Renata Sheyner from Fiserv says that to varying degrees, this transformation can extend to day-to-day financial processes, and one of the ripest areas for improvement is reconciliation.

While there may be no silver bullet that solves every reconciliation challenge an organisation may face, automation comes close. Automating this time-consuming and error-prone process has the potential to boost the bottom line and reduce the risk of compliance deadline misses and mistakes.

Addressing Perils of the Financial Close
For organisations with millions of transactions, closing the books is no easy feat. Quarterly, half-year and annual financial reports — along with other forms required by regulatory agencies — keep the accounting team working to meet deadlines year-round.

Financial statements face external scrutiny from regulatory agencies in every country in which the company operates. Additionally, there are shareholders, boards of directors and in-house audit and compliance teams analysing the numbers.

There is great pressure to avoid mistakes, and no one feels that pressure quite like the CFO who signs off on the books. By attesting to their veracity, he or she assumes a great deal of personal liability. But manual reconciliation processes used by many companies today provide no audit trail showing how the balance sheet was derived. As a result, executives must certify the data without visibility into how the numbers were achieved. And once financial leaders sign off, there isn’t an easy way to backtrack and gain visibility into the data they approved.

Manual reconciliation processes used by many companies today provide no audit trail showing how the balance sheet was derived.

Without an automated process, reconciling items such as payments, disbursements, commissions, and bank accounts at the transaction level is a labour-intensive and error-prone process. In addition, due to the lack of an audit trail, companies often write off unresolved exceptions because they cannot trace an error back to the source — raising the question of possible fraud.

Exacerbating the problem are the large stores of disparate data that must be taken into account during the reconciliation process. Data can come from internal departments or third-parties; in the form of text files, spreadsheets or PDFs; it can involve multiple currencies; and it can refer to a payment, customer information or a myriad of other data. Different sources and different structures of data make manual reconciliation difficult.

Automated reconciliation can enable companies managing high volumes of transactions to track, match and archive all incoming data, and connect that data processing directly to certification. Reducing the risk of error could save companies thousands of dollars in noncompliance fines and protect the company’s reputation among customers, peers and regulators.

Getting a Better Line of Sight
By bringing the full range of transaction-level and balance-level data together into a single system and automating the entire reconciliation process, from data acquisition and matching through period-end approvals and reviews, companies can form a complete account reconciliation picture. This enhances visibility into exceptions, helps eliminate manual interventions and facilitates rapid, cost-effective resolutions. Automated checks help ensure compliance with corporate and regulatory controls.

Centralising data in one place and integrating automated reconciliation and certification processes allows the data to be traced to its source throughout the entire financial close lifecycle — from data ingestion through matching, exception management, reconciliation, certification and signoff. It becomes trackable and transparent.

Integration of data and matching transactions using an automated process can cut the risk of error by as much as 50% (based on results from organisations that use an end-to-end reconciliation solution). Built-in audit controls can also help ensure that regulated financial standards are met.

A centralised view of transactions and the overall reconciliation lifecycle also makes it easier to mitigate the risks of fraud and write-offs related to unexplained exceptions. End-to-end reconciliation automation, combined with data agnosticism, facilitates the identification and resolution of exceptions. A data-agnostic tool can pull in massive amounts of disparate data related to payment and disbursement statuses and more, and funnel it through an automated matching system to pair the right data with the right transaction. This can lead to an overall 75% reduction in write-offs (based on results from organisations that use an end-to-end reconciliation solution).

 Gaining Efficiency and Reducing Costs

By minimising the need for manual research or interventions during the reconciliation process, companies can achieve significant efficiency improvements and lower operational costs while enabling staff to perform more value-added work. Reducing manual tasks and implementing automated reconciliation can lead to a 60–80% gain in efficiency (based on results from organisations that use an automated reconciliation solution). Further, it can reduce the time it takes to close the books by two to four days.

Here are some of the potential savings:

• Reducing audit costs by 25% by providing electronic access to accounts and required approvals;
• Eliminating document storage fees and printing costs;
• Eliminating cost of compliance deadline misses and potential fines;
• Reallocating staff to higher-value activities;
• Reducing write-offs.

In addition to realising savings, organisations also gain greater visibility and confidence in the accuracy of financial reporting, which helps lower compliance and reputational risks.

Increasing Value for the Bottom Line

Finance teams are evolving to work as strategic partners in their organisations, helping drive tangible business results. A fully-automated and integrated end-to-end reconciliation solution can ease the pain of financial preparation while facilitating speed, accuracy and efficiency. In addition, when these teams work with tools that do some of the number-crunching for them, they can focus on tasks that provide more value for the bottom line, such as exception investigations and strategic projects such as mergers and acquisitions.

The promise of digital transformation is vast, and automated reconciliation is a solid starting point for organisations looking to tap into its potential today.

Website: https://www.fiserv.com/index.aspx

This week Finance Monthly benefits from an exclusive analysis by Eric Werab, Global Product Line Owner, Financial Control Solutions, Fiserv. Eric details his thoughts on the value of streamlining reconciliation, the overall benefits and the best ways to go about it.

In today’s increasingly digital world, financial departments are receiving more and more data on a daily basis that needs to be managed and processed effectively and efficiently. Many institutions still take a disjointed, departmental approach to reconciliation that constitutes multiple systems and manual interventions. When financial controls fail or are absent, the damage to reputation and bottom line is undeniable. CFOs need to have access to a single view of any balance sheet at any time, which need to be accurate and up-to-date. However, with multiple systems and various teams managing different aspects of the reconciliation process, providing the most current information is extremely difficult, if not impossible.

Automating and streamlining the reconciliation process so that it is enterprise-wide can save on valuable man-hours and increase the likelihood that exceptions are identified and rectified quickly.  This strategy also ensures that organisations have the ability to stay ahead of the competition and remain compliant with industry standards, as well as deliver a high level of service to customers.

Digitisation and Cost-Effectiveness

Traditional reconciliation processes are spread out across teams resulting in errors being missed, and making it virtually impossible to compile a full picture of accounts. By automating the process, data is displayed in one single place and anomalies are more easily identified, and costs are reduced. Digitising the reconciliation process can help alleviate some of these costs as errors, late closings or being out of compliance with corporate policies can be avoided with an automated system, again saving on billable hours that can be reallocated to add value elsewhere.

It is not just financially that automating the reconciliation process can benefit an organisation. Key aspects of back-office processes can be simplified and secured with the use of technology. A large benefit to streamlining the reconciliation process is that the full range of financial instruments is supported by automation, ensuring that discrepancies and exceptions are more easily spotted and secured. Additional securities, inter-company transactions and trades are also built into this system and ensure that only one platform is necessary. This single-screen approach ensures that executives are able to see and identify exactly what is happening, in what area of the business and when it occurs; all helping mitigate balance sheet attestation and account certification risks.

Value of Streamlining Reconciliation

The first step in implementing an automated reconciliation process is realises the true projected expense of a manual system. Bringing together transaction-level and balance-level data in a single system is a key benefit to introducing a comprehensive reconciliation solution, as it provides detailed information on why exceptions have occurred and how they can be resolved quickly and easily. Using technology to identify these errors, rather than manually searching for them, improves effectiveness within organisations and lowers operational costs.

Workflows are used to fully automate the process and a series of automated checks ensure organisations remain compliant with corporate and industry controls. By automating the end-to-end reconciliation process, companies can track exceptions through to resolution quickly and cost-effectively.

Intangible Benefits

In addition to these measurable savings, there are advantages that can be harder to determine but that provide significant value to an organisation that has opted for an automated system. Increasing visibility and transparency by utilising automated reconciliation processes impacts the confidence that executives have in the accuracy of financial reporting.

Increased clarity also helps an organisation significantly lower compliance and reputational risks. With an automated reconciliation system CFOs and accounting teams can be sure that all of their accounting information is accurate, thereby improving the visibility of business performance, but also reducing the risk of error during monthly and quarterly financial close periods. Businesses will also gain peace of mind that their financial control has improved, while also allowing their teams to adopt the best practice across financial processes with ease. Finally, teams can focus on more profitable activities, as less time will be spent on closings, exception management, routine compliance and financial governance activities.

Choosing the Right Platform

Individual systems contribute to the overall reconciliation process, therefore choosing a technology to combine all, including the general ledger system and the trading system, is vital. The need to provide a single version of the truth for senior management is one of the most significant points in the business case for streamlining the reconciliation process.

Another factor to consider when integrating an automated reconciliation system is the ongoing reconciliation management, as this will need updating from the management of manual processes. Reconciliation specialists from across the business should establish a set of rules that remain consistent; the rules should be laid out and defined using comprehensive process templates so that there is clarity and transparency across the whole business.

The scope and scalability of a reconciliation system are   important factors in selection. Being flexible to meet any change in transaction size is essential when incorporating an automated reconciliation system. The technology that shared services depend upon should not be a barrier to business growth. Being able to easily integrate new acquisitions or business lines into the system to support growth objectives with ease is imperative to the success of a streamlined reconciliation system.

By centralising the reconciliation process through a single service model so balance sheets are more accessible, accurate and compliant provides organisations with a major increase in operational efficiency. The cost benefits of a streamlined system allow value to be added elsewhere, while simultaneously reducing compliance risk. In addition, it allows a company to provide a better experience to customers who expect an effective, real-time service whenever they demand it.

Before financial institutions embark on implementing a shared services strategy for streamlining reconciliation, it is important that they define exactly what they would like to achieve in the future. By building bridges with all departments and keeping the lines of communication open, it’s possible to identify areas for improvement and collectively agree changes that add value to the organisation in the future.