To say data accuracy is crucial in financial reporting is an understatement. It’s the requirement for staying compliant with the law; it’s the basis for future decision-making; it’s critical for financial analysis. Therefore, all businesses operating in finance, whether wealth management or other sectors, need to put all the efforts they can into ensuring that their data is precise and error-free. How to do that? We will discuss that in this article—read on to find out more!
Why Does Accuracy Matter in Financial Reporting?
Let’s start with the reasons why you should pay extra attention to data accuracy in financial reporting. As we mentioned in the introduction, this is mainly for three reasons: legal regulations, improved decision-making, and better analytics. Let’s look at them more closely.
Legal Regulations and Compliance
The simplest and most important reason why you need accurate data in financial reporting is that…if you aren’t precise, you risk being fined. Moreover, this could undermine your credibility with other financial institutions, potentially causing issues with future investments.
Analytics and Performance Monitoring
Accurate financial reporting means that you collect all the data you need and can extract insights from it. When combined with high data quality, it gives you the information you need to evaluate your business performance. For instance, with clean, precise data, you can:
- define operating costs,
- estimate profit margins,
- gain insights into your business’s cash flow.
Naturally, these are just a few examples of the power of data accuracy in financial reporting. By ensuring error-free reports, you'll extract many more helpful insights.
Improved Decision-Making
Insights are one thing, but your reaction to them is another. With high data accuracy, you can now rely on the data and hence…introduce tools for data-driven decision-making. It’s best portrayed when we look at machine learning models.
When you implement an ML model, you can harvest the power of your current data by juxtaposing it with historical data. Yet, if any inaccuracies occur in the information you provide your model with, it can lead to extracting wrong insights. In the best-case scenario, you don’t use ML models at all, but then you lose out on the power of AI. In the worst-case scenario, you use an ML model and make wrong decisions based on erroneous insights. Both situations are unfavorable; hence, ensuring data accuracy in financial reporting is a must.
How to Ensure Data Accuracy in Financial Reporting?
Knowing why data accuracy is important, let’s focus on how to ensure it in your financial reporting. We have prepared 4 tips that will help you with that—take a look at them below.
Monitor and Control Regularly
The first measure you should introduce to ensure high data accuracy is regular controls and monitoring of your financial information. By introducing internal controls, approval processes and reconciling your accounts, you can spot errors and correct them, before they make their way into your reports.
Use Data-Quality-Oriented Software
Whether working in wealth management or other branches of finance, you likely operate on multiple systems and derive data from various sources. This can cause problems with accuracy, especially when dealing with unstructured data. How to avoid it?
You need to invest in a data-quality-oriented platform that will integrate your data, while ensuring its highest accuracy. When data accuracy in wealth management is concerned, WealthArc can help.
Our wealth management platform comes with automatic data reconciliation and a robust document AI module, which will let you integrate all your information and extract it from unstructured documents. Moreover, our Data Team oversees the information, monitoring the data flow and eliminating any mistakes. This way, you can both automate the whole process, and accelerate it.
Add to that the fact that our app comes with a powerful financial reporting tool, and you get the ultimate solution for ensuring data accuracy and turning it into actionable insights, even if the data is sourced from multiple custodian banks.
Review Your Reports
Monitoring and controlling the data flow is one thing, but sometimes mistakes might make their way onto the reports. They can often remain hidden, unseen until it is too late. Therefore, you should also review your reports, not only your data.
By doing so, you will be able to spot patterns, trends or discrepancies that could indicate that data accuracy wasn’t achieved in your financial reporting process. This way, you will identify any remaining mistakes or errors that may have slipped through other checks.
Standardize Your Data
How to ensure data accuracy even if you acquire it from multiple custodian banks? Standardize it. By creating a single framework for information, you will find it easier to spot errors, whether manually or using automated tools. Plus, this will enable you to generate holistic reports more easily.
The Takeaway
As you can see, ensuring data accuracy in financial reporting is not as difficult as it could seem. Surely, it requires you to adjust the procedures, standardize data collection and implement new IT solutions, but in the end, it is for your own benefit. From staying compliant, to evaluating your business operations better and improving your decision-making—you will achieve all of these if you ensure maximum data accuracy, so it is indeed worth the effort.
You might also read: Cybersecurity in Wealth Management: Keeping Client Data Safe
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