How to Improve Your Account Reconciliation Process

Data Analysis Results Summary Graph Chart Word Graphic--account reconciliation

Finance pros are, by nature, a rigorous and disciplined bunch. So why do they stand for the barely controlled chaos that marks the close of many reporting periods? Why is the FP&A team so trapped under the drudgery of manual data entry and transactional tasks that it has hardly any time for analytics? Why, month after month, are finance teams stuck on the same hamster wheel of shaky data, sprawling spreadsheets, and spiraling labor costs?

If that sounds like an all-too-familiar nightmare, you’re hardly alone. The evolving strategic role of CFOs has grabbed headlines for the past few years, but most FP&A teams are still stuck in the equivalent of digital concrete. But with active planning—a dynamic approach built on cloud-based technology and tools that are easy, powerful, and fast—your team can finally break free from its ongoing nightmare.

Watch the webcast, “6 Essential Steps to Build a Modern Finance Organization”

In a recent webinar, we outlined several ways to improve the account reconciliation process:

Spreadsheet overload
As the end of the month (or quarter or year) approaches, Excel-based finance teams spend an inordinate amount of time cross-checking data from various departments. Reviewing and updating multiple spreadsheets is incredibly time-consuming: According to BlackLine Systems, only 38% of businesses finish their financial close in five or six business days. In spending all that time compiling information, today’s CFOs find themselves data rich but time poor: Some 63% of CFOs say that lacking time for analysis is their biggest roadblock to being a more strategic leader, according to a recent Adaptive Insights CFO Indicator report. You’re not going to find your team’s freedom in a spreadsheet. But you can find it in a cloud-based solution that’s easy, fast, and powerful to use. By automating data entry, the FP&A team is freed up to focus on analytics and solving strategic problems.

Out-of-control labor costs
The traditional reconciliation process turns a high-functioning department into a stressed-out mess staggering through late nights and missed family obligations. Accounting labor is underutilized during much of the reporting cycle and then pushed to the breaking point right before deadline. Not only does this lead to increased burnout and employee turnover, but it also causes organizations to pay for additional temp help during crunch time.

Solution: Ditching traditional static forecasts in favor of continuously updated rolling forecasts might just keep your finance team sane. Active planning—planning that is collaborative, comprehensive, and constantly updated—not only delivers better results, but it also smooths the peaks and valleys in traditional planning’s workflow. By working on plans and numbers incrementally throughout the week, month, quarter, and year, FP&A professionals can avoid the stress of rough deadlines, which will reduce turnover.

Competing “truths”
Finance teams have to manage more data than ever before. More than 70% of CFOs surveyed by Adaptive Insights say they deal with anywhere from three to five-plus data sources, and 59% expect that number to increase by half over the next five years. The same problem affects auditors working to close the books. When your company is decentralized, accountants and the accounts payable department are scattered across the country. This makes it incredibly tough for all the stakeholders to share the various documentation they each need. In the end, it’s almost impossible to handle the reconciliation process from a unified perspective.

Solution: Automating the reporting process through financial close software and cloud-based planning makes it easy for the whole team to view the reconciliation clearly and holistically. Templates keep information uniform, and dashboards provide that coveted single source of truth. As a result, mistakes are minimized and work can seamlessly transition between team members. Jill from accounting is sick during close? No problem. Someone else can take over his accounts and see them through completion.

The domino effect
When a reconciliation requires buy-in from various teams and people in different offices, managing the reporting process becomes challenging. It’s easy for something to slip through the cracks—and missing deadlines can become the norm. If the same person is repeatedly late, everyone else further down the workstream is affected. Solution: Active planning uses systems with dashboards and automated email alerts that make it obvious who needs to do what, when. Ownership is crystal-clear. Pain points or inefficiencies quickly reveal themselves, and management can work with the team member who is late to solve the problem.

Constant threat of material weakness
The possibility of a major mistake in a company’s financial statements is enough to keep any CFO up at night. Unfortunately, all these other FP&A inefficiencies and problems merely serve to heighten the risk of such a weakness. Finance teams that rely on Excel are more vulnerable to making mistakes, as different departments may use different protocols. Acting on disparate information from various departments, keying in huge quantities of data, and high employee turnover all cause confusion and, all too often, errors that create a material misstatement that must be disclosed under the Sarbanes-Oxley Act. Acknowledging a material weakness can have a wide-ranging impact, including public concern about the ability of a company’s leadership.

Solution: Active planning and continuous accounting make the reporting process easy, quick, and powerful. Automatically updated data minimizes the risk of human error, while reasonable deadlines keep key accounting staff from departing. All of this translates to a system in which executives are confident in the numbers and able to make data-driven decisions that improve the bottom line.

Watch the webcast, “6 Essential Steps to Build a Modern Finance Organization”

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