Financial reporting is crucial for businesses at every stage of growth, but for those that are expanding fast, it becomes much more so. Precise financial statements are the foundation for:
- Realising the actual state of your company’s finances.
- Choosing wisely in business matters.
- Observing legal and fiscal requirements.
- Monitoring creditworthiness, capital expenditures, and cash flow.
As your company grows, safeguard the accuracy of your financial reporting to facilitate data-driven decision-making and prevent expensive errors.
Accurate reporting is a problem for companies that are growing.
The increasing complexity of operational procedures in a firm might put pressure on the current finance and accounting controls. This is particularly valid if those systems lack scalability optimisation.
Executives in the middle market concur that incomplete reporting is a challenge to accounting and finance. Approximately 40% of companies generating between $11 million and $50 million annually list erroneous financial reporting as one of their top three biggest accounting and finance problems. Concerns rise with revenue; 50% of companies with yearly revenue between $51 million and $100 million face similar difficulties.
To be ready for obstacles in the next development stage, businesses should proactively evaluate and modify their current procedures. Take a look at these risk variables to help position your business for success in the future.
Financial Reporting Risk
Staffing Inconsistencies
Due to hiring volatility, companies are experiencing high employee attrition and a shortage of skills. This might make it impossible for a business to continuously implement new financial reporting procedures and systems as a growth-oriented lever.
Issues with staffing and retention also result in disparities in skill sets within internal teams because of employee experience levels. Even when finance departments are fully staffed, skill discrepancies may still exist. For instance, the optimisation of subpar financial processes may be slowed considerably by a lack of technical expertise in process management technologies, such as ERP systems. Just 36% of the organisations polled claim their personnel fully understands the ERP systems that 60% of them already employ.
As a developing firm, your staff’s abilities and knowledge are a powerful source of resilience and effective accounting leadership. Accurate and high-quality financial reporting depends on team members maintaining process continuity and being knowledgeable about technological tools and best practices.
Manual Operation
As a business expands, manual procedures often find their way in. Businesses with minimal internal resources can perform manual accounting procedures in the early stages of financial maturity.
But as revenue volume rises, it will get harder for your staff to stay productive and stay out of trouble with the books.
Accounts receivable (AR) and accounts payable (AP) are two examples of automated procedures that are essential for your firm to integrate as soon as possible. This will improve the quality of your financial reporting.
Month- End- Closing process error
Your internal resources may also be strained by inefficient month-end closing procedures. Larger workloads and slower procedures increase the likelihood of errors in your financial reporting. According to Ventana Research, “59% of “midsize organisations are slow closers” taking more than a week to close their books. Of them, 54% use Excel spreadsheets a lot in their work.
Regularly reviewing and refining your month-end closure procedure necessitates that your company:
- Identify inefficiencies
- Sort accounting mistakes into categories and prioritise risks.
- Establish new best practices and timelines for remedial measures.
By decreasing friction in your monthly operations and improving operational efficiency, little changes may have a large impact.
Reconciliation Challenge
Your financial staff will have difficulties with AR reconciliations as transaction volume rises. A robust accounting leadership can protect against reconciliation problems, according to the Journal of Accountancy, which states that financial leadership can take charge of “tracking the completion status of all reconciliations, making sure the reconciliations are finished on time and following up on incomplete or late reconciliations.”
Payment and remittance data pours in from several sources in a variety of forms when dealing with a deluge of electronic transactions and client portals. To prevent accounting and report mistakes, these transactions must be promptly tracked.
Acquiring the new company
A successful purchase might be a source of joy, but it can also put your financial reporting at danger. Maybe you’re thinking about buying another firm, or you just bought one and are having trouble navigating the strange world of intercompany accounting (ICA).
When you acquire a business, it’s possible that your team may have to combine several accounting systems or that you’ll receive a less developed tech stack. Your accounting staff therefore turns into a crucial part of your M&A endeavours’ compliance and success. The dangers to your financial reporting as your business develops will be greatly decreased by comprehensive financial leadership that possesses a thorough awareness of your sector and its subtleties.
Lacking in Objective Eye
You can be too “in the weeds” while you’re trying to raise money or when you don’t have as much time to devote to the task to spot little accounting errors that add up over time. An impartial third-party viewpoint can promptly identify those mistakes in real-time and stop them from growing worse.
Consult a reliable accounting controller to identify potential hazards. Their duties include monitoring a company’s accounting operations, making ensuring ledgers are correct, and following financial standards. They may assist in positioning your company for sustainable growth and enhance the accuracy of your financial reporting in addition to serving as a reliable adviser.
Invest In Finance and Accounting Outsourcing Firm to Drive Growth
You must raise the calibre of your financial reporting before implementing detail-oriented supervision.
To streamline your accounting and reporting operations, Proowrx offers adaptable accounting solutions. Gain technical and sector-specific knowledge from a group of top finance professionals to advance the accuracy of your company’s reporting and account handling while achieving a higher level of financial maturity.
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