The past decade has seen an increased focus on ensuring the integrity of financial reports for all publicly traded companies.  As a result, more companies are creating detailed standardized procedures to ensure that account reconciliations are performed timely and accurately.  While centralizing may reduce the proximity to where the account transactions originate, a rigorous review process is more likely to yield higher quality results than a haphazard process that takes place in multiple locations by staff with various levels of skill sets and training.

Peeriosity’s General Accounting research area recently held a Peercast^TM discussion that featured a company that developed an account reconciliation training program as one output from a detailed review of their overall account review process.  As a part of the reconciliation process, reconciled accounts undergo a quality review where an assigned reviewer evaluates the quality of the account reconciliation using a four-part scorecard.  These include:

1. The reconciliation description is available in the account reconciliation software (Assurenet). 
2. There is proof that the year-to-date balance has been substantiated and investigated.
3. Reconciling items have been identified and the required corrective action has been explained.
4. Specific comments have been added to call out high-risk reconciling items, including a lower threshold for items that are unexplained. 

One of the most challenging parts of the reconciliation is proving that the balance is correct.  This step can involve looking at other documentation including sub-ledger detail, bank statements, and supporting schedules.   It’s important to also consider whether or not the balance falls within tolerance levels, and the trend in the balance from month to month.  In many cases, business owners are required to review and sign off that they are comfortable with the account balance.

A related iPolling^TM question asked member companies about their status for centralizing the account reconciliation process.  The results were almost evenly split, with 52% of companies having achieved either moderate or high levels of consolidation of account reconciliation processes, and 44% who are either currently evaluating the opportunity or who haven’t yet considered it.  Here are the details:

When looking at the primary drivers for consolidating the account reconciliation process, 40% indicated that the centralization effort was included as a part of the overall consolidation of Accounting / Finance operations, with 23% indicating the effort was part of a post-consolidation effort to implement a new process design for Accounting / Finance.  Only 11% indicated that the driver was tied to the implementation of a new technology solution that was specifically related to accounting reconciliations.

Below are a few of the additional comments from iPolling participants:

• We have consolidated most Regional Accounting functions into a single center.
  

• We consolidated numerous legal entities into one, thus allowing for a centralized accounting structure. With few exceptions, the centralized accounting team performs all balance sheet reconciliations.
  

• A project has been approved for software implementation and consolidation based on cost reduction.  We are currently evaluating software suppliers.

• We have completed the consolidation of transactional processes, including account reconciliations, into a Global Business Services team.

• The nearly full consolidation of reconciliations to a central location has only resulted in half of the reconciliation activities being completed at the central location. That is because many reconciling items that require investigation need to be investigated by staff in the field locations.
  

• As part of our creation of Financial Shared Service Centers, we pulled most of our account reconciliations into our centers. However, we still have many hundreds of people involved in performing the reconciliations, so we are now looking to bring more of the reconciliations into a concentrated group at the centers over the next year or so as part of a Financial Shared Service re-organization.

• We have a highly dispersed finance organization (including BPO, regional centers, and Corporate). We are in the process of implementing an account reconciliation tool, and this could be the driver that enables us to consolidate further.
  

• We implemented BPM (Business Process Management) about 10 years ago. We utilize Shared Service Centers to perform most of our account reconciliations, with BPM as the driver for making that happen.

How centralized is the account reconciliation process at your company?  How standardized and rigorous is your reconciliation process? 

Who are your peers and how are you collaborating with them?

“Peercasts^TM” are private, professionally facilitated webcasts that feature leading member company experiences on specific topics as a catalyst for broader discussion.  Access is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from attending or accessing discussion content.  Members can see who is registered to attend in advance, with discussion recordings, supporting polls, and presentation materials online and available whenever convenient for the member.  Using Peeriosity’s integrated email system, Peer Mail^TM, attendees can easily communicate at any time with other attending peers by selecting them from the list of registered attendees. 

 “iPolling^TM” is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from participating or accessing content. Members have full visibility of all respondents and their comments. Using Peeriosity’s integrated email system, Peer Mail^TM, members can easily communicate at any time with others who participated in iPolling.