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4 Benefits of R2R (Record to Report) Automation in 2024

The process of collecting, managing, and presenting a company’s financial data to high-level executives is known as record-to-report (R2R), with financial closing being a crucial phase in the that process. If executives are reliant on their accounting staff to manually close the books, they might be provided with financial reports that are erroneous and not reflective of the company’s true financial position, for better or for worse.

In this article, we plan to explain how accounting teams can take advantage of financial close software to automate the closing of their financial accounts, which in return, will improve the accuracy of the R2R that executives rely on for navigating the company forward.

What is the record-to-report (R2R) process?

You can think of the R2R management as all the steps that accountants have to follow in their monthly financial close process in order to generate data-driven and informative financial documents, such as income and balance sheet statements, that explain the financial health of a company. Here are the steps in R2R and our recommendations about tackling their challenges with automation:

1. Preparing a close checklist

The close checklist is the umbrella term attributed to all the steps in the closing of financial accounts. These steps mainly include journal entries, identification of intercompany transactions, and what is commonly known as verification, or the reconciliation of balance sheet which would allow for the creation of financial statements and adjusted balance sheets.

The challenge

The main issue accounting teams face when it comes to checklist is the timely creation and execution of them.

The solution

Financial close automation solutions leverage automation tools that can be scheduled to create a close checklist on specific dates, on a monthly basis. Moreover, they also allow for real-time progress monitoring, enabling immediate remediation of issues and bottlenecks.

2. Recording the entries in the journal

The next step, after creating a checklist, is going is entering all the company’s transactions in the preceding month onto a journal, which will then be posted onto the general ledger for trial balance.

The challenge

This is often the step that takes the longest to materialize because the volume of transactions that need sorting through and recording can be overwhelming, which could then result in erroneous entries.

The solution

A financial close software can be integrated into a business’ various ERP systems to enter the transactions in a journal as they are taking place through out the month, in real-time. This not only allows accountants to save time, but minimizes erroneous entries as they are all automatically cross-checked with the appropriate receipts, orders, and invoices.

3. Consolidating intercompany transactions

Intercompany accounting is taking account of any money that has passed hands between a parent company and its subsidiary, or vice versa.

The challenge

Because a company’s legal entities may be spread throughout several geographical regions, they may all be subject to separate tax and regulatory regulations, which may affect how transactions are handled. The combination of this factor and the large volume of intercompany data that needs handling will bog down consolidation.

The solution

Financial close automation solutions benefit from orchestration and RPA integration, allowing them to automatically flag intercompany transactions, and only input them into the software after deducting the appropriate tax or changing their currency denominations.

4. Reconciling the balance sheet

The goal of balance sheet reconciliation is to ensure that the assets and liabilities of a company during the preceding month match.

The challenge

Because balance sheet reconciliation uses data that has been recorded in the previous steps, such as journal entry or the postings on the general ledger, any error committed early on the process will have a downstream ripple effect that will negatively affect the balance between assets and liabilities.

The solution

Because the preceding phases of data entry, identification, and matching are all automated, a higher level of precision will be applied to the recording of the numbers into the system, allowing for a smoother and more accurate balance sheet reconciliation.

For more on financial close

For more on finance automation, read our in-depth articles about:

If you believe your business could benefit from adopting a financial close solution, we have prepared a data-driven list of financial close vendors.

And we can help you find the right tool for your business:

Find the Right Vendors
Access Cem's 2 decades of B2B tech experience as a tech consultant, enterprise leader, startup entrepreneur & industry analyst. Leverage insights informing top Fortune 500 every month.
Cem Dilmegani
Principal Analyst
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Cem Dilmegani
Principal Analyst

Cem has been the principal analyst at AIMultiple since 2017. AIMultiple informs hundreds of thousands of businesses (as per similarWeb) including 60% of Fortune 500 every month.

Cem's work has been cited by leading global publications including Business Insider, Forbes, Washington Post, global firms like Deloitte, HPE, NGOs like World Economic Forum and supranational organizations like European Commission. You can see more reputable companies and media that referenced AIMultiple.

Throughout his career, Cem served as a tech consultant, tech buyer and tech entrepreneur. He advised businesses on their enterprise software, automation, cloud, AI / ML and other technology related decisions at McKinsey & Company and Altman Solon for more than a decade. He also published a McKinsey report on digitalization.

He led technology strategy and procurement of a telco while reporting to the CEO. He has also led commercial growth of deep tech company Hypatos that reached a 7 digit annual recurring revenue and a 9 digit valuation from 0 within 2 years. Cem's work in Hypatos was covered by leading technology publications like TechCrunch and Business Insider.

Cem regularly speaks at international technology conferences. He graduated from Bogazici University as a computer engineer and holds an MBA from Columbia Business School.

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