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INSIGHT: Navigating the ‘New Normal’ to Drive an Efficient Financial Close

May 19, 2020, 10:00 AM

What a difference a few months can make. In the beginning of 2020, people were working in offices as business proceeded as usual. But now many are working remotely, wondering how to maintain the efficiency and security as they acclimate to the new normal of working and living in a Covid-19 environment.

For financial institutions, back office demands didn’t stop with the abrupt change in work and home life. The accounting books still need to be closed on time. So, what happened in the first quarter of 2020 and how did banks respond?

Based on our recent discussions with financial institutions, many conducted their quarterly close with finance teams working remotely for the first time, and here are what they observed:

  • Those who had already embraced automation tended to have fewer challenges out of the gate, while those who employed manual or semi-automated processes, had a more difficult time ensuring a streamlined and accurate process with strong internal controls.
  • It became harder to conduct internal and external audits. With so many financial institutions relying on printouts for auditors, interactions could not be conducted as they typically were.
  • Relying on the same staff (some with sole knowledge of processes) wasn’t always possible, given the transition to working and staying at home with children or managing any family illness due to the virus.

What We Can Do Better

Automation is key to navigating the new normal of Covid-19. Even for those who have already automated the reconciliation process, more can be done. In addition to realizing cost and time savings, organizations can gain greater visibility and confidence in the accuracy of financial reporting, which helps lower compliance and reputational risks.

Teresa Hennessy, an assistant vice president at Park National Bank in Newark, Ohio, explained that having an automated reconciliation solution in place during the first quarter close provided greater efficiency and substantial time savings.

“As we transitioned to a mandatory remote working environment, we were able to keep our reconciliation processes running smoothly. With 98 percent of our reconciliations automated, we were able to achieve notable efficiencies and time savings, and focus our efforts on the logistical challenges of our new normal.”

Specifically, for accounting and reconciliation, automation can provide multiple benefits:

Accounting

  • Unattended processing—Automating monthly tasks such as general ledger transactions, accrual journal entries and prepaid amortization entries helps eliminate errors and boost efficiency, and tasks can be scheduled to run at the same time every month.
  • Report groups—Creating report configurations and placing those in a report group enable reports to automatically run together at a specific time, preferably overnight.
  • Processing and posting transactions—Processing and posting transactions in real time (even from other systems), will eliminate the need to run batches. Importing or separating posting runs for every session can potentially shorten the close time by days.
  • Eliminations—Creating a report that shows one column for each company, then a column for the elimination company and a consolidated column, allows eliminations to be reviewed in a report instead of manually in a spreadsheet.
  • Integration—Integrating core financial applications, preferably operating from a single database, to eliminate much of the rekeying and redundancy that can cause mistakes and limit productivity.
  • Streamlined processes—Automating workflows can enable efficiencies such as web-based approvals of invoices through a centralized workflow that also automatically sends reminders, saving time and reducing late payments.
  • Control Access—Managing which employees can access and edit data, with a system that logs who made changes, helps reduce risk.

Reconciliation

  • Rules engines matching transactions faster and with greater accuracy than humans, as exceptions are automatically found and flagged.
  • Automatically loaded data eliminates errors such as mis-keyed information.
  • Automated workflows ensure review and attestation procedures are completed by the right individuals in the correct time frames.
  • User roles limit access, strengthening internal controls.
  • Complete audit trails and strict enforcement of compliance measures help companies meet regulatory standards.
  • Auditor access to information from a single system removes reliance on printouts.

Where to start


It is important to first assess your current situation and pinpoint what is working and identify gaps. Find opportunities for greater efficiencies, streamlined processes and error mitigation. If needed, assign specific resources to identify process and workflow improvements. Areas to review include:

  • Data quality and visibility;
  • Manual processing of routine transactions and recurring journal entries;
  • Redundant data inputs or rekeying of incorrect data;
  • Receivables and payables held open for late transactions;
  • Unnecessary complex calculations;
  • Manual updates and comparisons of current activity to previous month and budget;
  • Review and approval cycles;
  • Use of spreadsheets and printouts; and
  • Adherence to internal controls and segregation of duties.

By thoroughly reviewing those areas, you will likely identify opportunities to automate multiple manual processes, saving time while generating a more accurate audit trail.

If you are dependent on specific employees who may be unavailable during this time, consider a multi-layer backup plan or staff augmentation. Many software vendors—who are knowledgeable about industry best practices—can provide this service.

Automation makes the month-end close as efficient as possible, no matter where employees are working. For many, this “nice-to-have” has turned into a requirement in this current Covid-19 environment. No matter the situation, a fully automated and integrated end-to-end reconciliation solution can ease the pain of financial preparation while facilitating speed, accuracy and efficiency, helping ensure institutional resiliency and grow client trust.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Danny Baker is the Vice President of Market Strategy within the Financial & Risk Management Solutions (FRMS) division at Fiserv, Inc. (NASDAQ: FISV). He is responsible for the overall market strategy and business development for the company’s risk management, performance management and enterprise financial accounting solutions. During his 34 years in the financial services field, he has gained expertise in key disciplines including data analytics and decisioning, business intelligence, and integrated strategic risk management, and is a frequent presenter, author and consultant for financial industry conferences, associations, trade publications and analysts.

As the Product Management Leader for Financial Control Solutions at Fiserv, Clodagh Swennumson engages with clients across regions and industries to understand and meet their compliance, risk and control needs. Prior to Fiserv she worked for Verizon and Motorola, where she had a strong track record of leading multi-regional teams to create highly profitable product portfolios, growing top line sales and market share, while delighting customers. A native of Dublin, Ireland she has lived and worked in Europe and the US throughout her career.

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