Many people believe that the financial reporting process is the most important function of an accounting system. Even the best accounting systems cannot handle flawed financial reporting processes. To help you determine whether the financial reporting process is experiencing difficulties, you need to answer the following five questions:
Answering “no” to one or more of these questions means that work needs to be done to support your reporting process. The following is a list of common business errors regarding financial reporting and information functions and provides feedback to avoid these errors in the future. Although some of these measures seem basic, many companies are still struggling with them, and all companies need to double-check to make sure they are handled correctly.
Financial statements have no comparable details.
Some companies may produce single-column reports, which are less educated than most columns due to a lack of information. The inclusion of last year’s figures, last month’s figures, or calculated figures enables the reader to assess whether the true figures exceed or fall below expectations.
Solution: make sure you include comparative information in your financial statements and information reports a lot. For example, you could present two income statements – one comparing the current value with budget estimates and the other comparing the current value with the previous year.
There are no calculated differences in the financial statements.
While the introduction of a comparative column (as mentioned above) is a good step, the lack of different statistics forces the reader to read the difference mentally or with the reader – it is both time-consuming and prone to error. The most effective way is to relax readers in the numeracy column so that they can focus more on learning and reduce numeracy.
Solution: When presenting financial information reports, include any numbered variances so that readers can read them easily.
Percentage differences are not taken into account in the financial statements.
Where the calculation of differences can be informative, the percentage differences can be equally informative. For example, suppose the budgeted and actual amounts are $ 62,000 and $ 74,000 for payment costs and $ 2,800 and $ 5,600 for facility costs, respectively. In this simple example, the calculated differences show that the actual labor cost was $ 12,000 higher than the planned amount, while the utility cost was higher than the average. In this case, a steep adjudicator could concentrate on the larger wage gap and reduce (or negate) high utility costs. However, calculating the percentage difference between the same amounts shows that the cost of salaries is 19% above budget (or unfavorable), while the cost of facilities above budget (unfavorable or favorable) is 100%. These additional percentage calculations make it much harder to overlook the dominant utilities. The Show Calculation Factor table shows this cost amount, including calculated and percentage differences. Note that the difference (12,000) and the -100% difference are easier to detect (or capture) rather than going beyond the actual column and budget.
Solution: When preparing financial statements with comparative data, you should include the percentage difference in the calculated difference so that the reader can capture the overspending, which may not be as noticeable when only the calculated difference is analyzed.
Financial statements do not reflect the truth.
From time to time, they ask my small business accountant if the balance sheet is correct. Almost always, these accountants answered “yes.” However, if you choose a specific amount from these financial statements (such as $ 38,200, $ 123,450 account, or $ 86,560 bank account number), then ask if the data is correct. 100% no, sometimes the accountants answer “No, that’s a little out of the way,” and then go on to give the same explanation for the following example: ” $ 32,200, not $ 38,200. Three months ago, and there is no plan to give them money. The bank account balance should be around $ 116,560. “My opinion is that, in some cases, librarians (and sometimes in the industry) think that if the financial statements do not show the truth, as long as the relevant employees are aware of the Minimum discrepancy report, many small business accountants are not used to have accurate financial statements and procedures to identify costs and, as a result, they do not consistently produce accurate financial statements. This type of event results in inaccurate financial reports, which in turn leads to the operator’s ability to make critical financial decisions based on the information contained in those inaccurate reports.
Solution: Clerks, administrators, and business employees need to be trained in proper accounting techniques, as well as inadequate financial and financial knowledge. In addition, it is important to consider training these employees with standard audit procedures to help them better understand why financial statements are made to accurately reflect the truth. Until this training is completed, other side-by-side audit procedures will need to be established to ensure that a qualified accountant is reviewing the company’s reports.
Could not read / learn / review financial statements
If no one cares about reading or examining these reports, the process of compiling financial reports is almost useless. If employees do not intend to investigate obvious deviations or suspicious problems or errors, reading or examining these reports is useless.
Solution: Everyone who receives a financial statement or information report should:
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