Internal Control Timeliness
Internal Control in Account Reconciliations – Timeliness
A Proformative participant asks the question “how much time should be spent on account reconciliations?”
The first response was, “Enough time to ensure they are accurate.”
How true!
The discussion then carries on about automation and the time savings it brings to the table. While many of the responses were from vendors, a quick search on the web as to timeliness and its role as an internal control reveals the necessity of timeliness, accuracy and completeness as the mandated trio comprising internal controls. In this post, I will focus on timeliness.
Timeliness in completing account reconciliations projects the image that auditors want to see. When accounts are reconciled within the expected time frame it means that the accountants are organized, have a good workflow established, and can easily locate any needed supporting documents as part of an audit.
Lack of Timeliness is a Sign of Weak Internal Control
Lack of timeliness in completing account reconciliations portrays a picture of team members struggling to keep their heads above water. They are likely swimming in spreadsheets, working overtime and would sink if more accounts were added to their list. Messy key accounts and discrepancies wreak havoc as to the number of accounts they are able to reconcile and as to the amount of supporting material they have time to attach.
Groupon, in its restatement press release, mentions the need to put policies and procedures in place to ensure “the … timely, effective review of estimates, assumptions and related reconciliations and analyses …”
Amtrak also incurred audit findings via E&Y that suggest a negative impact on timeliness and its financial reports. The factors contributing to the delay, among others, were lack of employees possessing needed levels of accounting understanding, lack of oversight of financial reporting and internal control, and lack of organization and review.
The number of accounts needing to be reconciled seldom shrinks in a growing company. The number of accountants reconciling these ever increasing accounts seldom increases. Cost increases in the finance department are like cheating to win the race. Finance departments are striving to be value- add, strategic partners with the rest of the company. They do not want to be seen as a cost center.
Attain Timeliness without Overtime or Adding to Headcount
When finance teams implement an account reconciliation automation solution, they are building timeliness into their internal controls as most SaaS solutions save time in the following ways: auto-reconciling low-risk accounts, mandating signatures and dates, calling attention to variances or lack of supporting documents, making progress visible via a dashboard, sending out email alerts automatically when the general ledger has uploaded the current balance making accounts ready to be reconciled and by informing reviewers automatically via email that accounts are ready for review.
There are many other tactics that automated account reconciliation solutions help financial teams take as a means of bettering internal control. Timeliness with account reconciliations and the month-end close is just one area where dramatic improvements are made. You can see a solution in action via this short demo showcasing SkyStem’s account reconciliation automation and financial close automation solution, ART.
