Preparing a Consolidated Fiscal Report (CFR) is often a complex and time-intensive endeavor. However, with thoughtful planning and strategic actions taken throughout the year (and even before the fiscal year begins), organizations can significantly reduce the stress and workload associated with compiling the report.
The Biggest Challenge: Wage Reconciliation
Reconciling wage data between the general ledger (GL) and the payroll system (PR) is frequently the most difficult and time-consuming aspect of CFR preparation. To minimize reconciliation issues, consider these best practices:
- Synchronize Wage Movements: Ensure that any wage adjustments made during the year are reflected in both the GL and PR systems. Discrepancies between the two can derail reconciliation efforts.
- Track Manual Adjustments: If wage movements aren’t recorded in the PR, maintain a detailed log to support reconciliation later.
- Reconcile Quarterly: Don’t wait until year-end. Performing quarterly reconciliations helps catch errors early and keeps the process manageable.
- Coordinate Across Departments: Human Resources (HR) and Finance teams must collaborate closely when assigning position codes. Misalignment can lead to reporting inconsistencies, inaccurate CFR reporting and complicated manual adjustments when preparing the CFR.
- Review Position Codes Regularly: Periodic reviews help maintain accuracy and consistency in reporting.
- Align GL with CFR Codes: While not required, configuring your GL to mirror CFR reporting codes can simplify mapping and reduce manual adjustments.
Aligning Your Chart of Accounts with CFR Needs
Structuring your chart of accounts (COA) to support CFR preparation is one of the most impactful steps you can take. A well-organized COA not only improves accounting clarity, but it also streamlines CFR tracking and reporting. Key strategies include:
- Mirror CFR Line Items and Programs: Create cost centers and account groupings that reflect CFR reporting lines (e.g., personal services, mandated vs. nonmandated benefits).
- Use Consistent Naming Conventions: Align terminology with CFR categories to simplify mapping and reduce manual adjustments.
- Break Down Broad Categories: Use sub-accounts by function, department, or funding source for more precise allocations and easier reconciliation.
- Incorporate Position Codes or Job Functions: Embed position codes or titles into account descriptions or coding structures to link payroll data directly to financial accounts.
- Track Nonallowable Costs Separately: Create distinct accounts for recruiting, advertising, meals, and entertainment to ensure accurate reporting of nonallowable expenses.
Leveraging Technology & Structure
Technology and thoughtful system design can play a pivotal role in easing CFR preparation:
- Maximize IT Capabilities: Work with your IT team to identify opportunities for automation or process streamlining.
- Use Allocation Features: Many financial systems offer built-in allocation tools—use them throughout the year to avoid manual adjustments during CFR compilation.
- Employ Report Writers: Automated report generation tools can save time and reduce errors.
Keep Perspective
Finally, it’s important to maintain a strategic view:
- Focus on the Big Picture and End Goals: Avoid spending time allocating insignificant amounts. Concentrate on areas with meaningful financial impact.
- Avoid Overcomplication: Simplicity is key. Overthinking the process can lead to unnecessary complexity and delays.
By putting these practices into play, CFR preparation doesn’t have to be a dreaded, end-of-year scramble. Think of it as a process you can actually manage, step by step, throughout the year. A little planning, regular check-ins between HR and Finance, and smart use of your systems go a long way in keeping things on track.
If you need further guidance or have any questions on this topic, we are here to help. Please do not hesitate to reach out to discuss your specific situation.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.
