Oracle Account Reconciliation

Welcome to the Financial Close Blog for MindStream Analytics! The purpose of this weekly blog is to increase awareness of the environment, trends, products, and solutions pertinent to the Financial Close spectrum. The blog will touch on multiple functional and technical areas around Financial Consolidation, Financial and Management Reporting, Account Reconciliation, Close Management and Workflow, and much more across industry/vendor specific and industry/vendor agnostic. We hope that this will give you food for thought, as well as some Best Practices and the peak of your interest. Let us know what more you would like to see!

ACCOUNT RECONCILIATION - a Key Financial Control

Account Reconciliation is one of those Financial Control processes that take on many different paths and methods. On the surface, it seems like a no-brainer that your balances and transactional detail should match and are accurate. In the world of on-line banking, many people look at their transaction records on a daily, weekly, or at least monthly basis (hopefully you are ?). But when reconciling corporate accounts, there is a lot of competition for time. On the Accounting/Finance side, the priorities can include External Reporting, Flash Reporting, Budget to Actual Variance Reporting, Segment analysis, Forecast updates, G/L postings, Aging Analysis, and much more. For Treasury, managing your cash and credit facility, payments, etc., often take priority for accommodating the daily needs of the business. Also, many companies take for granted that the data input into the General Ledger, Sub-Ledgers, transactional modules, or even a data warehouse, are accurate or fall within an "acceptable" tolerance. Of course, this is often not the case.

1. There are multiple critical elements to the Account Reconciliation process, which should serve to prioritize this key control:

• Compliance Regulations: The Sarbanes-Oxley Act for Disclosure, Certification and Assessment controls has made data accuracy to the transactional detail critical to ensure compliance.
• Data Integrity: In the fast-paced business and economic environment, technology advances, expanding global outreach and media exposure of the 2010's, Corporate leaders need to be able to make decisions much faster than their predecessors to make key business decisions; and often in real-time. In order to accomplish this, data integrity is crucial to making vital decisions.
• Workflow: Time is of the essence as noted above, and being able to have visibility for all the organization's stakeholders should be a prime requirement for meeting the Financial Close objective and schedule.

2. How do you streamline your Account Reconciliation process?

Account Reconciliation is not one of the "sexier" components of the Financial close processes (you are probably wondering what I would consider an attractive component. Well, you will have to wait for a future blog on my thinking there ?). However, Account Reconciliation, when done efficiently, should serve as the foundation of the Financial Close process. So when refining or defining your Account Reconciliation process, you should consider a number of elements to streamline this control. I like to call it the 3 C's - Chart, Collaborate, Comply:

• Chart out your Workflow:
• Categorize your Accounts into key Account groups. You don't need to reconcile every single base account if that detail is not material to business decision-making. It can significantly expand your account chart, require more support, increase the reconciling adjustments required, and ultimately become too cumbersome to complete in a timely and efficient fashion.
• Have your Preparers / Reviewers in teams that can provide additional/backup support as needed, understand each other's roles, and understand the business aspect of the accounts they are supporting. This can reduce the number of reconciling items and speed up the resolution.

• Collaborate:
• Preparers and Reviewers should have an on-going dialogue about the process, with a clear understanding of the account(s) supported, the detail required, schedule, escalation point, etc. For example, the preparer articulates the purpose of the account, the appropriateness of the supporting documentation and the nature of the reconciling items. The preparer and reviewer both have a solid understanding of how the activity in the account rolls into Financial Statements.
• Think of this as a team of doctors. If you are trying to formulate a diagnosis that could be based on input from different medical specialties, such as an autoimmune condition, you will have or be the primary point of contact; but on-going, effective communication with all of the specialists and between specialists is realistically the only way to achieve a proper diagnosis. Although Account Reconciliation is typically a little more static process, without proper communication, the amount of time it takes to reconcile exception items and understand their impact could lead to very negative consequences up the reporting chain.

• Comply:
• Don't try to circumvent the process. There should be a set schedule, workflow, proper templates to quickly report and track exceptions or exposures, escalation procedures, and validation procedures. There should also be a process in which to communicate bottlenecks in the process and a procedure for remediation.
• Have a "Peer" review that features an outside look at reconciliations beyond Preparer / Reviewer visibility. The peer reviewer can take an unbiased look at the process and flow to monitor efficiency, accuracy, and achievement of objectives. The peer can be the liaison between the workstream stakeholders and the Accounting Manager, Controller or other Senior Manager. The peer can ensure compliance and make suggestions to improve the process.

3. What can technology do to achieve a streamlined process?

It is often said that you can't solve a flawed business process by throwing technology at it. But if you are willing to put in the effort to solve the problem from its foundation, then the addition of advanced technology can significantly improve the experience. Account Reconciliation is perhaps more in need to receive best-in-class technology support than most other financial processes. The need for centralization and improvements in the integrity, workflow, visibility, efficiency, and auditability of the reconciliation process can also be enhanced by the proper technical solution. Oracle Account Reconciliation Manager (ARM - on-premise) or Cloud Service (ARCS - cloud subscription-based) can help your business streamline the reconciliation process in a matter of weeks. In the next blog, we will showcase this transformation using Oracle ARCS. In the meantime, check out our latest webinar "Reduce the Pain of your Account Reconciliations using ARM or ARCS" at https://www.gotostage.com/channel/200000000001345870/recording/d6f56b7c191b4c609b49bf57168ded99/watch?source=CHANNEL