What Is Record To Report? (With Benefits, Steps And Tips)

Indeed Editorial Team

Updated 27 September 2022

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Record to report (R2R) refers to the finance and accounting process, which involves collecting, processing and delivering accurate financial data to stakeholders and business owners. Companies often use this process for better financial performance, profit and competitive advantage. Understanding the R2R process can help analysts and investors gain strategic, operational and financial feedback on performance and identify business areas to improve. In this article, we define what the R2R process is, share its benefits for businesses, list steps for the process and provide tips to help you optimise it.

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What Is Record To Report?

Record to report is the process of documenting and reporting financial transactions and data within an organisation. The first phase of the process includes a comprehensive recording of financial documents, such as spreadsheets, budget reports and profit-and-loss statements, along with organising the data and analysing it to provide accurate information. The second phase involves reporting the analysed financial data to business owners to track the company's financial performance and understand where they can improve to boost their profitability.

R2R is also sometimes called the general ledger process, which refers to the maintenance of the general ledger. This includes gathering transaction data, preparing unit trial balances and reporting the company's consolidated financial results. The data recorded in the general ledger falls into several categories, such as assets, liabilities, revenues, expenses and owner's equity.

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Benefits Of R2R

The importance of the R2R process is its potential for accurate and efficient financial reporting. It can help produce documents that provide high-level evaluations. These evaluations support businesses in strategic thinking and decision-making and allow them to analyse their success and business operations. The following are some of the benefits of the R2R process:

Financial compliance

Complying with accounting standards and regulations while reporting financial transactions and performing accounting activities is a requirement for businesses and organisations. They may also operate under stringent financial compliance regulations to ensure ethical business operations. The R2R process consistently collects, validates and reports financial information that helps companies maintain accuracy and legal compliance in business operations.

Strategic planning and decision-making

Business owners and upper-level management can use the information provided by the R2R process to make better decisions. Insights gleaned from this process can enable companies to understand the overall business process management. The R2R process can also help stakeholders check whether the company is meeting its financial goals or requires a change to its business strategies.

Tax management

The information collected from the R2R process can affect all financial planning, including taxes. Accurate financial information can enable investors to pay taxes on time. It can also help finance professionals access tax liabilities and devise smart tax reduction measures to help save money.

Value creation

An R2R process supports value creation with formalised and well-structured data. It can result in quick and valuable insights that are helpful for analysis, planning and decision-making processes. Faster and more accurate decision-making can lead to better value creation for the organisation.

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4 Steps Of The R2R Process

Legislative changes and increased expectations from the financial department highlight the requirement for an efficient financial reporting process. The R2R process serves that requirement and can help businesses in several ways. The following lists the four stages of this cycle:

1. Recording transactions

In this step, accounting professionals record and process every transaction made by the company in compliance with local accounting standards. It is also called the data collection and management stage, which involves documenting revenues, purchases and expenditures for business units throughout the company. Financial experts gather the information for creating financial statements from different sources, including general accounting activities, procure-to-pay cycles and journal entries.

2. Consolidating

The second stage involves consolidation and is also called the reconciliation and validation stage. This step involves reviewing the recorded financial transactions and organising them into appropriate categories. As the accounting teams collect data from different sources, professionals may organise similar information in one place and ensure they have everything to present in front of stakeholders.

3. Reporting

At this stage, finance and accounting experts can create detailed financial reports about the company. They generate income statements, balance sheets, profit-and-loss statements and other important documents related to performance, profitability and compliance to track the organisation's financial health. Once they generate these documents, they send them to the company's leaders, including senior management staff and business unit managers, enabling them to make the required strategic changes to improve operations and financial performance.

4. Closing cycle

At the end of the fiscal year, accounting professionals complete all financial postings within a fixed deadline to lock the general ledger for specific accounting periods. The period may vary according to the organisation's reporting needs. Each team may receive a deadline to ensure they posted complete and accurate transactions for that period. Closing the reporting cycle for temporary accounts can help organisations prepare for their next accounting period.

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Tips To Optimise The R2R Process

As every company is unique, the optimisation process may vary based on the company's financial requirements. A step-by-step approach can help accounting professionals face common R2R challenges effectively. The following are a few tips to optimise the process:

Standardise the process

Create a standardised accounting procedure to increase the effectiveness and efficiency of the process, resulting in accurate financial data. Consider segregating the information for specific audiences and reports and mentioning the data source before documenting it. For example, you may set criteria for journal entries or develop naming conventions for accounting files. You can also assign specific roles to each team member, allowing them to complete tasks in time and meet organisational goals.

Organise the data systematically

Organising the data can help you set permissions, preserve data integrity and limit access to documents, pages and spreadsheets. You can create templates, formats and guidelines to apply across the organisation and develop smooth procedures for accessing and collating data from various sources. It can help you convert the data into useable and intuitive reports. Consider putting checks and balances in place to ensure the authenticity of the data and identify any issues immediately.

Implement automation programs

Automation can help you manage simple activities, saving you time and allowing you to focus on more complex tasks. You can use advanced tools and software available in the market to automate several aspects of your finance and accounting functions. Some additional benefits of automation programs include creating more consistency and limiting the risk of human error.

Promote interdepartmental communication

Large organisations usually have several departments and multiple locations, which require cross-functional communication and collaboration to support the R2R process. Communication makes it easier for accounting professionals to collect accurate data and perform their R2R duties. One of the effective ways to promote communication in an organisation and encourage collaboration within the finance and accounting departments is by using cloud-based platforms. These can enable professionals to share and edit information from any location and allow them to track changes whenever they occur.

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Conduct regular reviews with stakeholders

It can be a good idea to conduct regular review sessions with stakeholders to get feedback on every new report. Consider asking for suggestions from the appropriate stakeholders to ensure the data has accurate and relevant information. It can help professionals establish best practices, note missed details and avoid mistakes in the future.

Maintain an inventory of the reports

The R2R process leads to the development of many reports for different purposes and stakeholder needs. It comprises a lot of paperwork, which may increase the risk of delivering inconsistent financial documents. Effective inventory management can ensure continuity of information, facilitate the planning of budgets and investments and provide updated information on the actual use of resources.

Restrict changes to vital records

The reporting process includes key records or documents, such as customer credit master records, banking master records and vendor accounting-related master records. Any changes to these documents may result in fraudulent activities and inaccurate financial reporting. Restricting changes to these important records can help accounting and financial professionals maintain internal control and prevent significant accounting errors.

Create general ledger validation checks

Most accounting systems in an organisation have standard edit and validation checks in place. It prevents reporting errors and reduces chances for fraud and abuse of data. Adding validation to your R2R process can strengthen financial reporting control and provide an opportunity to deliver more accurate data.

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Hire a financial expert

All financial reports are a record of the company's historical financial performance. These documents can aid companies in changing their course of action and developing ways to boost growth. Hiring financial experts to undertake the process can save time and resources, allowing you to focus on more value-adding functions. Professional experts can also provide an accurate, timely and compliant report faster than in-house accounting staff.

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