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Online balance sheet reconciliation comes to UK

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11th Jan 2013
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Californian balance sheet reconciliation cloud software specialist BlackLine Systems is expanding into Europe from a new base in London.

BlackLine founder and CEO Therese Tucker visited the UK in December to open up the new operation and to explain to the natives why they should consider the company’s web-based balance sheet reconciliation system.

Reconciliations are a staple activity in most finance departments, where someone has to check various balances to examine and document how they were calculated, so that another accountant could use the information to confirm that the reconciliation was completed correctly.

The BlackLine online reconciliation system emerged from her work as in treasury and financial systems development and consultancy. A client sought help with its monthly close process, which had turned into a spreadsheet-driven mess.

“We started with account reconciliation, then moved on to checklists and variance controls, transaction matching, manual journals, tasks (checklists) and to do lists,” she said.

At most period ends, consolidation systems also need to cope with “tie outs”, where late journal postings and adjustments need to be tracked back to see that they’re included in the final consolidation.

“The common feature of these processes is they’re things people do badly with spreadsheets in a poorly controlled fashion,” Tucker said.

The company’s software system was built up from a core balance sheet reconciliation mechanism.

“If the balance sheet data is garbage, the consolidation is garbage,” she explained. “It’s at the beginning, so you want to make sure what’s in your general ledger is accurate before it’s fed into the consolidation. It’s a key control that auditors use to check that the trial balance is accurate.”

Tucker admitted that the 2007-8 financial meltdown and the regulatory response has been good for her firm.

“Until Sarbanes-Oxley came along, nobody focused on reconciliation. But after that the manual way was not sustainable.”

Sarbanes-Oxley is not the driver of her firm’s success, she explained: “The accounting scandals and the lack of controls in the books that drove that. The fact that people did it so badly is what drove the market for our software.”

Around 20 of BlackLine’s 500+ customer companies are based in Europe, with the majority based in north America. But many of these companies support users in around 100. Having the software hosted over the web helps the developer with these customers’ needs.

“One of problems with subsidiaries is visibility into their operations,” Tucker said. “If you print things out into binders, you have no visibility. If you have a browser-based system, you can see what’s going on.”

Users have since adapted the system for other reconciliations, including bank accounts, rent and other payment schedules, inventories, and comparing balance sheet balances to sub-level balances.

“We have very inventive customers who have used it outside of areas we thought it could focus on. If you think of anywhere you have a spreadsheet and use Vlookups, you can standardise it and use this particular tool to match data,” she added.

How BlackLine works

The heart of the software is a set of data import mechanisms - including links to big accounting and ERP systems such as SAP and Oracle, but BlackLine can accept information from pretty much any program that can export a transaction feed, CSV file or trial balance.

The operating environment is fairly unspectacular to look at, but caters for 18 different kinds of user with pre-defined access and functional controls, and eight standard templates that can be configured to deal with different balance types.

“Once someone signs off on the reconciliation, everything becomes view-only so the integrity is captured at that point in time,” Tucker said.

Costs and paybacks

The BlackLine system costs between £50 and £105 per user per month. Around 40% of customers are large corporations, but the company’s growth strategy is to take the tool out to smaller organisations in the £25m-£50m turnover bracket. Companies can run it with one user in each office or site, while a bigger group operating a shared services centre would be able to do more work with fewer licences.

Justifying the costs for such a specialist application come down to the savings that can be achieved from automation, or as Tucker put it: “cutting down on the amount of work devoted to rote tasks”.

Automated reconciliations also have a big impact on auditor interaction, she continued.

“The auditor typically goes to the accountant and wants to see a figure. The accountant goes to their binder and gives the information to the auditor. You can cut out a lot of that - and the paper storage that goes with it.”

Some BlackLine customers have used their streamlined processes to negotiate lower fees with auditors, who benefit by getting faster access to the information they need. There are other intangible benefits, she added. “If you can clean up a mess before your auditor finds, it can save a lot too. That is something that speaks to finance directors.”

Replies (3)

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By GSPANESER
11th Jan 2013 14:18

We've got something similar ourselves

As an organisation we implemented something similar last year; AssureNet (by Trintech).

The methodology is the same, i.e. the idea being to create reconciliations which;

-are standardised across the business (and therefore easier to review as well as prepare),

-reconciled to true ledger entries by way of direct links to ERP system data and attachments(Oracle in our case)

-reduces the use of paper

-works efficiently is the case of multinational operations, overseas shared service centres, etc.

-makes the auditors happy!

 

The idea of Assurenet is fine, but the execution leaves something to be desired. By this I mean that the operations are somewhat clunky and slow, and work has been known to be lost by system time-out issues. I'm not sure what the cost per user is, but I'm sure it's not cheap.

 

Be interested to hear of others experiences of either Assurenet or Blackline.

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By carnmores
17th Jan 2013 12:35

i am slightly surprised by the need for this

but may be missing a trick or two, surely companies with good internal controls etc should be all over this in the first place?

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By chatman
19th Jan 2013 12:08

Really Ms Tucker?

“Until Sarbanes-Oxley came along, nobody focused on reconciliation.”

Maybe she didn't, but accountants did. Rather weakens your faith in a person when they present a fundamental principal as a revelation.

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