When it comes to the financial close, many accountants tend to stick to the motto “if ain’t broke, don’t fix it”. However, just because finance and accounting (F&A) teams put in extra hours and Herculean team efforts to scrape by with their traditional account reconciliation process steps doesn’t mean they should.
In fact, with spreadsheets and manual processes, many organizations find themselves enduring common challenges of reconciliations that are simply inherent to the tools they’re using.
But what are the most common manual reconciliation problems, and how can you fix them?
4 Common Manual Reconciliation Problems
Problem #1: The reconciliation process isn’t standardized.
For enterprises, one of the biggest problems that results from manual reconciliation methods is the lack of standardization. Especially for global organizations with several entities, the balance sheet reconciliation process can get out of hand. Separate entities operating with different account reconciliation process steps and procedures, varying spreadsheet formats and institutional knowledge create issues when it comes to final reporting. Compliance risk also increases significantly when balance sheet reconciliation isn’t standardized.
Boston Scientific Corporation experienced these manual reconciliation issues firsthand due to their aggressive acquisition strategy.
With Cadency® by Trintech, they were able to standardize their balance reconciliation process across 86 entities in 53 countries. Read their case study here.
Problem #2: Critical financial data is being handled manually, increasing risk.
Many F&A teams still reconcile their balance sheets manually with spreadsheets and other methods. Not only is this time-consuming and frustrating, but deadlines are jeopardized because F&A teams are overloaded with the rest of the financial close, as well as the other activities they must complete for the organization. A fragmented system comprised of manual methods and spreadsheets also increases the risk profile for the organization, especially when custom macros and formulas are involved. The more human intervention through manual processes, the greater the error rate in the resulting reporting.
Secure Trust Bank was managing 700 General Ledger accounts in a 41-tab spreadsheet template; 32% of those cells were formulas. Not only did this approach consistently cause delays in the close, but also increased risk in an environment of constantly evolving, complex reporting requirements.
Discover how Secure Trust Bank was able to address their manual reconciliation problems and ultimately decrease their balance sheet accounts by over 40%.
Problem #3: You’re not looking at historical data and trends to improve processes moving forward.
The Office of Finance should be utilizing historical data and trends to drive decision-making and process improvement for the future. Financial close analytics can help leadership figure out where close bottlenecks are occurring, as well as other manual reconciliation problems that cause delays.
Or worse, you’re not capturing financial close analytics at all.
Financial close analytics are critical not only to the Office of Finance, but to the health of the entire organization. All organizations need a snapshot into the data-driven insights that the Office of Finance provides in order to make strategic decisions that drive departments and, ultimately, the entire organization forward. Spreadsheets can’t provide the visibility and insights that are needed to support business growth objectives.
CWT was able to face their manual reconciliation challenges around visibility. Learn more about how they solved their financial close analytics challenges here.
Problem #4: You’re not actively factoring risk into the reconciliation process.
Financial risk considerations should be integrated into every part of the financial close, especially the balance sheet reconciliation process. Taking a risk-based approach to reconciliations not only decreases the risk profile for the organization, but also significantly lessens the workload for F&A teams.
A major energy retailer experienced major benefits from taking a risk-based approach to their balance sheet reconciliation process. In fact, the company was manually reconciling more than 40,000 reconciliations monthly.
By automating and assigning risk ratings, their reconciliation volume has decreased by more than 75% and they now reconcile less than one-quarter of their original workload.
More enterprise organizations understand that manual reconciliation problems must be addressed sooner rather than later, and are choosing to automate balance sheet reconciliations by utilizing a solution like Cadency as part of their standardization and transformation initiatives. Solving the common challenges of reconciliations starts with learning from those who have already launched their financial transformation journey.
Learn more about how to standardize and automate your reconciliations to reduce risk, and discover similar efficiency gains to these leading enterprise companies who have blazed a trail for your organization to follow.
Written by: Ashton Mathai