Intercompany reconciliation can be a frustrating and time-consuming task. Managing financial information between different entities often leads to discrepancies due to differences in accounting principles, systems, or personnel. These inconsistencies may result in delayed closings, increased costs, and damaged relationships among departments and subsidiaries.
However, by implementing strategic changes, you can improve intercompany reconciliation. Below, we will discuss actionable tips for achieving optimal results.
Practical Tips To Improve Intercompany Reconciliation
Below are 7 major steps to optimize your intercompany reconciliation process.
Standardize Reconciliation Processes
Standardizing the reconciliation process involves establishing clear guidelines for handling transactions and communicating expectations throughout the organization. Develop a documented procedure detailing roles, responsibilities, and workflows. Consider using templates for common tasks like journal entry preparation, variance analysis, and dispute resolution. Consistent methods minimize confusion and encourage collaboration among team members.
Moreover, fixed schedules for monthly or quarterly closings should be established, allowing ample time for thorough reviews and corrections if needed. Set realistic targets based on past experience and communicate them clearly to stakeholders. Remember, predictability leads to reliability – stick to agreed-upon timelines and hold participants accountable for meeting deadlines.
Utilize Technology for Streamlined Workflow Management
Modern finance teams leverage specialized software like Board to manage intercompany reconciliation efficiently. Such tools offer features like automatic data extraction, match engine capabilities, and customizable dashboards. Users can track progress, assign tasks, and collaborate easily through built-in messaging functions. As a result, teams save countless hours previously spent manually compiling reports and chasing colleagues for updates.
When selecting a solution, prioritize integration with existing ERP systems to avoid disrupting current workflows. Also, seek user-friendly platforms supporting mobile access since remote work has become increasingly popular. If this all sounds too overwhelming then you can choose to consult with an expert EPM consultant and achieve better ROI.
Strengthen Internal Controls Over Transactions
Establishing robust internal controls is paramount in mitigating fraud risks and ensuring compliance with regulatory requirements. Segregation of duties (SoD) prevents individuals from holding excessive power over sensitive activities. For example, separate those who create master data files from those responsible for modifying them. Similarly, restrict access to bank accounts only to authorized personnel.
Additionally, institute approval routines before recording high-value transactions. Electronic signatures facilitate speedy authorizations even when parties involved operate remotely. Lastly, configure audit trails to capture every change made to records, providing transparency and traceability.
Invest in Employee Education and Skill Development
Equipping employees with appropriate skill sets boosts productivity and job satisfaction. Offer periodic training covering technical topics, soft skills, and industry trends. Topics may range from understanding GAAP vs IFRS treatments to developing negotiation techniques for settling disagreements amicably.
Furthermore, cross-training personnel to cover multiple aspects of the reconciliation process. This strategy builds redundancy, ensuring continuity despite turnover or unexpected absences. Furthermore, it encourages fresh perspectives and innovation.
Prioritize Data Quality Through Effective Governance
High-quality data underpin reliable financial statements. Therefore, invest efforts in refining governance protocols around data management. Define ownership structures clarify who maintains custody of shared ledgers, set validation rules, and determine backup strategies.
Promote data hygiene by enforcing naming conventions, character limits, and mandatory fields. Moreover, eliminates unnecessary duplication by consolidating disparate sources whenever feasible. Clean datasets expedite matching exercises performed during reconciliations to save precious resources and improve intercompany reconciliation.
Measure Success With Quantifiable Indicators
Quantitative measures illuminate strengths and weaknesses within the reconciliation framework. Common KPIs include cycle times, exception rates, and rework percentages. Compare historical figures against present ones to detect anomalies warranting investigation. Root cause analyses uncover underlying issues demanding remedial actions.
Visual representation techniques simplify interpretation, facilitating discussions among decision-makers. Share achievements openly, celebrating milestones reached collectively. Recognition fuels morale, encouraging sustained commitment toward continuous improvement initiatives.
Cultivate Cross-Functional Partnerships
Collaboration bridges functional silos often hindering efficient intercompany reconciliation. Fostering partnerships necessitates active listening, empathy, and mutual respect. Schedule routine checkpoints engaging diverse stakeholders representing different domains. Leverage virtual conferencing technologies to bring far-flung partners closer geographically.
Joint problem-solving sessions yield win-win outcomes benefiting both sides equally. Be prepared to compromise and accept occasional tradeoffs for long-term benefits. After all, unity engenders synergistic effects propelling organizational goals forward.
Conclusion
To Improve intercompany reconciliation you need holistic approaches addressing people, processes, and technology dimensions concurrently. Companies embracing recommended practices enjoy smoother financial close cycles, enhanced accuracy, and improved relations internally and externally. Committing to incremental improvements today paves the way for sustainable competitive advantages tomorrow.
