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Do you know where every number in your financial reports comes from?

One of the underlying requirements of finance is to put controls around the transaction to report processes. This is often referred to as R2R or Record-to-Report.

There are all sorts of qualitative measures we can put around reporting (accessible, timely and accurate just to start), but one of the most important requirements is accuracy.

For many years at IFS, we have allowed users to easily drill from the financial reporting to the business transaction and back again. We are now seeing ERP buyers rate this type of traceability with a growing level of importance.

A large part of this change is likely due to authorities using technology more effectively – tax audits, XBRL reporting and integrated online payroll tax filings are just a few places where we see authorities stepping up to the technology plate.

Fundamentally, I think that this is much more than meeting demands from authorities – it is really to ensure that stakeholders are getting what they expect and demand.

As I mentioned earlier, the requirement for all business transactions, records and reporting is as a control mechanism. Executives need to be confident that the details they are relying on to make business decisions are appropriate and the numbers that are being provided to investors so they can make decisions are also appropriate.

The list of corporate issues, either reporting or outright failures, is ever growing (Trump Entertainment Group, Tesco and BAE Systems have all been in the limelight over the last few years).

So the question is do you have clear traceability from all of your management reports back to the originating transactions? If you do, is the evidence of that transaction reliable?

This isn’t guesswork: you need to know for sure.

(Image via Ken Teegardin, Flickr, under Creative Commons license.)

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