In a difficult economy, business entities need to keep their “financial houses” in meticulous order in order to make every dollar count. However, this need for financial upkeep is not just limited to corporations. In fact, a number of government entities—specifically local governments—are discovering the importance of proper account reconciliation methods.
For example, take the government offices of Polk City, Iowa and St. John the Baptist Parish, Louisiana. Both were in the news recently regarding financial matters dealing with account reconciliation. Polk City, which had financial troubles over the past year, received a fairly clean audit … with one glaring exception. The auditor cited the city for “a significant accounting deficiency for failing to reconcile the utilities billing sub-ledger with the general ledger every month.”
Meanwhile, the St. John the Baptist Parish Housing Authority outsourced its accounting services to a firm that will be tasked with a host of items, including reconciling the office’s bank accounts and general ledger transactions. The firm will help the Parish reconcile financial records that an auditor last year described as “being in such a mess, with so much documentation missing, that he could not render an opinion on them for the agency’s annual audit”—the second year that such an audit result had been received.
One issue that many entities encounter when reconciling accounts is the use of manual processes. Many accountants are firm believers that spreadsheets provide the ideal solution to perform reconciliations and manage accounts. True, spreadsheet software has allowed accounting staff to abandon stacks of 13-column paper spreadsheets and toss 10 keys in the trash. Spreadsheet software does allow you to slice and dice financial data and make attractive reports complete with graphs.
However, if you continue to rely on spreadsheets on a day-to-day basis, it is possible to become frustrated with frequent data corruption. There will usually be some well-meaning executive or staff member that will open the file and “break” the trusty reconciliation spreadsheet. You can try to circumvent that by password protecting documents, but then you will run into the associates that always seem to need the password for one reason or another. Providing the password can mark the beginning of the end for your files, leading to countless hours spent fixing formulas broken by other users.
Another interesting situation occurred when an accountant involved in a fraudulent situation color coded the spreadsheet font to white and modified the spreadsheet, altering calculations referring to the white font cells. On the surface, the spreadsheet looked fine—referencing a blank cell with no impact to the calculation. However, it just was not obvious to the naked eye that there was fraud occurring.
Fortunately, the days of broken spreadsheets are over. Spreadsheet software can arrange and analyze figures on a small scale, but it has it flaws, especially when it comes to reconciling larger accounts with more complex data. Massive spreadsheets can be used to reconcile data, but maintaining those files is problematic. What happens in many instances is that formulas aren’t updated for the reporting cycle, so the accounting staff ends up booking the wrong amount. Month end is so harried that it is easy to make mistakes. People are tired and they are rushing, which is a bad combination.
The best alternative to spreadsheet software is a comprehensive, automated reconciliation solution, such as Chesapeake’s T-Recs® Enterprise. Along with the ability to perform complex volume matching with rules and formulas that cannot be corrupted, the T-Recs system has features that are built around internal controls, including workflow and audit trails. T-Recs’ risk assessment and variance analysis features provide key support to internal controls. Spreadsheets cannot do risk assessment. Also, a spreadsheet user can do variance analysis, but someone has to key in the numbers to perform the analysis. This causes increased risk for error, as people can make mistakes. Audit trails are more of a preventative control—people are less likely to perform fraudulent activity when they know all activity is being captured in a detailed audit trail.
Simply put, T-Recs Enterprise offers a complete control framework for reconciling a general ledger and managing core accounting processes. If you’re interested in learning more about what T-Recs can do for your organization, or if you’re just curious about automated account reconciliation, click the following link for more information: http://bit.ly/t-recs-ent.
If you have any questions, you can contact Chesapeake Systems Solutions by calling 410.356.6805 or visit Chessys.com today!
Chesapeake provides industry-leading, end-to-end financial solutions that seamlessly integrate cash management/treasury with general ledger account reconciliation, account analysis, and regulatory compliance functions. Information-sharing across all applications optimizes funds management, improves the financial close process, increases the efficiency and accuracy of general ledger account reconciliation, and simplifies compliance by enforcing company policies and procedures and financial regulations. Chesapeake solutions deliver actionable information and productivity improvements that can benefit a wide range of organizations, yielding tangible ROI from your software investment. From retailers to banks and financial services organizations to insurance companies, Chesapeake solutions help minimize risk, reduce costs, and maximize profitability.
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Tags: account analysis, Account Reconciliation Software, accountants, Automation, banks and financial services, business, cash management, Chesapeake Systems Solutions, economy, financial records, regulatory compliance, Spreadsheets
