Consolidating the Account Reconciliation Process

Introduction

For companies with operations in many locations domestically and around the globe, the number of accounting transactions to record every minute detail of business activity can be daunting, as can the process of reconciling those transactions for completeness and accuracy at month’s end. Management and legal reporting activities must comply with specific rules and standards, and the account reconciliation process ^[1] is no exception.  Centralization of work processes into Shared Services ^[2] can further complicate the process since much of the transaction activity still resides within local operations, where the knowledge about those transactions often resides.  This often suggests a shared responsibility for account reconciliations, with overall ownership either local or centralized, depending on the specific attributes of each account.

With the addition of advanced technologies and tools, many companies are shifting towards greater consolidation of the account reconciliation process, often into regional Shared Service centers, but sometimes even more globally, with the effect of eliminating as much local site responsibility as possible.

Company Experience

A recent Peercast^TM in our General Accounting (R2R) research area ^[3] featured a global manufacturing company with $5B in annual revenue, sharing its approach to transitioning the Account Reconciliation process to a consolidated location.  Here is an overview of their transition timeline:

1. Pre-2014 – Single VP for Shared Services, but structured as a decentralized organization
2. 2014 – Move to consolidate European Shared Services into a single low-cost location in Europe
3. 2015 – Implemented Blackline solution and consolidated European Shared Services reconciliations into the European Shared Services Center
4. 2016 – Added North American Shared Services reconciliations to the European center on an opportunistic basis
5. 2017 – Focused effort to add non-SAP and non-Shared Services reconciliations to Blackline using Shared Services standards
6. 2018 – Positioned to absorb non-Shared Services SAP reconciliations

Some of the successes from the consolidation of account reconciliations cited include:

1. Consolidation into a single location improved the consistency of reconciliations and the team’s desire to streamline and simplify the reconciliation process.
2. Having a critical mass of personnel in one location reduces the risk created if key personnel leave the company since the knowledge no longer resides with only a few people
3. Several staff members have been promoted into regional roles as a result of having greater knowledge about other geographies

Additional details regarding the efforts of the featured company can be found on the Peeriosity member website, exclusively for members of Peeriosity’s General Accounting (R2R) research program.

iPolling^TM Results Review

Peeriosity’s iPolling^TM was recently used to better understand how standardized the account reconciliation process was structured at member companies.  The results suggest that while 85% of member companies report having a standard structure/format for the preparation of account reconciliations, only 35% indicated that they were very satisfied with their implementation.  An additional 32% indicated they were somewhat satisfied, and 18% reported that the process, while implemented, needs improvement.  The remaining 15% of companies either haven’t yet implemented or are currently evaluating the opportunity.

Here are several of the added comments from members:

• Introducing standardization in preparing GL account reconciliations can be very helpful from a uniformity standpoint and may result in increased stakeholder satisfaction for such groups as the external reporting team, auditors, tax experts, etc.

• Implementation via a tool used as a centralized repository of accounts reconciliation – still needs 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).

• Once implemented it requires investment to maintain the standardization and quality levels ^[4] over time and through resource attrition.

• Standard, automated process across all regions.

• Standard templates are being suggested. In the process of reviewing and prescribing the use of one of the standard templates per account.

Closing Summary

Many companies that have a stable global Shared Services organization, with multiple regional centers, have the opportunity to successfully pursue the centralization of account reconciliation activities into one global location, particularly when the effort takes into account the many benefits of advanced reconciliation software solutions.  Determining the path that is right for your company can be simplified greatly by having direct access to the experiences of your peers, without influence or bias from external consultants or solution providers.

What approach does your company take to consolidating the account reconciliation process?  If you have a standard structure/format for the preparation of account reconciliations, how satisfied are you with your implementation?

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.