Maintaining the integrity of the financial statements is critical for a business. Yet, this is a challenge in an environment of growing transaction volumes and increasing pressure to reduce period-end closing time.
Inaccurate numbers can leave CFOs blind to problems or make the company look less valuable than it is. In industries heavily regulated, inaccurate financial reporting is an even bigger issue as it can land companies in legal hot water.
Every period-end, finance teams have to reconcile thousands of records to close the books. The main problem they face is how manual and time-consuming this activity is which leads to errors and inaccurate financial statements.
Some organizations attempt to accelerate the close and reporting cycle by simply asking employees to work overtime, an added cost for the business and highly stressful for employees.
Leaders are seeking to optimize the process and minimize errors ensuring they have access to trustworthy numbers. The good news is that with good planning, a practical approach built on cloud-based technology, and the leverage of automation, it is possible to streamline the process.
Here are five ways to improve your account reconciliations:
1. Define a Standard Operation
Organizations should standardize account reconciliation policy, process, and templates across the entire company.
When you define a standard operation, you are reducing the possibility of missed steps or other mistakes that impact the reconciliation process quality.
2. Establish Clear Ownership & Accountability for Each Account Reconciliation
When a reconciliation requires buy-in from various teams and people in different offices, it is easy for something to slip through the cracks—and missing deadlines can become the norm.
It is essential to make it obvious who needs to do what, and when. Accountability is crucial when it comes to being compliant with company policy and processes as well as laws, regulations, and standards.
Establishing ownership and accountability for each account reconciliation also increases employees’ ability to bring results. When the team has a crystal clear understanding of each one’s responsibility, it allows them to focus on taking action instead of wasting time trying to figure out what to do.
3. Leverage the Cloud
Leverage the cloud to ensure your team has a clear and up-to-date overview of your current reconciliation status.
There are many benefits of having access to data from any device with an internet connection, especially now with most people working remotely. Cloud-based technologies allow employees to access their work from wherever they are.
4. Avoid Manual Spreadsheets
While the accounting department can do it all in an Excel spreadsheet or by hand, manual reconciliation leaves the data open to human error, especially when dealing with a high volume of records. It is also time-consuming, inefficient and the main culprit of long period-end closing times.
A manual reconciliation process is also difficult to audit and not an agile method of work. Consider adopting technology for a more efficient and short period-end close.
5. Automate the Process
Due to having to match hundreds of entries manually, employees are left with little time to deal with errors, discrepancies and/or missing payments. The delay in identifying errors makes them more difficult to be addressed resulting in costly write-offs for the business. If left unchecked these same errors can compromise financial information integrity.
Fortunately, there are tools available that can automate the account reconciliation process allowing finance teams to focus on the extra-ordinary entries and detect errors faster.
An account reconciliation software can automate up to 90% of transaction matching, significantly reducing the risk of human errors and financial data manipulation. It also offers full traceability and compliance while saving hundreds of hours.
One example is SmartConcil, a cloud-based account reconciliation solution that supports transactional data from any source. SmartConcil applies business-defined logic to automatically match millions of records in minutes ensuring accuracy & real-time visibility into the company’s financial numbers.
Conclusion – Final Thoughts
Account reconciliations are a vital part of the financial close. An efficient process can reduce period-end closing time while improving numbers accuracy.
Furthermore, in an environment of growing transaction volumes, effective use of technology is essential to gaining accurate, timely and transparent data.
Have you implemented any of these steps in your company? Share with us your experience!