5 Genius Ways To Prevent Financial Reporting & Analysis Errors
By Kevin Hsu - Feb 01, 2017
We have all been there when it comes to our financial reporting & analysis. After spending hours of precious time compiling date and crunch formulas, you realize that a late-night typo has badly altered your findings. Or, hours too late, you realize one of your colleagues adjusted a formula, sending the team’s spreadsheets into an inaccurate mess. If these scenarios (or any like them) have never happened to you, then maybe that is because you are spending wasted days double and triple-checking the data, significantly reducing the amount of time you have for the actual analysis.
For everyone’s benefit, here are five tried and tested genius steps that will help you and your firm prevent financial reporting & analysis errors.
1. Implement appropriate security features.
While you are probably highly conscious of security measures that prevent cyber-crime and corrupt hacking, you may not be protecting your data from your employees. Now I am not saying that your employees are involved in nefarious behavior; but, when it comes to financial reporting & analysis, they may modify a formula (either by accident or because their fundamental premises have been altered), which in turn radically shifts your reports. Being able to locate typos or accidental alterations can be unnecessarily difficult and exceptionally time-consuming. In addition, if your financial reporting & analysis platform lacks security features then your spreadsheets and essential data will be laid bare when shared with investors or the broader community.
Therefore, your firm must implement the appropriate security features to prevent these types of financial reporting & analysis errors. Implementing these features can be as straightforward as choosing a financial dashboard that provides security features to limit access and track any modifications.
2. Insert assumptions in their own cell.
One of the most frequent issues we hear about are ones resulting from assumptions. When it comes to editing a calculation, assumptions are the most frequently edited items. Therefore, when embedded into individual formulas, they turn into a headache. In order to minimize the chance of a financial reporting & analysis error, insert assumptions into their own cell and then have the individual formulas pull from that cell. By making this small change, your FP&A team will only have to make a small change each time the assumption alters.
3. Visualize your data.
Ever since the English statistician Francis Anscombe published his 1973 paper Graphs in Statistical Analysis, the importance of data visualization has become more and more widely-accepted in the financial reporting & analysis arena. In the paper, Anscombe demonstrates how useful (some may say essential) graphs are to all kinds of statistical analysis. The raw data of his four groups seems almost identical and impossible to notice any kind of difference; however, upon graphing the data, outliers become easier to spot and discrepancies easier to discern.
No matter what industry you are in, visualizing your data helps you to catch potential errors quicker than merely looking at the raw numbers. By implementing financial reporting & analysis software that offers quick and easy visual analytics, you can help your finance team to move in a visualization direction.
4. Create a defined and consistent language.
I am going to hedge my bets that your firm has numerous team members discussing data from various software programs and spreadsheets. This setup can be complex by itself, but what do you do when each department describes and defines terms differently? This scenario is almost definitely going to create a slew of reporting errors. This is why before you embark on your next round of financial reporting & analysis, you must schedule some time to create a defined and consistent language that all department members can agree on and then utilize.
5. Integrate your data into one centralized source.
Research has shown that nearly 90% of spreadsheets contain some kind of error. If that alone wasn’t a big enough issue, the fact that many small businesses are juggling two or three financial reporting & analysis software programs, while mid-level companies may be juggling four to seven, should be.
Excel is a static financial reporting & analysis solution. It is unable to bring together these various programs and therefore creates a breeding ground for financial reporting & analysis errors. When companies have data that’s updated in real time for all users, it means less iteration, fewer update delays, and more veracity in the data. In other words, integrating your data into one centralized source through a cloud-based financial dashboard is a genius way of ensuring that fewer reporting errors rear their ugly heads.
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