What is Record to Report (R2R) Process

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Stages of Record to Report and Importance of a Streamlined Record to Report Process
Record to Report (R2R) is a Finance and Accounting (F&A) management process

Record to Report (R2R) is a Finance and Accounting (F&A) management process that involves collecting, processing, and delivering relevant, timely, and accurate information. It provides strategic, financial, and operational feedback on how a business is performing. Stakeholders read the feedback and gain insights into whether an organization is performing successfully or not, and if their expectations have been met.

Stages of Record to Report

  • The groundwork for the Record to Report cycle is laid from the data processing stage itself. This is where most of the data that is essential for creating the reports are generated. If the data entry teams enter the records correctly at this stage with minimum errors, then the rest of the process goes smoothly. If not, then much time is wasted on manual intervention and re-working.
  • During the end of a financial period, the finance team and everyone else associated with any kind of accounting work is given a deadline. They have to finish all their postings before the deadline so that the general ledger can be closed and the reconciliation and validation work can begin. The integrity of the data flowing into the general ledger is improved, and efforts are taken to reduce the need for manual journal entries. Most companies try to complete the closing cycle as quickly as possible. But large companies that have legacy systems carried over from acquisition of other companies, and complex internal procedures, take a lot of time over the closing. This subsequently delays the entire R2R process, and for many finance teams, completing the closing cycle on time is a constant challenge.
  • Once the closing cycle is over, the accountants start reconciling intercompany balances, performing eliminations, and validating the information that will eventually go into the financial statements. The finance team is well aware at this point that the reports it prepares have to address the needs of both internal and external stakeholders. The reconciliation exercise is quite complicated in the case of multinational entities with vast operations. Typically, however, companies try and complete the consolidation work within as short a span of time as possible after the close of the general ledger.
  •  Once all the data has been gathered, validated, and assimilated, the analytical process starts. A wide range of reports is subsequently prepared that contain a variety of statistics and key performance indicators. These reports are distributed to both internal and external stakeholders that include senior management, operational heads, investors, and industry regulators.

Importance of a Streamlined Record to Report (R2R) Process

1. Strategic Decision-making

It is based on these reports that senior management plans the strategies of the company. These reports tell operational heads whether their teams are meeting their targets, and if not, what actions they need to take. In conglomerates, the chief executives use the financial reports to decide which subsidiaries to drop and which ones to support.

2. Compliance

Post the 2008 recession, financial market regulations have become more stringent. Companies have to meet many more guidelines. Compliance issues have become a huge talking point after the Enron and Arthur Andersen scandals. Regulators are concerned that balance sheets and revenue statements could be manipulated. In such an environment where meeting regulatory requirements has become vital, preparing accurate reports becomes much more important.

3. Tax Planning

The tax planners in the company calculate their estimations based on the numbers in these reports. They have to understand how much tax the company needs to pay and what strategies they can use to reduce their tax liability.

Conclusion

It is highly important for the company to have a stable and efficient Record to Report process in place. Optimizing the cycle and reducing its length can enable scarce financial resources to be employed for mission-critical objectives. Completion of the cycle in fewer days will also aid in analysis and decision-making. An efficient Record to Report cycle can thus, bring about a reduction in the cost of finance and enhance the value of the finance function to the business.

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For information on how Invensis Technologies can deliver value to your business through Record to Report Outsourcing Services, please contact our team on US +1-302-261-9036; UK +44-203-411-0183; AUS +61-3-8820-5183; IND +91-80-2659-5899; or write to us at sales {at} invensis {dot} net.

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