How to Reconcile 100% of Your Accounts While Decreasing the Time Spent
Some companies reconcile accounts on a weekly basis, while a monthly basis works for others. Still some, like companies that consolidate their accounts, can stretch a few of their accounts to a quarterly reconciliation.
One thing remains certain – you absolutely must reconcile 100% of your accounts.
Account reconciliations are the most thorough way for a company to ensure it is not overpaying, forgetting to pay, or mysteriously paying vendors. They are a critical control that ensures revenue and expenditure entries are correct, are admissible and are applied to the correct accounts. They are the truth behind the account balance.
KPMG, in its Ethics and Compliance Management report, lists account reconciliation as one of the top five ways to detect fraud. As more evidence of the importance of reconciliations, Groupon cited its poor reconciliation process when faced with restating its financials in 2012.
Reconciliations, in their granular analysis of the flow of a company’s money, can only catch mistakes or mistakes made on purpose if they are performed on 100% of a company’s accounts. Groupon had an issue with its reserve for customer refunds and Weatherford had issues with its income taxes, while other companies may find errors in double payments to a vendor.
Rhino Resource Partners LP, a growing energy company with over twenty entities in multiple locations, was told by its auditors that it absolutely must start reconciling 100% of their accounts and that all account reconciliations must be completed by day five.
Following an eleven-day implementation period, Rhino Resource Partners pulled in all accounts across the twenty-two entities for reconciliation and review. ART helped the finance team get to 100% of the accounts being reconciled by system, or auto-reconciling the low risk accounts like prepays or zero balance accounts. With ART reconciling up to 35% of their accounts, the finance team now has more time to focus on key and complex accounts and strategic initiatives.
ART’s central repository stores all supporting documents. In subsequent months, the account reconciliations relying on those supporting documents are now completed in less time as the documents carry forward.
By reconciling 100% of its accounts, Rhino Resource Partners is meeting its auditor’s demands while also effectively strengthening their internal controls.
Read the complete case study here.