Finance leaders in most organizations are under increasing pressure to transform and streamline their financial close and reporting activities while continuing to maintain the integrity of the financial statements and the financial close process. A key aspect of the financial close process includes the completion of detailed account reconciliations, which is often a major bottleneck. In fact, account reconciliation is the primary non-data related delay in the financial close process.
Streamlining Account Reconciliations
The need to understand and certify an account balance and its transactions is mainly due to regulatory and audit control requirements. Therefore, finance leaders need an accurate reconciliation process that is fast, reduces risks and costs, and ensures regulatory compliance with a clear audit trail. This allows them to spend more time focusing on data analysis and strategic decision making.
However, in addition to the statutory requirements for account reconciliations, understanding the details and transactions behind every account offers many business benefits to finance executives. They need to be able to easily identify fraudulent, improper and excessively aged transactions. In most organizations, the account-reconciliation process is a manual, time-consuming and error-prone process. A robust and integrated, cloud-based account-reconciliation solution can allow finance departments to operate more effectively.
Account Reconciliation Best Practices
Enable Automated Account Reconciliation
Many organizations have to perform thousands of account reconciliations at the end of every month. Performing these tasks manually requires significant resources, takes a lot of time, is highly error-prone, and can delay the financial close process. This is further complicated by the number of managers and staff involved. To improve the efficiency and accuracy of these account reconciliations, organizations must adopt best practices and automate this process for suitable accounts. In order to automate processes and increase efficiencies, they need to:
- Fully integrate the account-reconciliation process into the financial close
- Provide workflow support for the account reconciliation process, including monitoring, reporting, and analysis
- Enable rule-based thresholds for automated certification and risk assessments
By doing this, organizations can achieve a predictable process timeline that ensures a faster financial close, improves finance staff efficiencies, and reduces the number of accounts to reconcile without reducing accuracy or increasing risk.
Manage Security and Risk
Businesses typically have issues in the account-reconciliation process with missing or lost reconciliations, along with un-reconciled accounts that increase the risk of inaccurate reports. These errors and missing values are often difficult to identify and can seriously compromise the accuracy of the reported numbers.
Additionally, businesses are struggling to control and manage access to sensitive financial data across the enterprise while using spreadsheets and outdated software. Errors are difficult to detect within the complex consolidation calculations, and there’s a lack of visibility into cash flow, intercompany transactions and other activity.
To control security and manage risk, organizations need to adopt the following best practices:
- Directly integrate data from their ERP systems, thereby ensuring all accounts are included
- Make sure they leverage existing IT investments
- Ensure the security and reliability of their account reconciliation software
Finance executives can relax knowing that their numbers are accurate and that their most important and sensitive data is only visible to authorized users.
Improve Collaboration Between Stakeholders
Organizations often have inefficient, error-prone processes for account reconciliation that involve many stakeholders across different departments. There’s also insufficient visibility and documentation due to the lack of modern tools for the job, as spreadsheets and email are most commonly used for account reconciliation.
Finance leaders must select the best software for efficient account reconciliation, with the following features:
- Provide instant visibility of the progress and status of the reconciliation lifecycle
- Employ cloud-based solutions to efficiently bring staff into the process
- Give access only to staff required for the specific items to be reconciled
- Use analytics to show process trends and areas for improvement
Collaboration is critical to getting account reconciliations done quickly and accurately, along with setting clear responsibilities, goals, and timelines. Companies that do this right will reduce the time it takes to complete the financial close.
Integrate with Other Systems
Organizations could be overlooking the availability of modern tools for account reconciliation because they’ve invested heavily in existing IT and have no bandwidth for managing add-on implementations.
Modern cloud-based financial systems are built using a best-practices approach, and have business user-driven data integration capabilities, so you can be assured all accounts and transactions are included. You can easily integrate with other business applications and systems such as supply chain or HR. These solutions are highly configurable and don’t require a lengthy or complex implementation project.