Synchronizing accounts is one of the key factors in closing the books at the end of the accounting period. While it is a necessary element in all closures, online payment reconciliations often take up a large part of the whole process, with accountants barely reducing each amount of money in spreadsheets. When using handmade methods, reconciliation takes a few days, if not weeks, to complete.
Set A Delicate Policy
Reconciliation takes place continuously, from day to day and week to quarter. No matter how often reconciliation, establishing an effective and efficient risk-based policy is important in reducing errors and risks throughout the closure.
Risk measurements can be driven by several account-related factors. A less risky account may be based on a difference in the monthly balance or a difference between the standard ledger and the final ledger balances. On the other hand, a high-risk account can be defined by the debit balance available where credit is expected, where there has been a higher than normal variance in the account balance, or where similar reconciliation has failed peer review in the past. Establishing these key elements between the key and the key account is the basis for having a general policy and procedure to follow.
By defining low-risk and high-risk accounts and separating the two into specific factors, financial and accounting teams can establish a priority list of accounts as they reconcile. Instead of getting closer to all account reconciliation with the same level of accuracy, teams should focus more on their time on high-risk accounts. These high-risk accounts often have a high risk of error, which means that they have a significant impact on the accuracy of the financial statements.
Implementing policies is not a one-time process; to establish close financial procedures and ensure that all accounts are reported, leaders should review these risk-based policies on an ongoing basis.
Common Communication Process
Each time a reconciliation is made, accountants follow a series of steps to ensure that they are accurately recorded, documented, and reconciled. This repetitive process relies on standard procedures to ensure that it is performed accurately at all times. Implementing a balanced reconciliation process helps reduce risk, report errors, and recruit new employees.
Whether you use a template that is followed by everyone in the finance and accounting department or the transaction verification process, every organization should have a set and standardized reconciliation process. Similar to developing a risk-based policy, organizations should also regularly review their existing reconciliation process to identify any gaps or opportunities for automation.
Automated Financial Communication
Technology has undoubtedly had a profound effect on business operations. Although automation is often referred to as a “last resort” to ensure accurate reporting and access to speculative understanding, the legal process is still crucial to its success.
Instead of relying on manual data entry in spreadsheets, synchronizing transactions, sending spreadsheets by email or shared site, and finding approved accounts, F&A teams can significantly improve their workflow by introducing automated processes in an equitable reconciliation process. Financial automation also enhances the process by simplifying data integration, highlighting differences, automatically syncing low-risk accounts, and providing a centralized solution for close operations management. In addition, financial automation also enables financial leaders to gain real-time insight into the duration of the closing period while looking at the number of fixed-term accounts and the timeline and workload of the organizers and reviewers.
While not a universal solution, organizations should recognize the importance of automated, state-of-the-art processes in all financial closures.
Key Examination Guidelines
Numbers are important to any organization, whether they are in a state of income, income, profits and losses, and more. Just as these financial statements are very important in assessing the current state of the business, key performance indicators (KPIs) are important in assessing the effectiveness of financial closures.
When performing a reconciliation, whether done through manual or automatic processes, it is important to track those KPIs. Some examples of KPIs include the time required to complete a high-risk account reconciliation or the average time required to prepare and authorize a selected period.
Focusing on KPIs empowers financial leaders to get an overview of how reconciliation is done from start to finish and to explore any gaps in the process. Leadership can make adjustments to streamline workflows and report on those important metrics and bring them to the C-suite management.
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Keep Continuing Improvements
Reconciliation is a necessary but repeated process for all organizations. As transactions come in and out of business, the similarity of the bottlenecks and the inequality of the workload that occurs often rises, which means that financial leaders must continue to analyze their processes and improve where necessary.
Perhaps there is an accountant with a large number of accounts that have a risk of syncing and keeping track, and another auditor has a small number of accounts that have a low risk. Guaranteed policies require that high-risk accounts be reconciled every month, and low-risk accounts repay twice a year. This inequality of workloads not only provides additional pressure on the high-risk producer but also reduces productivity that provides less risk. Workflow imbalances can also delay closure and affect
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