What Is Record-to-Report?
Record-to-report (R2R) is a finance and accounting management process that entails gathering, processing, and presenting financial data in the form of documents that management can use for analysis and review.
The procedure is divided into two stages, the first of which feeds into the second.
The first phase is record, which consists of several steps that serve to properly document all activities or transactions that have a financial impact on the business.
The second phase is report, which refers to the collection and compilation of data into documents that are used to evaluate the overall performance and financial health of the business.
Record-to-report is an essential component of any well-run business. It is dependent on timely and accurate accounting data, which is then used to generate documents that inform high-level assessments. These evaluations aid strategic thinking and decision-making by allowing stakeholders to conduct in-depth analyses of the business’s operations and success.
How Does Record-to-Report Work?
Record-to-report accounting is a methodical approach to business accounting. To complete the cycle, a number of steps and processes are carried out within the two phases described above.
The recording of all transactions is the first step in the cycle. This is the foundation of R2R. All transactions should be accurately and timely recorded. If a company has well-managed accounting practises, the R2R process will be supported by reliable accounting data.
Transactions, which come in all shapes and sizes, encompass the myriad of basic and fundamental activities associated with the accounting process. Journal entries, receipts, invoices, payroll, and supplier payments are examples of such actions.
A regular closing cycle, usually on a monthly, quarterly, and/or annual basis, is also part of the R2R process. The accounting team of the company will review, record, and reconcile all account information to ensure that the data is correct for the period in question. Closing accounts enable a company to track financial activity over a specific time period. This ensures that the recording process is disciplined and that F&A teams are equipped to evaluate patterns from one reporting period to the next.
The accounting team will sort and consolidate all of the data as the final step in the record phase of the cycle. All accounts in suspense should be cleared or eliminated. All intercompany transactions should be eliminated, and subsidiary ledgers should be journaled to the general ledger.
The accounting team will use the data gathered and organised in the first phase to produce various reports in the second phase of the cycle. Balance sheets, cash flow statements, and income statements are examples of these.
A balance sheet summarises a company’s total assets, liabilities, and stockholder equity over a given time period. The income statement, also known as the profit and loss statement, summarises a company’s total revenues and expenses and shows the net income or loss (profitability) of those transactions.
The cash flow statement sums up all cash inflows and outflows. Unlike the income statement, it does not include non-cash activities such as credit sales or purchases or depreciation.