Previously, we outlined a few areas of concern in the financial transformation process. The installment this week features adjunct applications and their role in control and efficiency.
While not critical components of a firm’s financial process, there are supporting applications that can be deployed to speed and better control the operation. Master data maintenance, exception reporting (items for attention), and responsibility/signoff matrices can be automated to produce significant process improvements.
Requests for new companies, accounts, cost centers, and reporting nodes/structures can be routed via workflow, such that each responsible department and stakeholder can assign the attributes, in their purview. This ensures that the treatment of new master data elements are properly classified and numbered, making the accounting treatment consistent from a management, regulatory, overhead, and intercompany perspective. Accounting policy rules and data quality standards are thereby enforced, disallowing non-compliant companies, accounts, or centers from being created. Once all attributes have been assigned, the master data tables can be systemically updated, removing the manual touchpoint with its inherent possibility of error.
Digital transformation challenges in banking have been well understood and the strategies to address them simple and clear. However, it is becoming increasingly apparent that the industry is reaching a tipping point in the digital transformation journey.
SOX compliance requires account balances be reconciled and understood, so a tool that assigns responsible parties and tracks review and signoff can be a crucial financial control. To be effective, the tool should be aware of a firm’s master data structures, so that responsible parties can be assigned by individual account number, report section (e.g., all fixed asset accounts, regulatory reporting line or schedule), cost center (e.g., trading desk, department manager), company (e.g., subsidiary company), or other structural dimension. This responsibility matrix can also denote any account that is not assigned to a party via any of the dimensions.
The analysis of accounting exceptions can be facilitated with an application that denotes the expected balance type for accounts at month-end (e.g., zero balance, natural debit/ credit). Should an account balance violate its expected balance type rule (balance in a zero balance account, debit balance where a credit is expected), an alert is sent to the individual(s) responsible for the account, as identified by the responsibility matrix above. The application can also generate exceptions where a balance changes month-overmonth by more than a specified percentage. Additionally, this type of application can also watch for journal entries that require review (e.g., recurring self-reversing entries of the same amount).
Master data maintenance, exception reporting (items for attention), and responsibility/signoff matrices can be automated to produce significant process improvements.
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