In our previous post, Periodic Reconciliations, we took a look at the account reconciliation process, the challenges it brings, and why reconciliations are a critical tool for organizations. In this post, we will identify solutions to help streamline the reconciliations process to better equip your accounting team.
Account Reconciliation Tools
While the process of reconciling accounts may not change at its core, the tools to gather, perform, report, and manage reconciliations have come a long way. The following improvements demonstrate some of the ways to streamline this manually intensive process. In addition to reconciliations, many of these tools also include matching engines that can reconcile or “match” large data sets. Examples of large data sets include intercompany accounts payable compared to intercompany accounts receivable or transaction files like credit card transactions compared to a credit card company payment.
Standardized Tools and Process
By standardizing process, whether manual or automated and enforcing common practices, you will make improvements to your reconciliations and streamline the process for your employees. Standardized processes facilitate uniform training and cross-training for reconcilers and approvers, mitigating time spent trying to decipher non-standard reconciliations and processes. Leveraging a common tool, you focus your resources on a standardized set of tools that allow them to complete their objectives in a consistent manner period over period, mitigating changes that may negatively impact the process.
Reconciliations start with the General Ledger Balance. By performing an integrated/automated load of your General Ledger Balances, you control the accuracy and timing of the GL Balances used in the reconciliation. This eliminates reconcilers using balances before the general ledger is closed and it also eliminates manual errors keying in the balances. Even if you have to re-open your general ledger for late adjustments and reload financial results, the tools available today will “re-open” any closed reconciliations if the general ledger balance has changed.
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Today’s tools also have the option of loading subledger balances for either manual or automated comparison to the general ledger. These integrations save time for employees having to gather their general ledger or subledger data and manually key it in. Additionally, they eliminate any human error due to manual keying or pulling incorrect accounts.
Automated Processes and Reconciliation Assignment
Multiple layers of automation available in today’s tools make quick work of otherwise mundane manual tasks. In cases where you import both the general ledger and subledger balances, if they meet certain criteria, you have the option of having the system automatically reconcile them. Additionally, for balances that have not changed or have had no activity, you can set parameters for them to be auto reconciled.
These parameters can be created when the application is set up and can be based off a user-defined risk rating (high, medium, low) as well as variances in the account balance, based on dollars or a percentage of the total balance. For example, assume an account has a risk rating of low and is set to auto reconcile if the balance is within 10% or $50 of the balance from the last period. If it meets those parameters, the system will consider the account reconciled and closed. You can also have the option to review the auto-reconciled accounts and/or have them approved by a supervisor.
For many of these systems, you have the option of assigning a reconciliation to a specific individual or to a group of individuals. The same will hold true for approvers. This way, if a specific user is too busy to work on a reconciliation, then another person in the group may perform the reconciliation. There are also rules that can be created for assigning reconciliations when a user is unavailable.
Additionally, some of the new tools also have the option of copying the prior-period reconciliations and/or support to the subsequent period. This can be a considerable time saver when a reconciliation has the same reconciliation components period over period.
To learn more on how to overcome financial close challenges, you can download our entire guide here or below. Otherwise, stay tuned for blog #7 in the coming week!