As management consultants we are often asked to help with a wide variety of financial and operational problems. For example, we may be asked to resolve Intercompany imbalances or to reconcile accounts that have not been reconciled for months or years. We have a number of tools that can help us to match disparate databases or do research to make the reconciliation process easier. These tools are invaluable to help us be efficient and cost-effective when serving our clients. They are typically investigational tools or analytical tools that allow us to diagnose issues or resolve problems. One common theme among a significant number of our consulting engagements rests in the timely and proper reconciliation of significant accounts.
Financial reporting for most organizations is monthly quarterly and annually. Public companies tend to focus on quarterly reporting because those are the ones that are published to the shareholders and filed with the SEC. As a result, there is less focus on the monthly financial statements. They are typically used for managerial purposes and there is less emphasis on monthly accuracy.
The reconciliation of significant accounts on a regular basis would solve many of these problems we are asked to remediate. Timely reconciliations will support the balances as reported on the financial statements and identify where there are weaknesses in internal controls or errors that need to be corrected. This timely recognition of accounting problems prevents embarrassing restatements or costly correction of issues over time.
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Another service line that we offer involves assistance with the preparation for an independent annual audit. Many companies realize that engaging a firm like ours to prepare for the audit can be cost-effective by reducing the cost of the Big Four firm’s auditee-caused inefficiencies. As a result, we have a defined methodology that provides for a disciplined approach to prepare schedules the auditors will require, explain variances that they require, and otherwise make the audit process much more efficient.
Why we Partner with BlackLine
Over the last several years a product that we recommend has become very popular, BlackLine. BlackLine offers a software program that is web-based and provides management a powerful tool that allows for a customized and competent closing process. After significant research into the tool and witnessing several successful implementations, we elected to partner with BlackLine to perform these implementations. To be clear, we do not earn any commission off the sale of BlackLine’s software. However, we do charge professional fees for its implementation.
Basically, here is how the software works. Each day a trial balance is uploaded into the BlackLine web-based software. Management, typically the controller or CFO, will assign individual accountants to significant accounts that they will be required to reconcile. In addition to the assignments of which accounts are to be reconciled, accountants are assigned a specific date for each month to have these accounts reconciled. Formats for reconciliation or templates are provided within the software to present the reconciliation in a typical auditable format. These reconciliation templates prevent what we see more often than not, a roll forward of an account versus a true reconciliation.
The controller and the CFO each have dashboards where they can see the progress of the monthly closing process. They can see statistics on the number of accounts requiring reconciliation, the number of accounts that have been reconciled and the individuals’ names who are or are not performing, among many other things. In summary, it provides a real-time snapshot of the progress made towards the planned monthly or quarterly close.
In addition to informing the accounting leadership of the status, there are rigorous quality assurance procedures built in. Each accountant reconciles their accounts and certifies them. Once certified, a designated reviewer of the reconciliation reviews and provides an electronic signature that the review has been completed. Each reconciliation gets two sets of eyes. As mentioned earlier, the trial balance is downloaded daily. So, should there be an adjustment that changes an account after the reconciliation has been certified, the software is programmed to decertify the reconciliation, notify the accountant of the decertification and require the reconciliation to be adjusted and recertified.
Although highly unlikely, should I ever decide to perform as a Chief Financial Officer again, I would demand the use of software like BlackLine. Properly used, BlackLine will streamline the closing process, provide visibility to senior management on the status of the close and identify problems on a much more accelerated basis. Suffice it to say, we are BlackLine supporters.
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Sam H. Carr is the Managing Partner of Carrtegra, LLC. Sam has over 30 years of experience in accounting, auditing, financial management and consulting. Sam has focused much of his career on process improvement and redesign. Sam holds an MBA and is a CPA, CIA, CISA and a Certified Compliance and Ethics Professional (CCEP). Sam is a finance and operations executive with broad-based experience that includes 12 years as a CFO or Chief Accounting Officer in both public corporations and private entities, and fourteen years with an international public accounting firm. Sam orchestrated an Initial Public Offering of a consolidation of dental practices throughout the United States. In addition to his IPO experience, he owns a powerful track record of demonstrated skills in a wide range of business environments including designing financing, mergers and acquisitions and growth companies. Sam has been the Chief Executive of a management consulting firm for the most recent 10 years. Sam’s focus has been substantially on quality of services and valued solutions as well as client and employee retention.