What Is Regulatory Reporting?

4 min read
15 November 2022

For many business owners, regulatory reporting may seem like a tedious, time-consuming aspect of running the company. It is also vital to the company’s survival. Regulatory reporting acts as a sentinel, always watching and ready to act when the time is right. The simple act of recording data keeps many businesses from making major missteps. Additionally, transparency about tax records and other aspects of the business helps to increase trust in the company. Here are a few things that business professionals should know about regulatory reporting.

What Is Regulatory Reporting?

Businesses have different regulations that they must follow. These regulations may depend on the type of business, the industry, the location and other factors. In most cases, the business is responsible for collecting data, keeping records and generating reports to submit to a regulatory agency.

As such, regulatory reporting is the process of submitting this information to the regulator for evaluation. Businesses may have several agencies for whom they need to follow regulations, generating different reports for each one. For example, tax regulatory compliance may require submitting reports to the IRS as well as other relevant agencies.

Are There Different Types of Regulatory Reporting?

The types of protocols and reports that companies might be required to follow depends on the industry and business, with hundreds of possible combinations. As a rule, the types of reporting tend to fall into one of these categories:

  • Keeping records of business processes

  • Creating terms and conditions for employees and clients

  • Explaining company guidelines as part of employee training or client onboarding

  • Documenting incidents that require a nonstandard process

  • Designating internal workers or third-party individuals to test the process and confirm compliance

Regulatory compliance may involve an assessment of how consistently and effectively a company follows the protocols, not just the timely submitting of a report.

Who Performs These Reporting Tasks?

In any given company, there might be a wide variety of employees who are responsible for performing certain aspects of the report process. The level of accountability often increases from production workers to directors. For example, a retail business with a storefront may generate reports each day with the following features:

  • Total revenue

  • Number of sales

  • Sales tax

  • Number of employees and hours worked

Each of these reports provides a way to track how much the business might be responsible for aspects like sales tax or employee tax withholding. A shift manager may play a key role in generating and tracking the initial reports, which they can hand off to a manager in charge of collecting and submitting the reports. In larger companies, there may be multiple people in charge of confirming that the business complies with regulations.

Why Is Regulatory Reporting Important?

Businesses that invest in regulatory reporting are less likely to have problems with clients, investors, employees or regulatory agencies. A consistent program of reporting can provide the following benefits:

  • Establishing Reliability for Clients/Investors: A consistent record of regulatory compliance shows clients and investors that the company intends to maintain a viable business.

  • Building Trust in Employees: Employees are more likely to choose to work with a company that maintains documented processes to follow current employment laws.

  • Avoiding Penalties for Noncompliance: Failing to submit timely reports may result in investigation, fees, legal liability or even loss of a business license, which can be easily avoided by compliance.

  • Finding Causes for Problems: Careful and consistent record-keeping can help to isolate causes of ongoing problems.

Businesses that do not ensure that they are following regulations are at higher risk for a major failure, due to a lack of any of these.

Regulatory reporting is such an important part of running a business that many business professionals do it without thinking. Complying with regulations can help a business thrive, while failing to take it seriously can lead to failure.

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Alex 9.8K
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