In the United States, the introduction of the Sarbanes-Oxley Act in 2002 highlighted the requirement for balance sheet Account Reconciliation to be included in a company’s procedures, improving the quality of the reported numbers. This was the first sign that the process would be improved with automation as opposed to a strenuous manual process.
With an announcement regarding UK SOX imminent, now is the time for Finance Teams to assess what controls and internal frameworks they have in place.
Having controls in place for the reconciliation of accounts mitigates both current and future risk. These controls include a structured framework and a focus on automation of processes and controls, moving away from labour-intensive and error-ridden processes often using spreadsheets.
As we all know, spreadsheet-driven processes create significant risk and often take place after the period end close.
Adding controls around Account Reconciliation will provide the Finance Team with a greater ability to justify the balance sheet and will allow the CFO to sleep at night!
The worst nightmare for accountants is an error-ridden close. This often leads to significant ramifications for the business including reporting incorrect numbers to the City with a consequential impact on share prices. Even worse perhaps is having to use the phrase ‘debit the P&L’. That phrase alone can terrify any one of us!
Visibility and Transparency
A well-planned Account Reconciliation process should be transparent and clearly communicated. With a reliance on spreadsheets, this is often very difficult. All involved should be able to see the status of the reconciliation of accounts at any time. Risk should also be quantified.
An automated solution will join what can be a very disparate process and bring it under the umbrella of Group Finance. To get the most out of the reconciliation process, it should be fully visible by Group Finance.
- Where am I in the close?
- Why aren’t those accounts reconciled?
- What’s the resolution?
Three examples of questions that require full transparency to complete the reconciliation process.
With the labour-intensive nature of manual reconciliation, it is even more time consuming for Group Finance to gather proof that Account Reconciliations are being completed. This then shifts the responsibility on Group Finance to check subsidiary reconciliations.
With an automated, centralised tool, it is possible to manage Account Reconciliations group-wide instantly.
In the words of CCH® Tagetik, “Account Reconciliation should be a hop, skip, jump of reconcile, review and resolve”.
CCH Tagetik’s Finance Transformation platform provides a single product to manage the end-to-end financial close.
By automating the process, transactions can be reconciled as they are happening, in real-time with Tagetik’s CPM Solution. This in turn reduces the risk of reporting incorrect numbers or having to debit the P&L! It also provides the structured framework necessary to reconcile with confidence. The solution uses a risk-based approach that provides a dynamic risk rating to different elements of the reconciliation based on factors such as materiality. Action items will also be labelled with a risk rating of high or low dependent on priority level. Open items will be flagged which quantifies the risk, both from a P&L and Balance Sheet perspective. CCH Tagetik provides a single source of validated data to ensure consistent and accurate data from start to finish.
The Tagetik solution also alleviates the complications of balance sheet accounts and provides greater visibility of the close. Pre-built templates are used with justifications to provide validation of the completeness and accuracy of the ending balance as well as highlighting any bottlenecks.
Preventative controls can also be set to monitor and reduce write offs and increase confidence that balances have been reconciled, reviewed, and approved correctly. Repeat rejections can be monitored to spot trends. Discrepancies are followed up or escalated, if necessary, with support provision. Further to this, machine learning can be used to search for patterns such as in bank reconciliation.
As a unified solution, CCH Tagetik will increase the automation of the Financial Close by 30-60%. Their Account Reconciliation solution can be quickly implemented alongside Close & Consolidation, Planning, Reporting, and Disclosure Management.
HAYNE has worked closely with CCH Tagetik for many years as an implementation partner. We specialise in the full Tagetik suite and will support you with the planning, training, and implementation of your CCH Tagetik solution. Our team consists of several qualified accountants who specialise in the full Tagetik suite. We work with companies of all sizes and industries to develop and implement compliant, robust, time-efficient, and effective solutions.
HAYNE is a lifecycle partner for all your Corporate & Financial Performance Management needs including Close & Consolidation, Budgeting, Planning, Account Reconciliation, Disclosure Management, IFRS 16, and Business Intelligence.
UK SOX summary
Implementing controls around the key elements of the financial close including Account Reconciliation will set organisations up for success and likely give them a competitive advantage in the market.
Specifically, from the perspective of Account Reconciliation, companies will have the ability to view reconciliation as a proactive control that will prevent errors, as opposed to an after-the-fact activity that detects errors.
- Contact us to arrange a call to explore and discuss your Account Reconciliation requirements or the CCH Tagetik platform
- Sign up to our upcoming Account Reconciliation webinar