Insurance meaning

As a finance director you may not be fully aware, but your finance department could also be a part of the overwhelming majority that are concealing an illness. The question you need to raise is your account reconciliation process fighting fit? A reconciliation medical exam will dramatically improve your finance department’s processes and will deliver additional worth and help facilitate to drive down costs. In line with a recent finance survey, only 8% of financial accounting employees are actually happy with their monthly close process. This implies that a large 92% of finance workers assume that it is time to call in the doctor as their financial close procedure is sick. The simplest way to help establish all of the potential issues within finance department is to carry out a reconciliation medical exam.

There are 3 main advantages of an efficient account reconciliation strategy that need to be considered: reduced operational costs, mitigated risk, and the tightest attainable compliance. Each account reconciliation method ought to give clear visibility over key financial information to bring these advantages – nevertheless however in line with a recent financial survey; only 8% of senior finance employees are happy with the visibility of key financial information.

Stages of the reconciliation lifecycle

There are four major stages to a reconciliation lifecycle:

1. Data import and enrichment.

2. Matching.

3. Exception management.

4. Reconciliation.

In order to produce the complete advantages of the account reconciliation process every stage should be in good health: optimised to be sturdy nevertheless agile, and standardised across your entire business. However, with 46% of finance employees using a shared spreadsheet solution to achieve a summary of all their data, their ledgers, to achieve the level of standardised reconciliation required for a really great reconciliation process may be a tall order indeed.

Checking the health of each stage

A health check of every stage of your reconciliation lifecycle should not be a large challenge. You need to possess an honest appraisal of where your department presently sits and wherever you wish to be.

1. Import and enrichment – This initiative is crucial in standardising your data. Enriching your knowledge upon import is much more efficient than doing it ad-hoc, reducing the price of your reconciliation process and limiting the chance of errors later on.

Health risks: the data import and enrichment method could also be let down by the usage of spreadsheets – thus if you’re still using them as an accounting cure, stop! They provide unsecure following or segregation of duties, no automation of enrichment and they do not preserve the initial details of the account. Not to mention the potential problems that arise from sharing spreadsheets- Sharing a finance spreadsheet is extraordinarily risky especially when it involves the health of your reconciliation. It is not always possible to inform you who has used the spreadsheet, have their changes documented and spot any errors that are created. Despite this risk, over half of all finance departments still share finance spreadsheets to organise their reconciliation.

Prescription: Specialist accounting software packages are much quicker, more accurate and helps guarantee compliance – paying for itself in the reduction of cost to your department.

2. Matching – Matching financial data is the core of your reconciliation process and also the one that consumes the most amount of time. While comparatively easy, the task is horrendously mundane for any accounting employees.

Health risks: Its very nature implies that manual data matching will prove to be the most error prone stage of the reconciliation method. Providing that a quarter of finance employees have no second authority or approver, this might mean that mistakes aren’t detected before filing.

Prescription: automated transaction and data matching software solutions cuts out around 98% of the manual work, serving to minimise errors. An enhanced automation software solution can even progress the reconciliation lifecycle forward for you and make sure that there is continually a second authority before figures may be signed-off.

3. Exception management – to create the most effective use of your time you want to be able to prioritize the unmatched exceptions in your ledgers.

Health risks: whereas exception management ought to cut back operational costs, sloppy budgets, input errors and also the increased activity for the managerial team will mean that costs grow much higher. This might be somewhat relieved by a less centralised method, permitting employees to tackle exceptions at source rather than add an additional method in later.

Prescription: automated account reconciliation software may be tailored to manage exceptions, which can help by dramatically reducing time, cost and error rate.

4. Reconciliation – The part where you get to play detective. Why don’t these amounts match: It might or might not be an error, underpayment or even perhaps fraud? Reconciling mismatched figures provides finance employees plenty additional information to get their teeth into; however the method remains vulnerable to health issues.

Health risks: one of the largest reconciliation health risks is that the overreliance on paper for archiving. When reconciling items, it’s typically necessary to trace back through all of the previous monthly close reports, as well as ledger entries and bank statements. However, 64% of finance employees still at least, in some way rely, on binders and paper to archive their financial close results.

Prescription: as well as being far more secure, digital archives can also be much easier to look through than paper archived financial data for the required information. Digitised financial archives create the reconciliation process faster, easier additionally as helping you keep compliant with things like eDiscovery requests.

Overall, the reconciliation lifecycle is an important method for the finance department, however for many people there is still an abundance of enhancements that are required to be carried out. The health risks exposed to your finance department’s reporting, issues with governance, risk and compliance and threats to your future financial position are all over the place. It is necessary for Finance directors and CFOs to make sure that their reconciliation process is in great health. A healthy finance reconciliation helps maintain correct and up-to-date general ledger data by comparing it to details noted within the subsidiary ledger for every account.

Poor reconciliation will result in cancerous late payment penalties, unnoticed liabilities, and missed vendor discounts. For these reasons each finance department ought to perform a daily self-examination, or internal audit frequently.

However, if you are seeking for the magic pill which will alleviate all of your woes then you ought to take a look at an enhanced balance sheet reconciliation software package. This type of accounting and reporting software package automates giant chunks of the reconciliation lifecycle, delivering multiple prescriptions quickly.

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