The Foundation of the Financial Close Process – Account Reconciliations

Whether an organization’s account reconciliation process is completed in-house or through a Shared Services Center (SSC), they will almost inevitably run into the same challenges. Primarily, this is because no matter the location of the process, the tools used to complete the process are the same and include error-prone spreadsheets.

Common Reconciliation Challenges

Spreadsheets have been the backbone of finance and accounting teams for decades. Even with technology changing and evolving over the years, many F&A professionals continue to rely heavily on an outdated tool in order to manage the highly intricate and detailed reconciliation process required for the modern-day organization. And because of this reliance on spreadsheets, organizations continually find themselves buried in a mountain of work while spending an inordinate amount of time and resources to maintain the highly manual process.

Some of the most common problems associated with the reconciliation process include a general lack of visibility and controls, inefficient processes and growing risk. While companies who are ready to transform often focus on the reconciliation process first, it’s imperative to look at the R2R process holistically.

Improving Controls

Aside from reconciliations, no other internal control is capable of mitigating errors and omissions in balance sheet accounts. The scheduling and efficiency of your reconciliation process is key to detecting misstatements in advance of filing deadlines. Any errors that are identified by your auditor and not initially by your internal team point to a material weakness in the overall internal control environment.

Unfortunately, the primary tool used from the reconciliation process all the way to month-end close is spreadsheets. As they get shared across the team, it becomes increasingly more difficult to track any changes or gain visibility into any progress in real-time. To compound these issues, as finance teams spread out to different locations across the globe, the inherent lack of control and visibility within spreadsheets grow in tandem.

For example, let’s say a Financial Controller has a task in this month-end checklist, that is reliant on another task needing to be completed by his finance manager, who is based elsewhere and happens to be off sick the day a task is due—this creates a bottleneck in the process that could be avoided.

Setting A Solid Foundation

Situations like this stem from the shortcomings of spreadsheets and are an unnecessary risk to the overall process. When looking at the close process as a whole, efficient and effective reconciliations set the foundation for all subsequent close activities. To ensure close tasks are completed on time and are ready to be approved and reviewed by the appropriate parties, the first step in the R2R process requires a control framework. With this in place, organizations can sleep soundly, knowing that close tasks are completed with accurate data and enough time for the appropriate parties to both approve and review.

Learn more about setting a solid foundation for your close process through improved reconciliations by downloading our eBook: How to Standardize and Automate Reconciliations.