Data is gold. Businesses thrive on the power of numbers because data helps managers and business owners to know what works, how it works, and ways to improve. However, raw data serves a limited purpose.
To become useful, data has to be refined into usable information. One of the tools for transforming data into usable insight is Record-to-Report (also known as the R2R process).
This article looks at what the term means, its various stages, and usefulness to businesses.
What is Record-to-Report?
Record-to-Report refers to all the steps and processes used to collect, record, process, and present accurate information on a company’s performance. Performance in this light includes the strategic, financial, and operational achievements that a business should attain.
R2R is vital to a company’s development. It provides operational feedback that reveals the enterprise’s state at all points, enabling management to make accurate data-driven decisions.
What is the Record-to-Report cycle?
The full Record-to-Report process is cyclic. So, the R2R cycle is the detailed stages that the R2R goes through from the beginning to its completion. Although there may be similarities in the industry-wide patterns of the Record-to-Report process, the stages may differ between companies.
The needs of specific businesses could necessitate the modification of the processes. For instance, the process could take a little longer as big organizations go through miniature Record-to-Report processes internally.
In small businesses, the challenges are less cycle-stretching. However, they may have to grapple with the challenge of manual workflows as R2R automation may be budget hostile.
Stages of a R2R cycle
These are the common stages of R2R for both big and small businesses as well as everything in between.
Self-explanatory, this refers to the process of extracting data from primary sources. Data at this stage is often unorganized. The primary sources of data for extraction include emails, documents, web pages, marketing leads documents, and more.
This is often combined with data extraction. During data collection, the extracted data is measured and represented for easy comprehension. Data collection is not unique to the R2R process as it is used in various other types of research both professional and academic.
However, it might be impossible to maintain research integrity if the data collection process is compromised.
Here, the data collected is checked to make sure that they are correct. The process of validating data is known as data cleansing.
Validation rules are employed to check for correctness, security, and the meaningfulness of data before it is fed into the system.
Data Analysis and Communication
After validation, data is analyzed and used to create the appropriate and useful report required for each situation. The analyzed data is communicated for easy interpretation by use charts, graphs, and images. There are experts skilled in data visualization, making it possible for non-experts to visualize the relationships between various types of data.
The closing process occurs at the end of the financial cycle. Accounting professionals have a window to complete all postings and ensure that the records are up to date.
While speed takes preeminence during this stage, accuracy is also crucial. Hence, accounting professionals have to tread the thin line between being fast and being consistent with their report.
When the cycle is completed, reports are typically sent to the Chief Financial Officer (CFO), or any other high-ranking officer for review and approval. In some cases, companies are legally obligated to send copies of the R2R to regulatory bodies, like the SEC, for review and approval.
Why Do You Need Record-to-Report?
It is essential to carry out the R2R process for a few reasons.
This is perhaps the most important reason for the R2R process. It gives a bird’s eye view of the company —what was working and wasn’t. This arms the upper management of companies with the right information to tackle challenges that plagues their business.
Also, the R2R makes it clearer and easier to implement changes in areas where changes need to be made and processes streamlined. As earlier mentioned, well-analyzed and properly categorized data is pivotal to making coherent and strategic decisions about a company’s future.
Streamlined tax processes
Decisions on what to pay, how to pay, and where to pay taxes are essential parts of a company’s tax-compliance system. The reports generated by the R2R process make it easier to compile and pay taxes when due. However, in some cases, non-compliance with tax requirements occurs due to ignorance.
In the wake of the different scandals that have rocked the global marketplace in recent times, regulatory agencies are imposing stricter standards on companies. To avoid the hangman’s wrath, companies need to ensure that they are meeting set standards. The Record to Report process is a viable means to achieving this.
Best R2R Tips to Implement
Considering the importance of the R2R process, it goes without saying that every company has to make sure it is done correctly. Here are tips to ensure that your R2R process is foolproof.
Define Roles Properly
Make sure that each stakeholder or collaborator’s role is well defined in the ledger and communicated beforehand.
Use appropriate terms
This is a basic step that controllers often overlook during the R2R process. Ensure that the appropriate accounting terms are used at all times. This enhances clarity.
Automating your R2R processes eliminates human errors, saves time, and reduces the money spent on mundane tasks. In addition, automation solutions allow for easy workflow tracking. So, you can monitor the progress of the R2R processes in real time and catch errors as they happen.
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RECORD TO REPORT (R2R) PROCESS SOLUTIONS (Datamatics)
The 8 Important Steps in the Accounting Cycle (Investopedia)