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Strategy - Global Banking | Finance

By Eric Werab, Director of Product Portfolio Management for Financial Control Solutions, Fiserv

Manual processes and fragmented, siloed departments are the enemy when it comes to increasing operational efficiency. Yet many institutions fail to achieve true financial control by continuing to take a fragmented, departmental approach to reconciliation based on multiple systems and manual interventions. Forward thinking organisations are not only automating these processes, but also integrating their reconciliation and attestation processes to provide a single version of the truth based on accurate, real-time, transaction-level data.

Large institutions process and reconcile millions of transactions every day – these can range from accruals, accounting (AR, AP), cash, deposits and banking reconciliations to name just a few. These organisations certify or attest to thousands of GL balances on a month end basis which relies heavily on the detailed transactional reconciliations completed every day as supporting information. Any manual work required to compare and reconcile data in different systems increases administrative costs and the risk of errors as well as slowing down exception management. Fragmented reconciliation systems and processes also make it difficult for the finance department to accurately track and report on accounting information. With no way to standardise the exception management process, there’s a risk of non-compliance with corporate and industry controls which can result in hefty fines.

Eric Werab

Eric Werab

An additional challenge is that the current systems used to perform reconciliation checks often use only balance-level information. This may help organisations identify where exceptions exist, but extensive manual research is still needed to find out exactly which transaction caused the discrepancy and drive the issue through to resolution. The cost of manually researching and solving exceptions can be significant for institutions.

Once transactions have been stored and reconciled, they are typically passed to a stand-alone system that supports both monthly and quarterly certification and ‘attestation’. To import the right data into the attestation system at the right time, organisations typically take snapshots of balance-level data from the reconciliation system and other systems where accounting data is stored. Often, this process relies on completely manual tools, such as spreadsheets, which increases administration workloads and costs and increases the risk of errors.

Even where stand-alone attestation systems are more sophisticated, organisations may be exposed to significant risks. This is particularly the case where institutions use custom developed attestation systems or non-integrated, outsourced services from third-party providers. In these situations, extracts of accounting data are shared at file level or cut and pasted between systems, providing only a static, point-in-time view. In addition, each system may show a slightly different version of the balance sheet, leading to internal discussions about which are accurate, and significantly increasing workloads and costs.

True, End-to-End Reconciliation Explained

To achieve true, end to end reconciliation organisations are deploying technologies that bring reconciliation activities together to present the bigger picture.

These ‘true’ reconciliation solutions bring transaction-level and balance-level data together in a single system, providing detailed information on why exceptions have occurred and how they can be solved. This eliminates the need for manual research or interventions meaning that institutions can achieve major efficiency improvements, lower their operational costs and free staff for more value-added work such as identifying root causes for exceptions and trends in the data.

End-to-end reconciliation also streamlines accounting and reporting processes and improves visibility of business performance. For example, if a payment is made or received late this is captured centrally in real time, ensuring that accounts can be closed more quickly and accurately. At the same time, the risk of error due to re-entering data between systems is dramatically reduced.

Automating the reconciliation process helps CFOs and accounting teams ensure that all their accounting information is accurate, reducing the risk of error during monthly and quarterly financial close periods and streamlining the reporting process.

Choosing the Right Technology for True Reconciliation

True, end to end reconciliation solutions support the full range of transaction types (wires, checks, cards, ACH, Swift, cash) as well as securities, inter-company transactions and trades – all in a single system. The best technology will integrate both balance-level and transaction-level data to increase visibility of what has caused exceptions, eliminate manual interventions and provide rapid, cost-effective resolutions. In addition the solution should support full automation of the reconciliation life cycle from loading and enhancing data to matching, identifying and solving exceptions through to certifying the accuracy of balance sheet. The right technology will standardise reconciliation processes for transparency and visibility across all transaction types and scenarios, strengthening enterprise-wide governance and controls.

ReconciliationLifeCycleCentralise to Optimise – The Value of a Center of Excellence or Shared Services Model

CFOs require a single view of the balance sheet based on accurate, real-time data. Many organisations find that centralising reconciliation based on a COE or shared-services delivery model can help kick start the process of stripping out legacy systems and automating previously manual administration tasks. As a result, institutions can achieve major reductions in ‘per transaction’ costs and free staff for more value-added work. Centralisation of reconciliation processes also provides major benefits in terms of increased visibility, releasing information previously held in siloed systems and giving CFOs and other senior managers a current, accurate view of business performance.

Before embarking on a shared services or COE strategy, it’s important to look at your current reconciliation systems and processes and define exactly what you want to achieve in the future. When organisations reach advanced stages of maturity, the shared-services model begins to deliver quantifiable value. Performance measurements can be used to effect major process improvements and the shared service function is seen as a trusted advisor and partner for all departments and business lines across the company.

Fragmentation is the enemy of solid financial controls – centralising reconciliation processes is the key to implement effective financial controls across the organisation in a consistent, timely and predictable manner.

Global Banking & Finance Review


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