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Account Reconciliation Standards and Quality Control Reviews

Introduction

Applying advanced technology solutions to overly complicated and non-standard processes makes implementation more difficult, reduces the benefit, and complicates process improvement efforts by requiring modifications that require carefully coordinated changes in procedures and technology.  While there is almost always more that can be improved upon, having a base level of stability and standardization, with accurate analysis work steps and control points, is a clear prerequisite to any automation project, and particularly for the account reconciliation process.  In addition, once new tools are in place, a careful assessment of how quality control reviews are performed in the new environment (both real-time and after-the-fact) must be completed.

iPollingTM Results Review

Recently, Peeriosity’s iPollingTM was used by two member companies to better understand related issues and opportunities.  The first poll from a global technology company explored whether or not companies have a standard structure/format for the preparation of General Ledger account reconciliations and, if they do, their level of satisfaction with the structure/format that is in place.  The member company had approved a plan, but had not yet implemented, so the intent of the poll was to identify companies with experience, where that experience could be directly leveraged. 

The iPollingTM results indicated that 84% of member companies have a standard structure/format in place, with 38% of all companies very satisfied, 27% satisfied, and 19% indicating that while they have implemented, their process is in need of improvement.  Of the remaining 16% of the surveyed companies, 12% have approved this idea, but have not yet implemented.

Here are some poll comments from responding companies:

  • Implementation via a tool used as a centralized repository of accounts reconciliation – still need to further standardize the account reconciliation process.
  • We have recently implemented Blackline for all account reconciliations globally. Overall, it’s working fairly well. We are just working on some fairly minor issues, like how to deal with new accounts (how to assign) and some reporting issues (like how to show which reconciliations are pending).
  • We have a standard, automated process across all regions.
  • Standard templates have been suggested. We are in the process of reviewing and prescribing use of one of the standard templates per account

The second poll was created by a large global retailer and manufacturer with an interest in understanding whether or not peers have updated their control review process post-implementation to the use of an automated reconciliation tool that adequately reviews the quality of the reconciliation.  Based on the results of the first question in this poll, automation solutions are increasingly prevalent, with 63% implementing Blackline, and 12% implementing either Trintech or Hyperion, with the remaining 25% using some other approach.

Interestingly, while almost everyone has completed some level of account reconciliation automation, only 43% report that the control review process has been undated and that they are satisfied with the results.  14% indicate that they have made updates, but they are in need of improvement, and 24% are either currently updating or evaluating their control review process.

Poll comments from responding companies provide additional insight:

  • Currently, Blackline is only used as an account reconciliation repository.  Account reconciliations have not yet been automated.
  • Reconciliations are made in Excel and uploaded to SharePoint.
  • Blackline tools are used for workflow and as a repository tool. We have an offline process to perform quality reviews, after we complete a risk ranking.

Closing Summary

For the past 25 years, as companies have transitioned from decentralized back-office processes to Shared Services, the ongoing debate was how to prioritize consolidation, process standardization, and reengineering opportunities.  After some trial and error, the clear answer was that unless you undertake some level of process standardization first, consolidation efforts will be less efficient and costlier, and process reengineering efforts will be a disappointment, if they ever get started at all.  That wisdom remains true today, where standardized processes with well-defined work activities are a necessary step prior to successfully automating.  Then, once automation is completed, it’s important to ensure the control review process has also been updated to match the new environment.

How standardized and clearly defined is your company’s General Ledger account reconciliation process?  If you’ve implemented new automated reconciliation technologies, who have you selected and have you completed the necessary steps to evaluate and update the account reconciliation control review process?

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

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