What is a Financial Reporting department?
The Financial Reporting department is the core part of the
finance department. They have the ultimate responsibility of final reporting
and taking care of general ledger. There are more responsibilities for the
department apart from the above. Assisting external auditors, Preparing Ad-Hoc
reports, Fixed Asset register handling, Monitoring and preparation of Balance
sheet and P&L reconciliations etc. All the departments are linked to the
financial reporting department. It is like the hub of the company as well as in
the finance department.
Scope of the Financial Reporting department
The scope and the size of the financial reporting department
would be decided based on the size of the company. There would be more
professionals in the department if the organization was larger. Below are the
main highlighted tasks that the financial reporting team has.
Handling the General Ledger
The financial reporting team is the main party for the
taking care of general ledger. They need to monitor the ledger transactions
coming from other departments such as accounts receivable, accounts payable,
bank reconciliation etc. Also, the department should monitor and prepare balance
sheet and P&L reconciliations, which helps to monitor the ledger easily. The
reporting department can raise the queries and escalations for the entries
recorded by other departments.
Reporting
One of the main objectives of the financial department is reporting.
Reporting can be divided into a few main categories.
1. Management Reporting
The reporting team needs to prepare
periodically accounts such as monthly, quarterly, semi annually and yearly. Also,
the team must prepare ad-hoc reports when the management and the other teams
requests. The management report shows the operation’s performance, and it helps
management to take the decisions. Also, this helps to reward people.
2. Financial Reporting
Financial Reporting is normally done based
on yearly. But the team must update it monthly or quarterly too. After
completing the financial reports yearly, the external auditors will audit those
and verify. This is normally done in the year end and it shows all the
comparisons with prior years and also the other performances.
3. Ad-Hoc Reporting
The reporting team must prepare ad-hoc
reports for the management, for other departments, for the regulatory body, for
auditors, etc. This reporting normally has no specific time frame or specific
format (It can be changed from time to time).
4. Regulatory Reporting
Every company has a regulatory reporting
requirement at least for the tax authority. Normally larger companies and other
economic key players such as banks, financial institutes, Insurance companies
have mandatory regulatory reporting to central bank and the inland revenue
authorities.
Handling the External Audit
The financial reporting team has the ultimate responsibility
for the handling and supporting the external auditors. Normally the main
contact points are appointed by the finance reporting team. The finance
reporting team should coordinate and guide for collecting evidence for the
audit.
Fixed Asset Register Handling
Fixed Asset Register is a major task for the financial
reporting team. The financial reporting team has below major tasks on fixed
asset register maintaining.
- 1. Checking the Quotations/invoices
- 2. Approving the payments
- 3. Recording the asset
- 4. Monitoring the asset
- 5. Depreciating & recording the depreciation cost into financials
- 6. Writing off the Fixed assets
Hierarchy of the Financial Reporting department
The financial reporting team is headed by an assistant
manager or manager and he or she will be reporting to the chief financial
officer. Whenever management needs the data regarding the organization,
management will contact the financial reporting team. Hierarchy size is depends
on the size of the organization.
Internal Controls Perspective
The financial reporting team has a major power and a major
role in implementing internal controls to the organization. To make smooth the
results of preparing financial reports and management reports, they have
authority to implement or insist on internal controls over any process or any
department.
New Developments in Financial Reporting
New Software
Nowadays we can see much software are being developed by
various parties. Companies have moved from paper-based reporting to computer-based
reporting completely everywhere in the world. Now with the emerging of knowledge-based
world, even individual people are developing software worldwide. Companies are
fully automating the financials apart from preparing manually in excels.
AI Reporting
Artificial intelligence is the newest trend in the newer
world. With services like ChatGPT, people do no need technical knowledge for
doing digital tasks. Anything works with a command. Reporting can be easily
done through AI. It reduces the research time and the technical time. It is
super-fast too. Hence nowadays software companies are focusing on creating more
tools for Artificial Intelligence which helps for financial reporting.
Shared Service Centers (Outsourced)
This concept was developed in the 2000’s and multinational
and large companies are practicing this method. Reporting is an area that need
high expertise and the knowledge. Companies can hire a shared service for doing
their financial reporting. They will charge for the task basis, and they take
the responsibility for their work. Report will come through few supervision
levels.
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