Michael Coppack of reconciliation software supplier Adra Match explains why UK firms are stuck in the past when it comes to account reconciliation.
The days when Britain led the world in terms of its industry and technology are long gone. The industrial revolution was fuelled by automation, more specifically mechanization. These days of course automation is found not at the physical or hardware layer but at the software layer, and this is an area where UK PLC is seriously flagging.
It would be fair to say that accountancy suffers from certain unkind image problems. Bookkeeping is not generally perceived as an exciting discipline. Of all the accountancy disciplines, reconciliation suffers most. It is a laborious, monotonous process which requires meticulous attention to detail; precisely the type of process that is ripe for automation.
However, account reconciliation retains a relatively low-tech reputation. Accounting within complex organisations is often carried out using completely different methods across the wide range of business units that exist. Growth through acquisition, mergers and demergers, and the introduction of new technologies and new pricing models have tied the supply chains and accounting departments of firms into bureaucratic, fragmented knots.
UK firms and organisations in particular are lagging behind their European counterparts with regards to their account reconciliation departments. While genuine automation is commonplace across northern Europe, the vast majority of UK firms still rely on manual or semi-manual processes.
Business leaders are right to be wary of new technologies that promise the earth and deliver nothing. For every solution that makes a difference, there are a whole host of others that fall short of the mark. The minds of CEOs and CFOs are focused on steady, realistic business practices rather than over inflated stock market valuations. Now more than ever, CTOs need to justify every single expenditure with provable and rapid returns on investment.
Even at firms that embraced business process management solutions such as those supplied by Oracle and SAP, account reconciliation is more often than not carried out by large teams of staff putting data into spreadsheets using semi-manual or completely manual processes. In today’s tough economy it is essential for organisations to take control of their cash management and financial accounts to increase financial control and reduce operational risk.
At many UK firms, account reconciliation sees spreadsheets being populated manually with cash, cheque and credit card transaction data and this is then matched by an individual against bank statements. A typical organisation will have teams of employees permanently checking and re-checking accounts.
Generally speaking, using manual processes provides little to no visibility and proving an audit trail and tracking transactions can be a timely, onerous and complex task, which is highly prone to errors. Resolving discrepancies also requires timely searches prior to decisions being made on given business decisions. This batchwise approach to account reconciliation is a major source of irritation and cost at the majority of UK firms.
Financial directors are under an enormous amount of pressure, particularly in the current economic climate and most of that pressure is being applied with the aim of cutting costs. Making an investment in technology requires an almost immediate, measurable, return.
Manual reconciliation takes time. Effective systems must save considerable time and enable users to feel confident that the reconciliation is 100% correct. The time saving alone makes automated account reconciliation solutions a sound investment, enabling users to focus on more useful and rewarding tasks.
Automated account reconciliation solutions will often provide a full return on investment within the first year of implementation. As a result of the automatic matching of the vast majority of transactions, time is freed up to deal with exception management and risk reduction. Some leading systems will often automate up to 95% of the transactions in the reconciliation process.
If you’re looking to invest in an automatic account reconciliation solution you should look for a proven supplier that offers solutions across a range of markets and industries, that is not only used for bank reconciliation but is also used for reconciliations of technical systems, internal account reconciliation, and for the reconciliation of inter-company accounts.
Firms need total control of their reconciliation process from input to output. They need to have real-time visibility into the status of the reconciliation process, giving the assurance that appropriate and effective controls are in place and used to best effect. With these systems in place, perhaps UK firms can iron out hidden operational inefficiencies and play a lead role taking the world out of recession.
Michael Coppack is UK managing director of Adra Match.