it cannot deliver actionable financial guidance to stakeholders. This data must be appropriately collated from various systems and sources from across the company and its distributed locations, collected, processed, organised, and then presented in an easy-to-consume format for it to be helpful.

Record-to-report or R2R services ensure that a company’s financial information is collected, processed, and presented not only accurately and in a timely manner but also in a way that meets the financial reporting standards applicable in the UK. A dependable reporting environment drives informed decision-making and helps navigate economic uncertainties confidently.

What is the R2R Process in Finance?

The R2R services function is an integral arm of the finance and accounting department and is the foundation of financial planning and analysis. The three pillars of R2R include data collection, analysis, and reporting to ensure that a company’s financial statement seamlessly aligns with its financial health and performance.

What is Record to Report in Financial Planning and Analysis?

Financial planning and analysis (FP&A) drives accurate, timely, informed planning, forecasting, and budgeting to support a company’s decision-making and lays the foundation for stronger financial health for companies. Finance leaders rely on scenario modelling and performance reporting to ensure their financials are reliably aligned with business performance. R2R services ensure that accurate financial information is presented to key stakeholders with respect to sales, revenue, profits, cash flow, and other parameters. They proceed to benchmark this financial data with historical information that can help them further strengthen the current business roadmap and provide future direction to the business.

The critical nature of R2R in FP&A demands record to report process transformation that builds a more consistent R2R posture for companies.

What is process transformation in finance?

A poorly designed R2R process, which is either incomplete, completely manual, time-consuming, or unable to offer granular visibility into data from different sources, or a combination of these and many other weaknesses, can impact the growth prospects of a company and, in the long run, impact its reputation. This is where record-to-report process transformation enters the picture that relies on a people, process, and platform approach to bring about sustainable improvements in the R2R process that enhances data collection, analysis, and reporting to ensure financial reporting delivers more value to all key business stakeholders. Transformation involves leveraging people with the proper knowledge and skill sets, advanced technology like AI and ML, and enabling process standardisation for more robust recording and reporting.

The Challenges to Process Transformation

While there is no doubting the importance of R2R, many companies cannot set up a dependable and scalable R2R process because it is not easy. We mentioned the word ‘manual’ earlier, but what does this mean? It means a team of accountants manually collects financial data from different systems across the company, trawls through digital reams of Excel sheets, curates this data, enters it in other Excels, and then pours through them to make sense of all the financial information in front of them; and finally develops presentations to put this data in front of them in stakeholders. Companies are not automating repetitive and time-consuming tasks, thus stretching their team of record-keepers and reporting experts thin, substantially reducing the time for strategic activities like extensive analysis and associated insights. This means the ‘results’ from R2R aren’t up to the mark. Also, scalability is directly proportional to the number of accountants you can assign to R2R if a company’s R2R is largely manual. This is both an expensive and challenging task, owing to the skills shortage in the industry. There is another aspect to this challenge. You must hire the right financial services personnel to oversee R2R. According to a survey conducted among finance leaders, 30% need finance professionals with more tech expertise. This demand can further decrease the talent pool, making hiring a highly skilled accounting workforce even more difficult.

Scaling a manual process is challenging. But, moving from a legacy process to a more tech-enabled record-to-report process transformation calls for focused tech deployments. This not only includes deploying automation tools but also identifying the areas for improvement. E.g., process standardisation for closing the books faster; reducing workload through automation – this can include automating journal entries, account reconciliations, and more; deploying tech for smarter accounting; setting protocols for better data governance and compliance; and more. There is a substantial cost associated with all manner of tech intervention, the kind of investment that not many businesses can afford or do not want to make, considering the economic climate.

Can Record to Report Process Outsourcing be the Answer?

We know that outsourcing helps companies experience the benefits of labour arbitrage, which results in cost savings. However, it is imperative that when it comes to R2R services, it is important to look beyond cost and how an outsourcing provider fuels record to report process transformation. The right provider can bring much-needed agility to R2R driven by digital transformation and the skill sets of an expert team that can leverage this transformation to deliver expected outcomes. They will focus on delivering actionable insights driven by in-depth visibility into finance data lying across functions, which aids results-oriented decision-making.

Unfortunately, not all record to report process outsourcing companies are built equal. You must choose a provider who can deliver end-to-end transformation to maximise efficiency and centralise processes through optimal use of the tools, technologies, and people who can help develop a highly mature R2R process that serves the current needs of a company and those of the future. The process should scale seamlessly to meet the growing needs of the business. The provider should achieve lean-sigma-led process standardisation, which guarantees a streamlined process that maximises record-to-report potential. More importantly, they should be able to harness the power of advanced technologies like RPA, AI, and ML to improve R2R accuracy and productivity to reduce costs.

These benefits can be boiled down to two critical benefits: data accuracy, resulting from a transition from manual to a more advanced process, and timely reporting that is a direct outcome of scaling R2R by scaling people, processes, and platforms.

QX delivers R2R services that are founded on the core pillars of process optimisation, highly skilled accountants, and intelligent technology. It has earned a reputation for customising R2R transformation to meet specific client demands. Contact QX to know more about how its team can help you improve R2R process efficiency with standardisation and digitisation.

Originally published Feb 14, 2024 06:02:52, updated Feb 15 2024

Topics: Finance & Accounting Outsourcing, Record-to-report cycle