Advice and Information for Finance Professionals

Why Your ERP Needs Account Reconciliation in the Cloud

Guest Author

By Tim Gaumont, Director of Product Management, Oracle 

Let’s face it: every finance department is being asked to do more, at a faster pace, with fewer resources—even as they handle more complex reporting and analysis. 

Typically, finance teams respond in one of two ways. Many of them simply work harder and longer, juggling more spreadsheets, emails, and laborious, manual processes. 

The rest decide to automate finance processes using sophisticated cloud software that slashes the time and frustration inherent in manual tasks—all while improving accuracy and security. 

Let’s take one prominent example: account reconciliation.

The Future is Now: Automated Account Reconciliation

The process of reconciling accounts is the leading non-data cause of delay in the financial close. Third-party financial systems (bank records, credit accounts, and so on) don’t provide an automatic method to substantiate the balance reported alongside your general ledger activity. As a result, finance professionals spend inordinate amounts of time trying to reconcile these figures across charts of accounts. Typically, this is done with spreadsheets, emails, and other manual methods.

To further complicate the picture, bigger companies (more than $500M in revenue) often have more than one ERP system—meaning even more accounts to reconcile. This is especially true if the company has made acquisitions or opened subsidiaries overseas.

Over the past few years, numerous companies have adopted cloud applications specifically designed to automate account reconciliation. These systems automate the preparation of high-volume, labor-intensive reconciliations, execute transaction matching, and provide interactive dashboards to more effectively manage the process.

Applications such as Oracle Account Reconciliation Cloud pull in data from disparate systems and accounts and automatically compare transactions. In most cases, transactions can be reconciled automatically; when they can’t, the system alerts someone that a particular transaction needs closer inspection.

This allows finance teams to manage the overall reconciliation and compliance process for the entire balance sheet. It also provides a single, more accurate, real-time overview of the financial close position of the organization.

Addressing Security Concerns About Finance in the Cloud

Many who remain stuck on the spreadsheet treadmill have concerns about the security of cloud-based systems. Yet a spreadsheet-based account reconciliation process is considerably more prone to human error. The problems are well documented: spreadsheets lack internal controls; formulas can be changed by accident or deliberately; templates get ignored; or team members can mistakenly save their work to a network drive where it can’t be found.

As for security, spreadsheets are commonly saved on employees’ laptops or flash drives, where they can be lost, stolen, or accessed by unauthorized personnel—and there’s no audit trail of who did what work on the files.

A cloud-based application keeps all the data in a single, secure location, ensuring that the right people are monitoring and accessing the data as they should. Tight controls on each record throughout the workflow process limit who can see or edit the in-process or completed work.

Once the preparer signs off that a reconciliation is complete, it’s locked down. The system provides a fully documented audit trail that validates the balance at a specific point in time.

Gain the Ability to Prioritize Reconciliations by Risk

Most people preparing account reconciliations in spreadsheets admit to feeling as if they are drowning. They barely get through the process for one month, then must begin again. There’s no time to measure, monitor and improve the process.

With automated reconciliation, the process is managed within a centralized system via interactive dashboards that provide visibility into the progress and status of the assigned tasks: how many are open, late, due today or in next seven days. This offers the ability to prioritize reconciliations by risk.

More importantly, by automating the steps of loading and matching, and delivering automated analytics, cloud-based reconciliation frees accountants to focus on handling exceptions. This gives them the time and information they need to identify problems and improve the process.

Customers Reduce Reconciliation Time, Gain Visibility

An early adopter of automated account reconciliation reported that it had reduced reconciliation time from about five days to one, with 80% of reconciliations in fixed assets closing automatically with no manual intervention. With the new solution, the company reconciled and reported on 16,000 accounts every day of the close process (rather than only once or twice a month), providing improved visibility and accuracy, and enabling it to close in one hour.

Another customer recently moved from Blackline’s point solution to Oracle Account Reconciliation Cloud to leverage integration with Oracle ERP Cloud and realized the following benefits:

  • Enhanced data analytics and improved monitoring
  • Flexibility to assign due dates based on risk ratings, which allowed it to control and manage the close cycle and use employee’s time effectively
  • More scalable solution to handle additional interfaces and reconciliations/transactions without additional cost

Building the Finance Function of the Future

Automation and seamless processing will be the defining standards of next-generation financial systems. Work is already underway to use intelligent process automation to automate the financial close, so that it’s a continuous process rather than a scramble at the end of every period. Automating account reconciliations is the first step along that journey.

Once your finance team is freed from the manual tasks that consume so much of their time, CFOs can put their talent and stills to better use: analyzing new business opportunities, developing business plans, and building the finance function of tomorrow, today.

Learn more about Oracle Account Reconciliation Cloud, or download the Gartner Magic Quadrant.

Join the discussion

Comments ( 4 )
  • Deborah Rua Tuesday, April 24, 2018
    In reading through the Oracle Account Reconciliation documentation, it says the preparer locks the reconciliation after it is prepared. SOX requires a preparer sign off and a reviewer sign off. How does Oracle Account Reconciliation system manage the review sign off? Can the recon be rejected if it isn't correct?
  • Lynne Sampson Friday, May 11, 2018
    Hi Deborah, here is Tim's response to your question:

    Hi Deborah – thanks for the question! In the Account Reconciliation workflow there is a Preparer role, and in addition you can configure however many levels of review are needed, or let the rules determine how many levels of review are needed based on things like size of ending balance, reconciling item P/L impact, age of open items, etc. Roles can be assigned individually or as a team. Any role can be completed automatically or manually. It would be completed automatically if the selected business rules have been met, for example zero balance account is actually zero, no activity month over month, etc. It would be completed manually if those rules are not met. The roles are completed in sequential order, and when any role is completed that role is then locked down (some people call the role “certified”). No one can change the information that was certified by the person who completed that role. However, there are some rare scenarios where reconciliations may be re-opened automatically if a balance change is detected, or perhaps a re-open request is approved. No matter which way it’s re-opened a full audit trail is always kept, and then each role must re-certify.

    Hope this answers your question!
  • Jamie Friday, July 27, 2018
    I understand Gartner has released new magic quadrants this month which have moved Oracle out in front of the competition for CPM/EPM. Do you have a reprint for distribution?
  • Lynne Sampson Wednesday, August 15, 2018
    Hi Jamie,

    Yes, we just published an article yesterday with links to both reports: https://blogs.oracle.com/modernfinance/oracle-named-a-leader-in-two-gartner-magic-quadrants

    Thanks for your interest!
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