While it’s likely that you’ve heard of XBRL, you may not have an in-depth understanding of what it is, how it’s used, and why it’s growing in popularity. For almost every type of organization, using XBRL can offer significant benefits when it comes to your business reporting and analysis.
What Is XBRL?
XBRL or “eXtensible Business Reporting Language” is a digital business reporting standard that allows for uniform tagging and formatting. In the past, organizations have struggled to maintain reporting uniformity both internally and externally. XBRL eliminates this problem, making it simple for data to be shared, organized, and analyzed.
Let’s consider former data sharing processes between two companies. Each company may have their own way of organizing and reporting data. So, when those data sets are shared, it’s a cumbersome process for one company to translate the other company’s data into their own format. With XBRL, these processes are made simple because data is now categorized uniformly using a single language defined by the U.S. Securities and Exchange Commission (SEC).
Who Can Benefit from Using XBRL?
The short answer is almost everyone. XBRL is applicable in the vast majority of reporting cases both for internal and external reporting. According to XBRL International, XBRL is used in more than 50 countries by entities in both the public and private sectors.
XBRL is used by a variety of entities to organize and analyze data, including publicly and privately held companies, governments, regulators, investors, accountants, analysts, and more. To put it simply, if you work in an industry that utilizes data, XBRL is applicable to what you do.
In March 2017, the SEC proposed to make XBRL a requirement for public companies and mutual funds, so it’s imperative that companies use it for reporting processes.
The Benefits of Using XBRL
There are numerous ways your organization might be able to benefit from XBRL. Here are five of the most important ways XBRL can positively impact your reporting processes:
- Saves Time – With XBRL, data compilation and organization are no longer tedious, time consuming tasks. In the past, tasks as simple as compiling data from different divisions of a company could take days or weeks. Now those tasks take mere hours.
- Reduces Cost – Every saved minute due to XBRL can be translated into cost savings as well. Instead of dedicating a team to data compilation, organization, or analysis for weeks on end, these tasks can now be done by one or two people over the course of a few hours. This frees up your employees to work on other tasks, maximizing operational efficiency in your company.
- Reduces Errors – When you’re not using XBRL, it’s nearly impossible to maintain uniform reporting standards. A lack of uniformity leads to errors and miscommunication. With XBRL, however, you can trust that data tagging and analysis is uniform, making the reporting process more accurate. XBRL narrows the window for miscommunication between everyone, from clients to other departments of your own organization.
- Provides Transparency – Maintaining data reporting transparency is essential, both for operational and compliance purposes. With XBRL, you’re better able to trace data points back to their original sources. And, when data is analyzed, you can track conclusions back to the data points on which they were based.
- Improves Analysis – Ultimately, XBRL allows for faster, more accurate data analysis. You’re able to tag data not only based on number, but on topic as well. You can organize beyond numbers and make data more accessible to all parties in your company. Instead of lagging, error-prone reporting processes, you can now make the most of your data.
When you understand the benefits of XBRL, it’s obvious why so many organizations in so many sectors use it. Whether it’s saving time, reducing errors and costs, or improving your analysis and decision making, XBRL is worth consideration by almost every company.
Lorenzo is a Senior Manager in AC Lordi’s Accounting Services practice with 20 years of accounting and auditing experience. He has worked on SEC reporting engagements for financial services, manufacturing, pharmaceutical and cloud based services clients, and has participated on numerous Sarbanes-Oxley compliance teams. He can be reached at email@example.com or 610-738-0100.