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 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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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.

 

0 comments on “PEOPLE: INSOURCE OR OUTSOURCE — Which function and why?”

PEOPLE: INSOURCE OR OUTSOURCE — Which function and why?

Future-ready finance creates leaner, high value teams. To achieve this, finance must eliminate the non-value adding activities and focus on what the business needs to succeed.  Repeatable, structured transactional activities can be insourced or outsourced to the right experts in business processing.  Doing so frees MORE TIME for analytics!

  • Insourcing refers to the practice of hiring specialists to fill some spots or simply training in-house personnel to perform specific tasks that could have been outsourced. Insourcing is an option when in-house employees don’t have the needed education, skills, talent or discipline to perform the growing new or higher demands of the tasks.
  • Outsourcing means engaging an outside professional service provider, expert, consultant, freelancer, contractor, or agency.  Savings from outsourcing services can include office costs & equipment, technical solutions, services provided by other department, training and keeping a talent pool.

Insourcing or outsourcing aims to farm out the running of transactional processes and activities in order to focus management time and resources in building and developing the new core demands of analytics.

But then again, here’s something to consider – how do you build and operate an analytics practice given the rarity of analytics talent?

Will retooling of existing employees suffice? Or opt to hire the experienced experts to build, operate and transfer, train and transform your finance organization?

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How can we help? Accelerating your analytics journey is the core objective of RAPID INSIGHTS ZONE — premium analytics professional services, made available to all business types and sizes. Our services will help you KNOW MORE through analytics, so you have MORE TIME and resources to focus on growth. When you are ready to accelerate your analytics journey and inevitable business transformation, contact us!