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Challenges & Best Practicesn anag ng e ccounReconciliation Process
Donna Dean, CPA
Experis Finance Director, Finance & Accounting
Susan Parcell s, CPABlackLine Systems Director Finance Transformation
and Product Expert
Title of Presentation Change in Master SlideChallenges and Best Practices in Managing
the Account Reconciliation Process
General Information
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Title of Presentation Change in Master SlideChallenges and Best Practices in Managing
the Account Reconciliation Process
Earning CPE Credit To receive 1.0 CPE credit for this Webinar, participants must:
Attend the Webinar for at least 50 minutes on individual computers
(one person per computer)
Answer polling questions asked throughout the Webinar
Experis | Thursday, September 27, 2012 3
Title of Presentation Change in Master SlideChallenges and Best Practices in Managing
the Account Reconciliation Process
Meet Our Presenters
Donna Dean, CPA - Director Finance & Accounting
Experis Finance
Susan Parcells, CPA - Director Finance Transformation
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BlackLine Systems
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Title of Presentation Change in Master SlideChallenges and Best Practices in Managing
the Account Reconciliation Process
Agenda Why perform reconciliations?
Attributes of an effective reconciliation process
Warning signs of reconciliation process issues
Common root causes of reconciliation issues
Account reconciliation process improvement framework
Getting to leading practices
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Technology and process automation options
Automation using BlackLine
Recap
Title of Presentation Change in Master SlideChallenges and Best Practices in Managing
the Account Reconciliation Process
Polling Question #1
Which of the follow ing are features of your companys
A. Timely reconciliation on a scheduled basis
B. Clearance of all reconciling items within agreed timeframes
C. Segregation of duties and responsibilities (including authorization)
D. Centralized control, tracking and reporting with
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strong management oversight
E. Formalized reconciliation policy and procedures
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Title of Presentation Change in Master SlideChallenges and Best Practices in Managing
the Account Reconciliation Process
Why Perform Account Reconciliations? Assures reliable and accurate financial statements
vo s s gn can wr e-o s managemen surpr ses
Provides accurate management reporting for decision-making
Investors - Vendors
Customers - Regulators
Critical tool for understanding balance sheet and business conditions
Helps to detect fraudulent activity
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Regulatory compliance
SOX - FDICIA MAR
Reconcili ations are a critical internal cont rol.
Title of Presentation Change in Master SlideChallenges and Best Practices in Managing
the Account Reconciliation Process
Balance Sheet Account ReconciliationAttributes of an Effective Reconciliation Process
Centralized Control,Tracking and Reporting
Formalized ReconciliationPolicy and Procedures
Prioritizationbased on the risk
profile of account activity
Management oversight /commitment / authorization
Timely Clearing ofReconciling and Aged Items
Segregation of Dutiesand Responsibilities
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Improved accuracy/completeness of financial systems
Investor/customer/vendor confidence
Reduced external audit scrutiny/fees
Improved accuracy of information for decision making
Avoids financial information embarrassment/penalties
Improves fraud detection measures
Benefits of an Effective Reconciliation Process
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Title of Presentation Change in Master SlideChallenges and Best Practices in Managing
the Account Reconciliation Process
Balance Sheet Account Reconciliation
Warning Signs of Process IssuesTypical warning signs:
Significant old
unreconciled values
Inconsistent/no supporting
documentation for
reconciliations
No detailed follow-up
action plans
-
Prepare
DocumentApproval
Copies of
su ortin
An asses sment
of the validity,
correctness andappropriateness
of an accountbalance
Documented by
relevant calculations,
clear and complete
explanations
Prepared at
a specific
point in time
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prioritization
Manually intensive process,low automation
Account knowledge retained
by specific individuals
Reconcile
Balances &ResolveAged Items
Review &Challenge
documentation
In compliance
with company policy and relevant
accounting standards
Title of Presentation Change in Master SlideChallenges and Best Practices in Managing
the Account Reconciliation Process
Balance Sheet Account ReconciliationCommon Root Causes of Process Issues
Analys is of the issues identi fies the underlying root causes:
Prioritizationnotbased
ontheriskprofileof
accountactivity
Inadequatemanagement
oversight/commitment
Lackofformalized
reconciliationpolicy
Inadequatereconciliation
procedures
Poorsegregationofduties
andunclearresponsibilities
Lackofcentralized
control
Insufficienttracking
andreporting
Lackofadequately
trainedpersonnel
Significant old
unreconciledvalues
IssuesRootCauses
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No detailed follow-up
action plans No (risk-based)
account prioritization Manually intensive
process, low automation Account knowledge retained by
specific individuals
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Title of Presentation Change in Master SlideChallenges and Best Practices in Managing
the Account Reconciliation Process
Polling Question #2Benefits of an effective account reconciliation process include all
A. More efficient external audit process
B. Avoidance of financial misstatements
C. Prevention of fraud
D. Improved accuracy of data for decision making
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Title of Presentation Change in Master SlideChallenges and Best Practices in Managing
the Account Reconciliation Process
Balance Sheet Account ReconciliationProcess Improvement Framework
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Title of Presentation Change in Master SlideChallenges and Best Practices in Managing
the Account Reconciliation Process
Balance Sheet Account Reconciliation
Remediation Methodology
UnderstandTransaction
Flow
DetailOutstandingTransactions
ResearchOutstanding
Items
PrepareCorrecting
Entries
DocumentControl
Weaknesses
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Timely preparation
Clear comments, explanations and documents
Record required adjustments
Improve processes that create recurring problems
Title of Presentation Change in Master SlideChallenges and Best Practices in Managing
the Account Reconciliation Process
Balance Sheet Account ReconciliationRisk-Based Account Prioritization
Focus on accounts that could contain a significant or material misstatement
Quantitative
characteristics:
Volume of transactions
Dollar balance of account
Normal account balance
Use a rating system, e.g.:
Qualitative characteristics:
Complexity of transactions
Complexity and subjectivity of
accounting rules
Degree of regulatory oversight
Internal controls over
transaction rocessin
Key target
areas:
Payroll
Inventory
Bank accounts
Receivables
Payables
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1 = High Risk 2 = Medium Risk
3 = Low Risk
or Key / Non-Key Accounts
Level of automation/manual
intervention
Taxes
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Title of Presentation Change in Master SlideChallenges and Best Practices in Managing
the Account Reconciliation Process
Balance Sheet Account Reconciliation
Process Improvement InitiativesACCOUNT RATIONALIZATIONRationalize the number of accounts by identifying and
eliminatin accounts no lon er re uired
PROCESS OWNERSHIPEnsure the process is centrally coordinated. Ensure clear ownership
of each account and implement quality control reviews by a central
team
SEGREGATIONEnsure reconciliations are prepared
for each relevant account, avoiding
TRAININGTrain staff in policy and procedure.Rotate reconciliations between staff
to ensure knowledge base is
PROCESS MONITORINGImprove information management and workflow(standard forms, formal approvals, supporting
documentation, action plan documentation,regular MI reporting)
STANDARDIZATIONEstablish and apply standard definition of reconciled
and the methodology to be used to attain it and where feasible deploy a standard
reconciliation template
An assess ment
of the validity,
correctness and
appropriateness
Prepare
DocumentAppr oval
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,
where this would involve netting
PRIORITIZATIONPrioritized timing of reconciliations on riskcriteria and reconcile high-risk, priority accountsearly (before period close, if possible)
driven. Introduce peer reviews
AUTOMATIONAutomate processes wherever possible. Technologyintroduces system controls leading to efficiencies in
the close process and improved audit transparency
balance
Review
and
Challenge
Reconcile
Balancesand Resolve
Aged Item s
Title of Presentation Change in Master SlideChallenges and Best Practices in Managing
the Account Reconciliation Process
Polling Question #3
Which of the follow ing is NOT an indicator of a high ri sk account?
A. Complexity and subjectivity of accounting rules applicable to the
account
B. Inexperienced preparer responsible for reconciling the account
C. High degree of regulatory oversight affecting the account
D. High volume of transactions posted to the account each month
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Title of Presentation Change in Master SlideChallenges and Best Practices in Managing
the Account Reconciliation Process
Balance Sheet Account Reconciliation
Technology and Process Automation ConsiderationsTechnology can shorten the reconciliation cycle and improve controls
MS Excel MS AccessIn-house
Processes
SpecializedReconciliation
Software
Deploy specialized
reconciliation software
Use Access database
queries for large /
complex reconciliations
Develop in-house
processes supported
by IT programming
and operations
Frequently used software
in accounting and
finance groups
Requires consistent
Functions with consistently
formatted data fields
(i.e., numeric to numeric,text to text)
Address manual
reconciliations that are too
large or complex to beperformed efficiently
Database design using
predefined templates
Easily accessiblesupporting documents
Use Excel worksheets
for smaller
reconciliations
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formatting of data fields tobe analyzed (i.e., numeric
to numeric, or text to text)
File size is limited
Number of fields used
for efficient analyzing or
matching of transactiondata are limited
File size is almost unlimited
Number of fields used
for efficient analyzing ormatching of transaction
data are unlimited
Results can be displayed as a
MS Access report or exportedback to MS Excel for reporting
or inclusion in other files
Provide a high degree ofautonomy and flexibility
for the user
and company policiesand procedures
Readily available reportsto see the status of all
reconciliations
Title of Presentation Change in Master SlideChallenges and Best Practices in Managing
the Account Reconciliation Process
MS Excel MS AccessIn-house
Specialist
Reconciliation
Balance Sheet Account ReconciliationTechnology Options and Features
Software
DataSecurity and Integrity
Locking input cells, data validation
Input/Output Controls
Cross checks, balancing, conditional formatting
Segregation of Duties
Defines duties, roles and responsibilities
Backup and Archival
Regular backup on securedserver
Development Controls
Control, development, testing and approval
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Documentation ControlsDocumentation of use and application
Access Contr ols
Define and restrict user access, rights and privileges
Change Controls
Defined process for system changes
Version Controls
Use of naming conventions
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Title of Presentation Change in Master SlideChallenges and Best Practices in Managing
the Account Reconciliation Process
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Title of Presentation Change in Master SlideChallenges and Best Practices in Managing
the Account Reconciliation Process
BlackLine Process
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Title of Presentation Change in Master SlideChallenges and Best Practices in Managing
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Account Task Transact ion
Ideal Automated Platform
Variance
Analysis
Journal
Entry
Consolidation
Integrity Manager
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Real-time monitoring and reporting
Controlled process
Data integrity and integration
Title of Presentation Change in Master SlideChallenges and Best Practices in Managing
the Account Reconciliation Process
SSAE 16 + ISAE 3402
Internationally recognized auditingstandards developed by the AICPAand IAASB Third-party opinionson control effectiveness
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Title of Presentation Change in Master SlideChallenges and Best Practices in Managing
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ROI & Cutting Costs Auto-certification
Increased staff productivity
Reduced paper, printing,
storage, overhead, auditor fees
Improved process management
Faster close
ROI: 495% Payback: 2 Months
Cox Communications
ROI: 227% Payback: 6 Months
Education Management Corpor ation
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Return on investment
is one of the most important
indicators of value
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the Account Reconciliation Process
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Title of Presentation Change in Master SlideChallenges and Best Practices in Managing
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Title of Presentation Change in Master SlideChallenges and Best Practices in Managing
the Account Reconciliation Process
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Title of Presentation Change in Master SlideChallenges and Best Practices in Managing
the Account Reconciliation Process
Balance Sheet IntegrityAccount Reconciliation Recap
Today we have:
Reviewed the basics of account reconciliation and why differences arise
Considered your individual account reconciliation processes and
compared them to effective processes
Considered the warning signs of a poor reconciliation process and the
areas of weakness they may indicate
Started to consider steps toward leading practices
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Taken a high-speed tour through the process improvement stepsthat will lead to account reconciliation process optimization
appropriate for any business
Learned about the BlackLine automation technology
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Title of Presentation Change in Master SlideChallenges and Best Practices in Managing
the Account Reconciliation Process
Questions?For more information:
Donna Dean, CPADirector Finance & Accounting
Experis Finance
Susan Parcells, CPA
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Director Finance Transformation and Product Expert
BlackLine [email protected]
Title of Presentation Change in Master SlideChallenges and Best Practices in Managing
the Account Reconciliation Process
Experis Finance is a leader in innovative professional
services that help companies create competitive
advantage, custom tailoring our project solutions and
professional resourcing services to fit our clients needs
in risk advisory, tax and finance & accounting.
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Title of Presentation Change in Master SlideChallenges and Best Practices in Managing
the Account Reconciliation Process
More information
For more information, please visit
www.experis.us
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