Adding automation to your financial close increases efficiency and reduces the chance for error in your reporting process. When working on a tight SEC deadline for 10-Q and 10-K reporting, every hour saved helps. If using NetSuite as an ERP, below are five custom reports that can improve efficiency in the close process. My assumption is that companies are tracking activity by account, functional department and program in NetSuite.
GAAP income statement: Income statement expense classification is likely driven by the functional department as either a general and administrative (G&A) or research and development (R&D) department. The GAAP income statement is built by combining the total expenses for the department grouping. I'd suggest a version with the prior fiscal quarter and the prior year, same quarter period comparisons, since you will need both.
GAAP balance sheet: The balance sheet will be built around the GL account grouping in each unique financial statement line item (FSLI). NetSuite does not allow users to customize the generic FSLI options in the standard balance sheet. Hence, you need to build a custom report.
Supplemental disclosure of cash flow information: Two cash flow disclosures you can automate are cash paid for income taxes and purchases of property and equipment included in accounts payable and accrued expenses. Using a saved search, you can query transactions coded to an income tax expense account or transactions coded to a PP&E account that is in a journal entry.
Management discussion and analysis (MD&A) explanations for G&A expenses: Companies provide high-level explanations for changes in their G&A expense within the MD&A. Using a custom financial report, you can group accounts into the appropriate category and only transactions coded to G&A departments. Typical categories include salaries and benefits, facility-related costs and consulting / legal fees.
MD&A direct R&D expenses table: Biotech companies also disclose a direct R&D spend table in their MD&A, which reconciles to the income statement. Using a custom financial report, you can calculate total program expenses and group accounts for the general expenses. And like the G&A expenses above, you would filter transactions to only include transactions coded to R&D departments See below for an example disclosure from Magenta's Q3 2018 10-Q:
Automating reports used in the financial reporting process adds efficiency to the close and reduces the chance for user errors. If you are looking for other ways to add automation to your close, consider intheBlk's ASC 606 revenue tool. Contact us to find out how easy it is to automate your revenue recognition process today.