The Risk Of Manually Reconciling Transactional Details

Molly Boyle

Part 4 of the “Risk of Manual Processes” series about how to improve efficiency, accuracy, and compliance in the financial close process.

Rainbow spreadsheets. Thousands of lines to match and clear. Late nights faced with the fact that this is not the reason you got your degree in accounting… all while knowing there must be a better way.

You know what I’m talking about: reconciling financial data from disparate sources, and specifically, manually matching an ever-increasing volume of transactions. This process is tedious, time-consuming, and error-prone, tying up top talent and developing bottlenecks in the close process.

And not only does this cause frustration; it also creates layers of risk.

The impact on accuracy

Reconciling transactional data is arguably the most onerous of routine tasks, yet it carries significant risk.

This process invites errors when you need to reconcile hundreds of thousands of transactions – bank records vs. GL, invoice vs. PO, credit cards, intercompany data, and more. That challenge is augmented even further if you’re dealing with multiple ERPs or extreme decentralization.

And still, the prevailing method of matching and reconciling transactions at companies, both enterprise and startup, is manual. Sixty-one percent of finance organizations are “highly dependent” on spreadsheets, according to an Institute of Management Accountants (IMA) survey.

As a result, companies have limited real-time data, and little time (if any) is left for analytics that can help identify errors or required adjustments.

The impact of ignoring open items

If there’s complex logic that needs to be applied, a manual matching process increases the possibility of a false match. One-to-many or many-to-many relationships between data sources, coupled with limited time to work through the high volume, can leave accountants with no choice but to make assumptions.

And those assumptions aren’t always accurate – opening the door for missed entries and financial statement errors.

The stakes are raised when the volume increases. Individually, issues and errors are often immaterial. However, when they’re not addressed or identified, those individually small write-offs can quickly aggregate to more significant errors and unexpected write-offs.

With regard to open-item managed accounts, the additional effort required to systematically clear transactions adds an additional burden. As a result, companies often let open items build up on the balance sheet.

Beyond balance sheet risk and employee burnout, high volumes of uncleared open items can create more widespread challenges, including system performance issues, and ultimately, delays in the close process.

The impact on talent and the bottom line

Organizations look to finance leaders to support strategic initiatives. Ultimately, they can only be successful business partners when reliable financial data is available and when compliance is consistently achieved.

When accounting and finance teams rely on manual processes, they struggle to focus on higher-risk areas and analyze trends – especially at peak times during the month.

Top talent has the skill set and drive to deliver value-adding insights, and yet they’re spending most of their time on the areas that must get done, like reconciling bank accounts or clearing open items. Brute force is required just to get to the finish line, and that leaves little capacity for anything else.

Accountants spend time and money earning their degree, studying for the CPA exam, and keeping up with regulatory changes, like accounting pronouncements, along the way. When they finally get a job – only to spend 75% of their time on repetitive, spreadsheet-driven tasks – well, they’re not going to be happy at that organization for very long

Yes, matching and reconciling is a critical requirement. But if leadership and accountants are aligned with wanting to best utilize accounting resources, it’s time to help them rethink the process.

The solution is process automation

The reconciliation process and substantiation of general ledger balances are at the core of an accountant’s responsibility. Financial data is transacted in multiple places, and therefore, the reconciliation process involves disparate systems and sources.

A process automation solution automatically matches many transactions based on user-defined logic. An auto-certification and intelligent workflow embed greater control in processes. Reducing the volume with automation frees accountants to focus on exceptions, allowing issues to be identified earlier and accelerating the close process.

Automation also ensures accuracy. Rather than relying on an accountant to sift through volumes and volumes of data, system-based logic does this automatically.

Read this brief to learn more about how modernizing your manual processes transforms accounting and finance into a trusted business partner.

This article originally appeared on BlackLine.com and is republished by permission. BlackLine is an SAP partner.


Molly Boyle

About Molly Boyle

Molly (Welton) Boyle is the senior manager, Solutions Marketing at BlackLine, a provider of finance automation solutions. She is responsible for helping companies understand the value of BlackLine in the financial close and finance transformation space and supporting the go-to-market strategy with relevant content and collateral. Molly is based in Baltimore, MD and has extensive experience in public and corporate accounting.