Placing Controls and Governance Around Your Account Reconciliations with Oracle EPM

Published May 25 2021
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Accounting departments spend a significant amount of time and resources each reporting period working through account reconciliations. The process is often manual, not standardized across the organization, and does not have a centralized approach. This leads to a longer close, limited confidence in the reconciliations and supporting controls, and longer audit reviews. Oracle Account Reconciliation is a purpose-built, cloud-based reconciliation solution that provides companies with the ability to efficiently complete the reconciliation process, standardize controls, and centrally manage the entire reconciliation process.

Oracle Account Reconciliation provides companies with the ability to eliminate redundancies and inefficiencies by utilizing standard out-of-the-box attributes or defines attributes that are critical to support the reconciliation process. Those attributes are then used in rules that automate and place governance over the reconciliation process, which promotes a reliable and effective process. Within this blog, we will focus on six attribute-driven rules from the Reconciliation Compliance feature set of Oracle Account Reconciliation.

Adding Attributes and Rules to the Reconciliation Process

A few common themes that we hear from our clients regarding account reconciliations is that they:

  • strive to accelerate the close
  • want a standardized reconciliation process
  • need governance and controls around the reconciliation process
  • want a better understanding of risks to the process

These concerns can be handled by creating automation through the reconciliation process which takes the preparers and reviewers away from spending time on dealing with reconciliations that do not have a material impact on results and allows them to focus on out of balances and items that need to be reviewed further.

Auto-Reconcile

By creating an auto-reconcile rule with specific features, such as a materiality tolerance, companies are able to speed up the reconciliation process by removing the manual tasks on accounts that are typically low risk. Additionally, companies are able to do this by placing controls around those accounts that are commonly zero balances, amounts that reconcile to the subledger or subsystem without variances or with small variances, or have immaterial amounts in the accounts.

In the example below there is a rule that allows reconciliations marked as Low Risk to be auto-submitted with a $1000 tolerance.

 

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Oftentimes, our clients have exceptions that carry forward from a prior period due to a known variance between a subledger and ERP or an amount that has not cleared that needs to be monitored and supported. By creating a rule that carries forward explanations or support for exceptions from prior periods, the preparers save time from hunting and pecking for support or recreating the explanation within the process.

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Period Over Period Variance

The reconciliation process should be built to validate the integrity of the financial statements and while the reconciliations are used to ensure subledgers and subsystems are reconciling to balances within the ERP, the substantiation of those account balances is critical. Given the importance of the substantiation policy to the overall financial controls of companies, as a leading practice, we commonly build rules to capture period over period fluctuations that require an explanation of a period change when that account changes by 10% or more for the period. This provides added controls to the company and helps to validate the integrity of the financial statements, ultimately proactively monitoring accounts and providing further evidence to auditors that account balances have been validated.

In the example below, a custom attribute was built called GL Flux. This attribute calculates the fluctuation of activity between periods in percentage output. If desired, a rule can be built to require an explanation if the GL Flux is greater than a specific percentage.

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Submission Prevention Rule

We know that there are going to be times where support is necessary to ensure exceptions are qualified and steps are being taken to rectify the amount.

The below rule requires that attachments are made on the summary of the reconciliation or on the transactional detail.

 

 

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Exception Type

Exceptions will occur in the reconciliation process and, as a result, being able to classify those exceptions properly to report to management and audit is critical. To manage exceptions, we have built out the ability to isolate those exceptions, which can include:

  • timing differences
  • write-offs
  • re-classes
  • foreign exchange differences
  • unknown differences
  • items passed on

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Additionally, we have built rules that require action plans for specific exceptions to ensure exceptions have accounting controls that ensure these items are cleared in a timely manner.

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Ledger Close

We have also built out rules that ensure a reconciliation is not submitted until after the ledger is closed. This ensures that reconciliations are final when they are submitted and no additional steps should be needed to validate the account. This also ensures that the preparers are not duplicating work as the company’s financial statements are being finalized.

In the example below, a custom attribute has been created that is placed on each reconciliation. By default, the attribute will be set to ‘No’ until the administrator sets it to ‘Yes’. At that time reconciliations can be submitted for review.

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The above is a sampling of some key attributes and rules that we have built for our clients to support their reconciliation process. There are many other attributes and rules that we have built to help place governance, control, and automation in the reconciliation process. Oracle Account Reconciliation will transform your reconciliation process, leading to a shortened close, a focus on value-added tasks, and leading to a streamlined reconciliation process.

For comments, questions, or suggestions for future topics, please reach out to us at infosolutions@alithya.com.  Visit our blog regularly for new posts about Cloud updates and other Oracle Cloud Services such as Planning and Budgeting, Financial Consolidation, Account Reconciliation, and Enterprise Data Management.  Follow Alithya on social media for the latest information about EPM, ERP, and Analytics solutions to meet your business needs.