0 comments on “Do You Perform REGULAR Bank Reconciliation for Your Business?”

Do You Perform REGULAR Bank Reconciliation for Your Business?

Being the most liquid of assets, we recognize the importance of ensuring the accuracy of our cash balance through regular bank reconciliation.  However, most companies put this important process aside and settle with annual reconciliation, usually just to meet year-end audit requirements.

As complicated as it may sound, there are actually basic steps towards accurate cash reporting.

KNOW WHAT YOU NEED. To perform a reconciliation, you will need your (a) cash transactions and balance per books and (2) bank statement as of a specified date.  It is also very important to ensure that the covered period in both records are the same.

CLOSE YOUR BOOKS. Going through the entire reconciliation process only to find out that there were additional cash transactions booked in the period you are covering is inefficient and frustrating.  Make sure that your records are complete and no more cash transactions are booked on or before your covered period.  If unavoidable, be at least informed so you can consider them in your reconciliation accordingly.

ESTABLISH BANK BALANCE FIRST. It is generally easier to get the correct bank balance first since there are only a few (and usually recurring) reconciling items involved.  These transactions do not require you to post adjusting entries.  The most common bank reconciling items are Outstanding Checks, Deposits in Transit, and Bank Errors.

  • Outstanding Checks – These are checks released but not yet cleared with the bank. In your books, these are already considered payments hence, should be deducted from your bank balance.
  • Deposits in Transit – These are collections that are yet to be deposited. In your books, these are correctly recorded as part of your cash hence, should be added to your bank balance.
  • Bank Errors – Although uncommon, banks can commit errors too. In this case, you should inform your bank right away for proper action.  Depending on the transaction, bank errors may be added to or deducted from your bank balance to get to your adjusted amount.

Once you have established your bank balance, you can already compare it with your book balance and assess the magnitude of your book reconciling items.  Book reconciling items should be recorded accordingly to get to your correct book balance.  Book reconciling items include bank charges, direct deposits made by customers, auto-debit transactions (usually for utilities), and book errors.

SAY NO TO MONTHLY MATCHING. The secret to fast month-end reconciliation is by not doing it monthly.  As much as possible, matching book and bank transactions should be performed at least weekly.  A few companies are actually doing it daily!  TIP: If you subscribe to online banking, you can easily download bank balances and transactions as of the day before.

AUTOMATE. Bank reconciliation is already (or can be) embedded in most ERPs today.  Inquire with your software provider.  However, if you’re still comfortable with excel spreadsheets, templates can be developed to simplify the reconciliation process and significantly reduce the time spent manually matching transactions and identifying red flags.

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How we can help? Developing and implementing a solid finance transformation agenda is the hallmark of our ACCOUNTING SERVICES model — we build, operate, and transform fundamental capabilities in people, processes, and technology. Contact us to know more about these services.

0 comments on “How to Effectively Manage Year-end External Audits”

How to Effectively Manage Year-end External Audits

Most companies actually dread year-end audits.  You will find that Finance organizations are usually off-limits during this period as they struggle to make last-minute adjustments, prepare supporting schedules, find source documents, and review a year’s worth of transactions.  Stressed, pressured, and burned-out, risk of errors increase.  Overall — an unpleasant experience.

But year-end audits should not be disruptive.  Nor preparations should be done, well, at year-end.  To ease the stress during this period, below are simple changes and process improvement that your Finance organization can adopt.

PEOPLE

Plan your audit activities & deliverables and discuss with those who will be involved so they know what are expected of them.  A checklist of audit requirements and due dates that everyone, including your external auditors, can refer to is most helpful as it will keep people focused.  Schedule regular update meetings and use the checklist to track progress.

TECHNOLOGY

Leverage on available (and affordable) technology.  Reduce reliance on excel spreadsheets by investing in an accounting system that best fits your organization.  Most systems now come with subsidiary ledgers and customizable reports that will not only reduce time spent on data preparation but will also increase the accuracy of your information.  Documents-scanning technology (within your accounting system or as a separate software altogether) is also helpful when retrieving supporting documents requested by your auditors.

PROCESS

As mentioned, preparations for the year-end audit does not have to be done at year-end.  Embed automation, control, and period-end tasks within your day-to-day activities.  By adopting continuous accounting, you will be “audit-ready” any time of the year.

BONUS TIPS:

Year-end audit process will include review of your quarter one results right after the period under audit.  Make sure you don’t neglect your usual closing activities while attending to the requests of your external auditors.

Most of all, immediately after the conclusion of every year-end audit, take a moment to review, evaluate, and list down learnings and areas for improvement — both within your organization and with your external auditors — for an even more hassle-free year-end audit next time.

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How we can help? Developing and implementing a solid finance transformation agenda is the hallmark of our ACCOUNTING SERVICES model — we build, operate, and transform fundamental capabilities in people, processes, and technology. Contact us to know more about these services.

 

0 comments on “How to Ensure Success of Finance Operations during Christmas Break”

How to Ensure Success of Finance Operations during Christmas Break

Christmas is just around the corner and we can’t help but get distracted with parties, reunions, shopping, and out-of-town trips!  However, we should not lose our hats and forget our responsibilities as a Finance organization.

We don’t need to be physically reporting to the office, but safeguards should be in place for business continuity – and stress-free Christmas break!

MAINTAIN CREDIT STANDING. While you can be conservative and not expect collections from customers during holidays, don’t expect the same from your suppliers.  Review your payables and settle due accounts before the long break.

SECURE CASH POSITION. Some banks open their doors even on holidays.  Make sure you have enough cash to cover account payments (auto-debits, PDCs, outstanding checks) and emergency purchases during this period.

MANAGE INVENTORY. Head office may be closed during the holidays, but this is the busiest time of the year for those in retail and manufacturing.  Study your historical data: forecast sales and analyze inventory behavior to avoid losses due to out-of-stock fast-selling items and stocking up instead on the not so popular ones.

PLAN HEADCOUNT. Expect people to file vacation requests that, most of the time, will extend beyond declared legal holidays.  To avoid unpleasant surprises and business disruption, ask for at least one-month notification and ensure proper delegation of tasks and turnover of important files (electronic and manual) to those who will be temporarily covering for them.

STAY INFORMED. Take advantage of cloud-based technology solutions to keep in touch with your business anytime, anywhere, and with any device for as long as you have internet connection.  View sales and inventory balance with just a few clicks, approve purchases, invoices, and payments online, even send (scheduled) management reports even if you’re enjoying a long vacation yourself!

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How we can help?

Developing and implementing a solid finance transformation agenda is the hallmark of our ACCOUNTING SERVICES model — we build, operate, and transform fundamental capabilities in people, processes, and technology. Contact us to know more about these services.

0 comments on “How to Measure Performance of Your Finance Organization”

How to Measure Performance of Your Finance Organization

New technology triggers the transformation of finance into an analytics powerhouse that derives insight from data.

Finance will become the enterprise hub of analytics by the end of the decade, if not sooner.

Finance must earn this role quickly or be simply relegated to an automated accounting function.   Success will depend on a finance workforce with very different skills than today.  Automation, robotics processes, and intelligent systems are becoming part of the finance team – i.e., humans and machines will join forces to boosts Finance organization’s influence and value in the business.  Humans will turn to the judgment work that machines cannot do.

Now, between the full shift and today, Finance must strive to promote its value in the business by publishing performance scorecards of its key deliverables and service level objectives.  The scorecards must contain metrics of productivity and efficiency of finance in the overall and in core functional areas.

  • Headcount: ratio to stores or total company
  • Finance G&A cost: ratio to revenues
  • Accounts payable: no. of days to process, volumes per day per person, errors
  • Financial closing: no. of days to complete and release reports to management
  • Tax compliance: no. of days before deadline, incidences of penalties

Gone are the days when finance (and any functional department) can operate and function without published key performance indicators.  Without the performance metrics, no one will understand and appreciate a functional department’s value in the company.  Besides, an organization without measures will just be seen in motion without any direction.

Much sooner than later, challenges in developing performance metrics will become greater as the shift to analytics, and robotics and intelligent systems become more real than just a concept.

Imagine the metrics of performance when finance is fully transformed into the analytics arena.

Finance must keep scoring and expanding the business value it delivers to stay relevant.

Are your people ready to migrate from spreadsheets to analytics? They better be!

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How we can help? Developing and implementing a solid finance transformation agenda is the hallmark of our ACCOUNTING SERVICES model — we build, operate, and transform fundamental capabilities in people, processes, and technology. Contact us to know more about these services.

0 comments on “FAST CLOSE: How to get there?”

FAST CLOSE: How to get there?

How fast do you close your books?

If you can close your books, distribute reports to stakeholders, AND give analysis or data-driven insights to management within 5 days after period-end, then CONGRATULATIONS — you may stop reading this now and get on with doing a very fine job!

These days, it is not uncommon to find Finance organizations struggling every period-end — swamped with non-value adding activities and overworked during closing — resulting to burned-out employees, increased risk of errors, and out-of-date results. This is especially true in retail organizations (i.e. drugstores, restaurants, coffee shops, etc.) where consolidation of multiple remote locations remains a challenge.

Fret not, here are common and simple solutions and approaches applied from years of experience in various industries:

PEOPLE

  1. Define clear objectives. People will follow you if they know where you are going.
  2. Set key performance indicators. You can’t control (hence, can’t improve) what you can’t measure.
  3. Ensure continuous learning & development. When you know better, you do better.

TECHNOLOGY

  1. Automate. There are already an abundance of technology solutions available even to small enterprises from as basic as desktop automation like workflow and macros to sophisticated cognitive automation.
  2. Integrate. When data is compartmentalized, organizations look to the office of the CFO to initiate integration of various systems in order to operate from a single version of truth.
  3. Innovate. To maintain competitive advantage, it is imperative that your business be up to date with all of the relevant technological upgrades such as cloud-based technology.

PROCESS

  1. Standardize and simplify. From transactions processing to master lists to report templates, standardization enhances the quality of data and makes it easy to spot mistakes/errors.
  2. Implement and enforce effective controls. Strategic checkpoints and red-flags throughout the period eliminates period-end lengthy tracking and tracing and resolution of errors.
  3. Set cut-offs. Pro tip: It doesn’t have to be the last day of the month.
  4. Process documentation. Documentation of tasks that are done more than once or completed by multiple people provides consistency and allows easy monitoring and revision of processes as you go along.
  5. CONTINUOUS ACCOUNTING embeds automation, control, and period-end tasks within day-to-day activities. Blackline explains it accurately in these illustrations (READ MORE: https://www.blackline.com/continuous-accounting).
OLD MODEL: Record-to-report

Blackline - old model

THE MODERN APPROACH: Continuous Accounting

Blackline - modern approach

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How we can help?

Developing and implementing a solid finance transformation agenda is the hallmark of our ACCOUNTING SERVICES model — we build, operate, and transform fundamental capabilities in people, processes, and technology. Contact us to KNOW MORE about how to FAST CLOSE.