After recovering from some hand surgery, I am now able to restart my blog postings. Sorry for the short sabbatical.

As the calendar year is rapidly coming to a close, this means that the annual closing and audit process is once again starting to get on our minds. And regardless of whether or not you have to contend with SOX compliance issues, we all want to reduce the risk of control failure in our routine closing processes and in our internal controls over financial reporting.

The monthly (and annual) close process is a critical part of an organization’s internal controls. How well that close process is managed has a direct impact on timely decision-making during the normal course of business and on the level of reporting risks the CFO and controller have to consider. It is not unusual that close processes and account reconciliation management are manually intensive, time-consuming, and error prone. The term “hodgepodge” often comes to mind when talking about the close process.

Many of us use a patchwork system to manage the close procedure. Most often, spreadsheets are used to monitor the status of tasks, and e-mails are used to communicate assignments and approve reconciliations, journal entries, and even variance analysis. Documentation then gets stored in binders, file drawers, individual PCs, and on shared drives. Assuring that all steps are completed and approved as necessary and then retrieving the work for review by auditors is no easy task.

I have recently learned of several tools that provide easy-to-use help for business process management, including workflow automation for managing mission-critical closing tasks. Here is a typical example of how these tools work in automating the management of balance sheet reconciliation tasks:

• Account reconciliations are assigned to preparers, reviewers are designated, and due dates are set.

• At the end of the accounting period, a data file containing GL balances is exported from the user’s accounting system into the reconciliation management system and used to populate the reconciliation folders.

• Using a predefined schedule, the preparers are automatically sent (via a secure e-mail) reconciliation folders for each account assigned to them.

• Each folder includes the GL account balance, specific instructions, due dates, and an area for attaching supporting spreadsheet and/or PDF files.

• Once the preparer completes and certifies the reconciliation, the folder is automatically routed to the designated reviewer.

• The reviewer approves or rejects the reconciliation.

• If rejected, the reconciliation folder, including the reviewer’s comments, is automatically returned to the preparer.

• If it is approved and certified by the reviewer, the reconciliation is closed and filed on a secure hard drive.

The software then compiles status reports as the reconciliation goes through the steps described above. Management has remote access to reports that provide the status of the reconciliation in real time. After the reconciliations are completed and certified, management can access the secure drive and review the actual reconciliation folder, including reports indicating the exact time each process was completed. Many companies, allow their auditors to have remote access to the completed and approved reconciliations.

The benefits of implementing these tools include increased productivity, reduced risk and audit costs, improved data accuracy, and accelerated time to financial close.

Workflow software for use in automating the close process is available from vendors such as Compliancy Software, Blackline Systems, Trintich, SmartStream, Fiserv, and Amadeus. The solutions are typically delivered using the software-as-a-service model. The cost of the solution is normally based on a per seat fee and the critical success factors for implementing the process include engaging subject matter experts to coordinate the implementation and rollout. ###