Taking a Risk-Based Approach to Reconciliation

Three Practical Phases to Digital Finance Transformation Part 3 of 3

In parts 1 and 2 of this series, we shared examples of organizations who took the initial steps to financial transformation – standardizing processes and increasing visibility. The impact of account reconciliations on the complete close process drove change for the organization’s we explored, and they have proven the importance of transforming gradually while looking at the close process from end-to-end.

This final blog in our series will discuss a company who had an established approach to reconciliations and looked to a software solution to enable greater automation. Once an organization has a global, standardized approach to a process as well as the required visibility to enable continuous improvement, attention tends to turn towards automation. In this example, the approach was not to use automation to reduce workload like previous examples, but instead to ensure they were performing the correct tasks by taking a risk-based approach.

Phase 3: A Risk-based Approach to Automation

As organizations progress through their financial transformation journey and implement a global, standardized approach to a process as well as the required visibility to enable continuous improvement, attention can turn towards more effective automation.

A global life sciences organization implemented Cadency by Trintech to help standardize its reconciliation process and had been successfully using it for more than a year. Additionally, they had a standard chart of accounts with more than a thousand which they mandated should be looked at on a quarterly basis.

The Challenge

The reason accounts were only being reconciled on a quarterly basis was that they simply didn’t have the resources to look at every account each month. They would have a ‘flavor of the month’ and would focus on specific account classes each period. Even by only reconciling accounts on a quarterly basis, there was still a significant spike in monthly close activities around the period end. So much so that work was becoming exhausting for their short-handed finance team as they regularly worked late into the evenings to close the books. Instead of increasing their working capacity by hiring additional headcount, they decided to try to reduce the amount of work for their current staff while still maintaining control around the financial close.

How Trintech Helped

To do this, they turned to Risk Intelligent Robotic Process Automation™ within their Cadency solution. The first goal was to simply automate the lowest risk activities, like accounts that hadn’t moved or had very few transactions in the period and included zero-balance accounts. By allowing Cadency to automatically reconcile these, the finance team was able to gain back time for the more value-add work.

Then, by utilizing automatic risk ratings in Cadency, they were able to flatten out the workload throughout the month to reduce the spike of activities around month-end. The risk ratings were then used to adapt the schedule of each reconciliation. For example, a high-risk account would have to be reconciled each month, whereas a medium risk account would only be looked at once a quarter.

The automation introduced was all about reducing the spike of activities around period end, ensuring individuals no longer had to work late each month. They were able to accomplish this and redirect valuable attention towards the higher-risk accounts when they were reconciled more frequently. Additionally, this also had the unexpected benefit of reducing the turnover rate of employees.

To learn more about the Risk Intelligent RPA capabilities and benefits you could achieve with Cadency, download this info sheet.

Read the complete series – Three Practical Phases to Digital Transformation
Part 1: Standardizing Processes
Part 2: Increasing Visibility & Trusting Your Numbers
Part 3: Taking a Risk-Based Approach to Reconciliations