The future of the financial close: automating account reconciliations and review


This paper examines the problems traditionally encountered in the financial close, and uncovers the real reasons behind late filings, out-of-date management information and earnings restatements. In doing so, it addresses ways to automate one of the few remaining manual processes still carried out by the corporate finance team: the process of reconciling and reviewing account balances and transactions at the end of a financial period.

Group finance typically encounters numerous problems at period end, including narrow timeframes, cumbersome processes, and incomplete reconciliation and review - all contributing to poor visibility, control and accountability. At the same time, it faces increasing pressure from the ‘fast close' lobby to rein back the amount of time it takes to reconcile and review figures. Senior management wants to know the position of the business today, rather than six weeks ago or last quarter.

While there are many ways to tackle this time lag, automating account reconciliations has become one of the most significant areas of focus. Covering a wide variety of data sources and transaction types, reconciliations is the process of matching one set of data with another, analysing variances, and in the course of the review process, making corrections. It's a process that's carried out over and over in multiple business units, and as a result it tends to be inconsistent, time-consuming and inefficient. In many cases, this is the real pinch point for the smooth flow of consolidated information needed for the financial close.

Automating account reconciliations, combined with the development of appropriate workflow around balance sheet substantiation (or account certification), provides a number of benefits, including the ability to:

-- Improve process efficiency and effectiveness, saving time and money. Some organisations have gone as far as creating a shared service-style Reconciliation Utility.

--Transform the role of the group finance function, allowing account owners to manage by exception rather than reconciling every last line of an account.

-- Improve management visibility, with dashboard data allowing senior managers to track progress.

-- At a strategic level, help finance evolve as a business partner, providing high-value advice across the organisation.

Many firms have made account reconciliation automation the focus of their drive to improve the financial close process, delivering high Return on Investment (ROI) and operational risk reduction. This paper describes why.





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