Insurance companies have implemented broader and deeper levels of financial and business reporting with an expanded lens on underlying business drivers. At the same time, the insurance industry requires companies to complete state financial filings, supplemental data filings, as well as audit reports on multiple basis of accounting. Furthermore, companies typically look to the finance function to go beyond the singular responsibility of regulatory reporting and include management reporting and analysis that supports business functions and corporate objectives. Overwhelmed yet? If you are an employee in the finance department – you know the answer. While the various reporting needs of an organization can be a heavy lift, the finance function is well-positioned to add significant value and support the needs of the company.
Is Management Reporting Really That Different?
Regulatory reporting is standardized which allows for comparability across industry companies and is supported by consistently applied basis of accounting. Management reporting focuses on business performance information to support company strategies, objectives and decision-making. Some other comparisons include:
Preparation and Utilization
The typical approach to regulatory reporting is to efficiently and accurately complete the required financial filing reports as dictated by the regulatory authority – annual statement, quarterly statements, and audit reports. While necessary, these can be very detailed reports and do not always align with how management operates the business. Additionally, they primarily just inform the user in a standardized format and are accompanied by a limited level of analysis.
Management reporting is more flexible and can be structured in a manner that best fits how the company operates. The inclusion of non-financial information, ratios, and trend information allows for deeper analysis as well as the ability to influence and guide the business. Interpreting financial results and influencing business outcomes are higher value-added activities.
Framework
Changing business needs (more frequently) and regulatory requirements (less frequently) can lead to inefficient and ineffective processes. Periodically reviewing and developing a conceptual design is important to maintain effectiveness. An outside-in view from management and/or regulatory authority in terms of needs and requirements is an important first step in establishing or modifying a financial reporting blueprint. Designing an information structure, underlying business processes and system structures around this blueprint is the most effective approach.
Guiding Principles
While management reporting is flexible (this is a good thing!) – it can be challenging to develop and maintain effective and efficient processes. Spending time up front developing guiding principles and building a framework anchored in meeting business needs is imperative. Some examples include:
- Management Decision-Making
- Most people (outside of Finance) don’t view financials through a regulatory lens
- Don’t just report numbers – interpret and influence the business
- Control versus Insights
- Control reporting includes consistently providing information on key organizational goals and objectives (think actual versus plan/forecast)
- Data that supports deep insights or special studies should be viewed as separate and distinct from control reporting – this will aid in efficiency and the underlying data structures
- Reporting and Analytics
- Use a combination of numbers and charts for more effective visual representation
- Focus on critical areas that support management needs
- Tailor illustrations to promote valuable and informative discussions
The Finance function is uniquely situated to support the reporting needs of the organization and its various constituents. However, information delivery can be slowed and ineffective under the weight of inefficient processes as well as disaggregated underlying data. Compounding this challenge in most companies is the lack of resources available to effect change.
How We Partner for Improved Accounting
ARC Strategic Services, a division of TAC4 Solutions, has experts that can provide current state assessments as well as lead projects to improve regulatory and management reporting – and unlock finance function capabilities to be the company trusted business partner. Contact us to setup an initial consultation.