Finance departments are under increasing pressure to accelerate the financial close cycle while maintaining the integrity of their data and meeting an ever-growing range of regulatory reporting requirements.
One major bottleneck in the close process is the completion of detailed account reconciliations. Every month brings the need to gather, reconcile and report on hundreds, if not thousands, of accounts. Multiple currencies, business entities and accounting standards only add to the complexity of the process. And, gaining control over the entire effort can be one of the most time-consuming processes in an organization’s monthly close.
Indeed, the account reconciliation bottleneck can delay the monthly close by days or even weeks. What’s more, these delays can lead to direct and severe costs that affect the entire company, in worst cases, even including hits to your share price and credit rating.
If your account reconciliation and financial close management (FCM) processes are optimized, your monthly close shouldn’t take more than 3-4 days. Beyond cycle time, the close shouldn’t burn your team out with 12+ hour workdays, late nights and long weekends.. every 30 days.
In our experience, though, FCM and Account Rec in particular are still largely manual intensive, error-prone processes. As several studies can attest, roughly 2/3 of companies still rely heavily on manual (read: spreadsheets) efforts to get the close done. As a result, more than 30% take a week or more to complete the month-end close, and even longer to report on it (see chart).
Even among the largest firms with sophisticated ERP and accounting solutions, this reality persists. Typical accounting systems and spreadsheets alone are simply unable to automate account reconciliations, let alone track the numbers collected and contributors who submitted them. Even with technologies widely available, and the need clearly defined, barely half of companies have automated and centralized their account reconciliation process.
We’ve found the best Account Rec solutions share a core set of features that you’ll find consistently within top (first quartile) performers in financial reporting, namely:
- Embracing and extending the functionality of Excel spreadsheets;
- A centralized database with a “single version of the truth”;
- Integration between Excel and ERP, General Ledger and other data sources;
- Automated data capture, certification and batch reconciliations;
- Standardized templates, business rules and chart of accounts;
- Workflow management including version control, segregation of duties and a detailed audit trail.
Companies with a centralized, automated financial close process cut 40% off their month-end close and report 20% fewer errors
Combined with the right governance and executive leadership and these best practices can quickly deliver significant and tangible results. According to PwC, companies that have centralized their financial close management have seen a reduction of 40% in the monthly close cycle and 20% in reporting errors.
The roadmap to faster, smarter account reconciliation is clear. If you’re not on your way already, the question is.. which road are you going to take?