Automating Account Reconciliation to Mitigate Compliance Risk


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The role of Accounting and Finance Professionals is ever evolving. Demands are increasing; regulations are even more stringent; and areas of focus are expanding. All of these make it more challenging for companies to efficiently close their books while ensuring they have balance sheet integrity. The account reconciliation process is an under-appreciated, yet critical, control which helps ensure financial integrity. By leveraging technology, a company can automate its reconciliations and link accounts across different standards to minimize the amount of manual labor required and ultimately the risk of errors. This session is designed to inform finance and accounting leaders of how account reconciliation process optimization can create a foundation for streamlining the overall financial close process and more importantly, ensuring appropriate controls are in place for greater accuracy in the numbers.

Susan Parcells, CPA, Director, Finance Transformation, Blackline Systems
Wendy Shapiro, CPA, Senior Director, Corporate Accounting, Atlas Air Worldwide

Presentation delivered at CFO Dimensions 2013 -
Track: Finance Technology | Session: 5

Published in: Business, Technology
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  • Speaking points:Regardless of how you are currently handling your acct recs, a world-class process should include…Current policies and procedures, available to users when and where they need themStandardized reconciliation templates so information is consistently reported and explainedSecure information that can be easily accessed by authorized users, regardless of time of day or locationMultiple training delivery methods in place to ensure staff is taking advantage of full functionality of system, meeting company standards and following proceduresWorkflow is defined, automated and controlled to ensure high level of visibility to reports, audit logs, etc. with minimal time commitment, effort from senior staffCFO and CEO must review and attest at least quarterly that internal financial controls are in place and adequate
  • Automating Account Reconciliation to Mitigate Compliance Risk

    1. 1. 1© 2013 Automating Account Reconciliation to Mitigate Compliance Risk Marc Ursick, CPA, CMA, CISA Ernst & Young LLP Susan Parcells, CPA BlackLine Systems Wendy Shapiro, CPA Atlas Air Worldwide
    2. 2. 2© 2013 Account Reconciliation Point of View Utilizing Close Management Technology to Enable a Faster, Higher Quality Close
    3. 3. 3© 2013 Marc Ursick, CPA, CMA, CISA Ernst & Young LLP
    4. 4. 4© 2013 AGENDA FSCP Overview Account Reconciliation – Example Issues Value Proposition / Business Case Process Overview and Implementation Approach
    5. 5. 5© 2013 What is Financial Statement Close (FSCP)? Budgeting Long Range Planning Consolidated Financial Information Business Unit Submissions External Reporting Internal Reporting Production feed schedule Chart of accounts FSCP is the bridge between critical business processes (e.g. order to cash, purchase to pay, etc.) and the ability to report the financial results. Data Collection Entity Close and Submission Consolidation Reporting AnalysisDetailed Close Checklists Allocate Eliminate Perform Acct. Recons
    6. 6. 6© 2013 FSCP process: ERP vs. complementary software to drive efficiency 4.0 Internal/External Reporting Level 1 1.0 Data Collection 2.0 Entity Close and Submission 3.0 Consolidation Level 2 Close all incomplete tasks 1.1 Run end of day General Ledger close 1.3 Reconcile Feeds 1.4 1.2 Reconcile all General Ledger accounts to Consolidation Software 2.1 Close all open issues related to the close 2.2 Perform variance analysis 2.3 Obtain supporting documentation for elimination and consolidation entries 3.1 Review and approve the elimination and consolidation documents/ entries Reconcile intercompany accounts for accuracy (Multiple manual systems often demand a compensating manual control) Reconcile key accounts and agree on intercompany balances 3.2 3.3 3.4 Business Unit Reporting Conduct initial variance analysis and commentary Analyze variances for actual versus budget Analyze variances for actual versus prior year Complete business specialist detailed financial analysis 4.1 4.4 4.5 4.6 4.7 Daily throughout the month Days one and two Collect Subledger Feeds Record standard JE’s - Steps wholly supported by most ERP or consolidation packages - Steps where Close Management Software can supplement the quality of the process or increase the efficiency Compile disclosures and external financial statements
    7. 7. 7© 2013 Acct Recon – Example Issues ResultsProcesses Inconsistent application Inappropriate SoD Aged reconciling items Lack of approvals Potential unreconciled balances Issues Financial statement risk Compliance (SOX) risk Inefficient processes Decentralized execution Not timely Limited visibility Manually intensive Decentralized testing
    8. 8. 8© 2013 Value Proposition What: Standardize, centralize, automate Why: Create efficiency, visibility, reliability, confidence and better manage overall risk
    9. 9. 9© 2013 Account Reconciliation - Why Fix It? Keep Us Out Of Trouble Drive Sustainable Cost-Effective Compliance Make The Business Better Drive Process & Operational Improvements Increased Visibility Quantification of Errors Consistent Formats Completeness Validation 302/404 Certifications Compliance Financial Misstatements Auditable Support Approval Certifications Workflow Management Risk Based Priority Approach Automation of Controls Process Improvement Monitoring vs. Transactional Reduce Audit Fees Operational Reconciliation and Exception Management Continuous Improvement and Quality Assurance Account Reconciliation Process Improvement
    10. 10. 10© 2013 Business Case Quantitative Benefits Qualitative Benefits Compliance and Operational Benefits ► Completeness Validation ► Standardized Policies & Procedures ► Adjustment Rollup ► Consistency in Execution ► Vertical vs. Horizontal Control Environment ► Priority Based Risk Assessment and Approach ► Centralized Configuration and Compliance Management ► Centralized Security and Help Desk ActivitiesBusiness Case ► Process Execution Time Savings ► Process Administration ► Paper Savings ► Audit Savings ► Storage Savings ► Segregation of Duties Assurance ► Centralized Repository and Archiving ► Workflow and Assignment Investing in an account reconciliation tool will not only provide cost savings, but also compliance and operational benefits
    11. 11. 11© 2013 Process Overview Facility-level Technical landscape Corporate Review and approve Monitoring dashboard Centralized audit Web-based forms Prepare reconciliation using online tool Technical support Attach supporting documentation Workflow engine Central repository and database
    12. 12. 12© 2013 Implementation Approach Assessment and fit analysis Remediation and improvement design Develop, test and train Rollout and control Execute and improve Monitor and control Develop GL reconciliation improvement Assess the potential benefits Project management Change enablement
    13. 13. 13© 2013 Contact  Marc Ursick (440) 476-0149 (cell)  Do not hesitate to contact if you have any questions after this session.
    14. 14. 14© 2013 Susan Parcells, CPA BlackLine Systems
    15. 15. 15© 2013 AGENDA Current Regulatory Environment/Impact on Finance Organization Importance of Account Reconciliations/ What to look for in an Automated Solution Client Case Study – Atlas Air Worldwide Q&A
    16. 16. 16© 2013 Current Regulatory Environment Accounting standard setters, including the European Financial Reporting Advisory Group (EFRAG), the FASB in the United States and the IASB (its international counterpart), are enforcing multiple standards that companies must adhere to Accounting rule makers also are mandating international alignment on reporting rules and requirements Restatement of corporate earnings worldwide are more common than ever due to new and changing rules, tax credits, etc. Convergence of standards and guidelines causing confusion among CFOs/CEOs about what is required and how to comply
    17. 17. 17© 2013 Accounting-Specific Changes for 2013 Several projects underway to align U.S. and international standards on revenue recognition, leasing, financial instruments and insurance. SEC setting new policies for how U.S. companies will adopt International Financial Reporting Standards (IFRS). Updated COSO Framework was issued on May 14, 2013 and added more stringent mandates on internal controls for large corporations Regulators in the United States and Europe are considering a rule requiring public companies to switch their auditing firms every several years
    18. 18. 18© 2013 CEOs/CFOs have to be more meticulous than ever in enforcing company reporting policies and procedures; more training will be required Number of reconciliations, tasks, journals, etc., is multiplied for each set of books maintained Maintaining multiple sets of accounting standards, including IFRS, GAAP, and Statutory accounts, will create significant resource constraints and challenges for companies when closing the books each month By leveraging technology, a company can automate its reconciliation process and link accounts across different standards to minimize the amount of manual labor required for each financial close Just as account reconciliation is a key control in producing accurate financial statements, proper IFRS reconciliation will be key, as well – a process must be put in place to ensure this is done effectively What Does All This Mean For The Corporate Finance Dept?
    19. 19. 19© 2013 Lack of visibility Little/no standardization of reconciliations Too many manual processes Unclear ownership of tasks Too much room for human error New Rules Causing Confusion, Weaknesses In The Close Process
    20. 20. 20© 2013
    21. 21. 21© 2013
    22. 22. 22© 2013 Current Regulatory Environment/Impact on Finance Organization Importance of Account Reconciliations/What to look for in an Automated Solution Client Case Study – Atlas Air Worldwide Q&A AGENDA
    23. 23. 23© 2013
    24. 24. 24© 2013 Doing manually Excel/spreadsheets Internally developed tool/system Automated technology/software tool Others? Existing Methods for Handling Account Reconciliations
    26. 26. 26© 2013 Standardization • Accommodates complex org & account structures • Standard templates • Pre-populated • Policy procedures • Supporting docs • Full audit trail
    27. 27. 27© 2013 VISIBILITY & CONTROL • Role/risk-based • Real-time status • Drill-down links Dashboards (quick view of assignments)
    28. 28. 28© 2013 Automated Interfacing between Data Sources and Software Functionality, Modules
    29. 29. 29© 2013 System that can be used for entire balance sheet: pre-paids, accruals, bank, subledger, debt, equity, etc. Auto-certification of low risk reconciliations Templates-based process for standardization and quality Supporting documents – can be saved/accessed from within the system Approval workflow – multiple levels with flexible scheduling Automated e-mail alerts for proactive notification/monitoring Reporting for real-time status updates Centralized, global access – anywhere, anytime Multi-currency AND multi-language (available in 15 languages) Easy integration with existing ERP, GL systems Specific Functionality to Look for Surrounding Account Recs
    30. 30. 30© 2013 BENEFITS OF GOING WITH A CLOUD/SaaS SERVICE PROVIDER: No hardware or software to purchase, install, or maintain Lower upfront costs/minimal capital outlay at onset Pay as you go, only for the users who need access Reallocation of internal IT resources to more strategic projects Quick implementation, even for multiple locations When using world-class hosting partner (such as Rackspace): Higher level of uptime guaranteed Hot disaster recovery built-in Security is No. 1 priority 24/7 access to superior customer service/support team Anytime access from anywhere with an Internet connection Should We Maintain In-house Or Host “In The Cloud”?
    31. 31. 31© 2013 WORRY-FREE SECURE Saas SERVICE No software to maintain or install Quick implementation Hot disaster recovery built-in Encryption of data in transmission and at rest Redundant world-class data centres Only financial close software provider to successfully complete a SOC 2 Type 2 security examination, complementing its SOC 1 Type 2 audit prepared in accordance with Statement on Standards for Attestation Engagements No. 16 (SSAE16) ISAE 3402 audits – internationally recognised standards developed by the AICPA and IAASB (3rd-party opinions on control effectiveness)
    32. 32. 32© 2013 ROI & CUTTING COSTS Auto-certification Increased staff productivity Reduced paper, printing, storage overhead, auditor fees Improved process management Faster close Return on investment is one of the most important indicators of value MeadWestVaco Corporation ROI: 495% Payback: 2 Months Cox Communications ROI: 227% Payback: 6 Months Education Management Corporation ROI: 138% Payback: 10 Months
    33. 33. 33© 2013 Current Regulatory Environment/Impact on Finance Organization Importance of Account Reconciliations/What to look for in an Automated Solution Client Case Study – Atlas Air Worldwide Q&A AGENDA
    34. 34. 34© 2013 Wendy Shapiro, CPA Atlas Air Worldwide
    35. 35. 35© 2013 Atlas Air Worldwide Overview Atlas Air Worldwide before Automating Why Automate? Implementation Realized Benefits from Automating Here is what our Auditors say………. Q&A AGENDA
    36. 36. 36© 2013 Atlas Air Worldwide is the leading global provider of outsourced aircraft and aviation operating services. Our headquarters are located in Purchase, NY We are the world’s largest operator of Boeing 747 freighter aircraft, as well as Boeing 747 and 767 passenger aircraft and Boeing 767 freighters. We are the only outsource provider that offers Boeing’s new 747-8 freighter. In addition, we dry lease Boeing 777 freighters to leading carriers in the airfreight industry. Customers include some of the world’s leading airlines and express carriers – British Airways, Etihad Airways, Qantas, and DHL Express; air charter specialist Chapman Freeborn; as well as governments, nongovernment organizations and major freight forwarders – DHL Global Forwarding, Agility,CEVA, Expeditors,Hellmann, Kuehne+Nagel, Nippon Express, Panalpina, among others. CMI customers include Boeing, DHL Express, MLW Air and SonAir-Serviço Aéreo, S.A. (SonAir). In 2012, we operated more than 22,700 flights, serving over 360 destinations in more than 110 countries. About Atlas Air Worldwide
    37. 37. 37© 2013 Atlas Air Worldwide Before Automating Which was the final reconciliation????? Filing reconciliations, journal entries and sox documents Excel reconciliations – Are the formulas even right????? Drowning in papers…….
    38. 38. 38© 2013 Atlas Air Worldwide before Automating Documents disappearing Stressed employees…….. Photocopies, photocopies, photocopies Mailing information from international locations to headquarters
    39. 39. 39© 2013 Better visibility into close process Automated workflow Business continuity Cost savings Streamline processes Risk mitigation Efficiencies between international locations and headquarters One system for account reconciliations, variance explanations, journal entries and checklists Efficiencies for internal and external auditors Employee morale Why Automate?
    40. 40. 40© 2013 Signed contract in Q4 2008 Phased approach December 2008 – variance module February 2009 – task module March 2009 – account reconciliation module August 2010 – journal entry module October 2010 – matching module for bank reconciliations January 2013 – auto certification Ongoing – matching module for other account reconciliations, sub ledger match for Accounts Receivable, Accounts Payable and Cash reconciliations Minimal IT resources required Approximately 85 users worldwide Implementation
    41. 41. 41© 2013 Cost savings Business continuity Ability to close remotely Ability to access prior periods Fewer SOX deficiencies Documentation for reconciliations that remains unchanged does not need to be reattached each month Simplified variance analysis Ability to file faster – Filed 2010 10-K 10 days earlier Improved employee morale Happy auditors Realized Benefits from Automating
    42. 42. 42© 2013 Audit Fees have decreased PBC list has decreased Reconciliations given to the auditors are always the final version Knowing exactly what schedules were given for an audit request in a prior year Fewer audit questions Simplified controls to test that appropriate review of reconciliations and journal entries have been completed SOX testing efficiencies Fewer critical spreadsheets Realized Benefits from Automating
    43. 43. 43© 2013 Ability to work remotely All PBC items are uploaded and readily available Reduces the number of requests related to SOX controls No duplicate requests for misplaced workpapers as they are stored online Multiple accounting periods are stored, therefore you can easily refer to prior period activity No need to tie reconciliation balances to the ERP system Easy access to test SOX controls Here is What Our Auditors Say……….
    44. 44. 44© 2013 Thank You!
    45. 45. 45© 2013 Thank You Sponsors! PLATINUM GOLD SILVER DIAMOND