Most financial institutions use an accounting system to automate general ledger and accounting processes. But it often stops there. Reconciliation and certification processes – essential to an accurate and compliant financial close – are often completed using a spreadsheet and highlighter.
In a time of digital transformation, don't leave financial close activities to error-prone and unproductive manual processes. Just like the digitization of consumer-facing applications, automating back-office applications can be revolutionary. Consider the case of an accounting manager at a $2 billion credit union. Her team wasted countless hours researching transactions and, due to time constraints, wrote off many out-of-balance transactions and missed looking at every reconciliation daily.
After automating accounting and reconciliation processes, the credit union improved the accuracy and speed of reconciliations, taking some from two to three hours to less than 20 minutes. The accounting staff is more productive, thanks to daily reconciliations and fewer write-offs. And unknown out-of-balances are a thing of the past.
Financial closings are among the most critical responsibilities of any business. Beyond leaving behind inefficient and error-prone methods, here are the top reasons to automate the financial close process, from accounting to reconciliation and certification.
Automating reconciliation and certification processes allows the data to be traced to its source throughout the entire financial close life cycle, from data ingestion through matching, exception management, reconciliation, certification and signoff. The result? Data becomes trackable and transparent. Automation can reduce the risk of error by as much as 50 percent, according to a post-implementation analysis of Fiserv clients.
In another example, a large bank was able to reconcile data from disparate systems into one. That makes it easier for auditors and regulators to see the numbers without shuffling through reams of paper.
Manual reconciliation is generally done at the balance level, which is fine when everything balances out. But when data doesn't match, it's hard to pinpoint the source of errors. Integration of balance- and transaction-level data increases visibility into exceptions, eliminates manual interventions and provides rapid exception resolutions.
Digital transformation is usually connected with consumer-facing applications, but automating back office applications can be just as transformational.
By minimizing the need for manual research and interventions during the reconciliation process, Fiserv found financial institutions see efficiency improvements of up to 80 percent, while also lowering operational costs. In addition, automated reconciliation and certification can reduce write-offs by as much as 75 percent, according to the internal analysis of Fiserv clients. Banks and credit unions often write off unresolved exceptions because they can't trace an error back to the source, raising the question of possible fraud.
Most manual reconciliation processes don't provide an audit trail that shows how the balance sheet was derived. As a result, management must blindly certify the data to comply with regulations – without visibility into how the numbers were achieved. Those same executives are held personally responsible for the results. Automated reconciliation and certification increases everyone's confidence about the numbers being certified.
By eliminating manual processes throughout the financial life cycle, financial institutions can help ensure compliance with audit and regulatory requirements. For example, internal and external audits, FDIC directives and Sarbanes-Oxley regulations require the management team and auditors to understand and document every aspect of the financial process. In addition to the data visibility provided by a reconciliation solution, automated checks within the solution offer reminders to help ensure deadlines aren't missed.
Automation frees up the finance team's time for more strategic initiatives that directly or indirectly affect consumers. The team can focus on tasks that provide the best bottom-line value, such as exception investigations and strategic projects, including mergers, acquisitions and transformation initiatives. With automation comes faster processing times, which enable staff members to work on other high-value tasks.
The digital transformation isn't just for consumer-facing services. Consider how automating behind-the-scenes, back-office functions, particularly reconciliation, can lead to greater accuracy and improved speed, performance and control. For many financial institutions, it just makes sense to automate time-consuming and mistake-prone tasks – and ditch the spreadsheets and highlighters once and for all.