If you can’t re-trace how your reports are prepared,
How do you know they are correct?
If your Reports are flawed how do you make good decisions?
The primary purpose of preparing any report is to drive great decision-making, so if a report is incorrect or unclear then it is practically impossible to end up with the best decision.
Do any of the following issues arise in your business?
• Difficulty balancing inter-company transactions
• External financial reports that differ from internal management reports
• Internal management reports that show volatile results from month to month
• Difficulty identifying potential financial surprises
Reporting transparency issues are often the source of all of these niggles; and dependence on manual processes across several people/sites/divisions will exacerbate challenges. The good news is many of these are quite easy to resolve.
This post has some other ways to improve your reporting – Create Clearer Reports[/box]
Transparency is operating so it is easy for others to see what actions are performed.
Dictionary.com defines transparent as: easily seen through, recognised. In business reporting this translates to ensuring there are clear process paths, easily definable audit trails and documented checks and balances during all stages of report preparation.
In a recent post on Reporting with Bias issues of transparency were high on agenda of the comments. However, even an exec summary is “biased” as the process of summarizing, by necessity, created bias. The trick with Transparency is to make sure it is correctly labelled as an Executive Summary so all of the users are clear important details may be omitted in this part of the report.
Fix Reporting Transparency Problems:
- Improve accountability – Start by appointing one person as responsible for the accuracy of each report. Often reports have multiple sources of information; have one owner to verify the sources and inputs into the report, this needn’t be onerous, once the other steps are completed. Also ensure that each person who adds data to the report is able to verify and replicate the data added with the original source of truth.
- Simplify and standardise the report preparation processes – Next eliminate unnecessary complexity and inconsistencies in the process of report preparation; one set of instructions that is always followed. Ensure that at every handover point there is a check to make sure what was handed over is the same as what was received.
- Streamline – Sequencing all the work steps to eliminate bottlenecks, duplication of effort and remove all non-value-added activities. With clearly defined and logical steps in report preparation it is easier to see where breakdowns have occurred. – Double checking can be seen as a duplication of effort, but it is also a value add activity because it insures against errors .
- Align with stakeholder needs – to provide effective decision support and regulatory compliance different reports will be needed by different people, and the levels of transparency needed will also differ. As with the Executive Summary example, be clear about what type of data consolidation has taken place – include a small part of the report that lists references and/or sources of information so that individual users are able to verify the data themselves if needed.
- Leveraging technology – reporting macros can be your best friend or worst enemy. Any changes to the source data can throw automatic reporting rules for a six and result in bad reports – build in cross checks to your technology and ensure tables and fields are appropriately updated
So for example a Monthly Income Statement pulled straight from your accounts system, shouldn’t need too much verification, but needs to transparently reflect all of the income and expense transactions that happened during the month. On the other hand an excel Dashboard prepared monthly by two people who reference both the Income Statement and the Balance Sheet will need more documented checks and balances included in the report to evidence transparency.
Benefits of Improved Transparency
Just some of the benefits you will experience by undertaking to improve the transparency of your reports:
- information will be reliable, verifiable, and objective
- there will be more time to spend analysing information, rather than checking errors
- comparability in the accounting information
- the workload will be more effectively distributed without bottlenecks, redundant tasks and non-value add activities
- Reduce volatility in financial data
- improve confidence when certifying financial statements for both the tax office and lenders
Has gambling with reporting transparency ever caused your business an issue?
Feel free to share your experience in the comments below…
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About the Author
Eve Blackall the small business answer to The Supernanny.
At Smart Accounting you work one-on-one with Eve who has already assisted hundreds of business owners increase cash-flow, grow profits, also ensuring those businesses fetch the highest price when it comes time to sell.[/box]