Account Reconciliation Transformation

Introduction

Account reconciliation is an essential element of control within the finance function required to substantiate GL account balances and support the monthly financial close. As organizations consider adopting cloud technology for various EPM solutions within the finance function to avail themselves of up-to-date functionality and reduce costs, they must consider whether to migrate existing account reconciliation applications to a cloud-based platform. Oracle Account Reconciliation Cloud Services (ARCS) provides an ideal option for those clients already using the on-premise Oracle Account Reconciliation Manager (ARM), as functionality can be migrated quickly and easily, to grasp the benefits of new abilities within the Cloud application.

In this paper, we will provide an overview of the benefits of adopting cloud services for account reconciliation and look at a case study of a global financial services company that migrated their account reconciliation application to the cloud.

Benefits of Cloud Adoption for Account Reconciliation  

Many companies are considering the benefits of moving to the cloud with their EPM/BI technologies, including Account Reconciliation tools. Though less than 35% of companies have adopted cloud technologies thus far, Hackett’s research indicates that cloud adoption will more than double over the next two years.

Current Cloud Adoption

Future Cloud Adoption

To ensure a successful cloud implementation of any EPM/BI tool, it is important to consider the overall vision, cloud readiness, and functionality trade-offs. When determining whether to use a cloud solution, the most important decision criteria are (or should be) functionality and features. While decision makers consider Total Cost of Ownership cost and application management, application functionality is considerably more critical to the end users who adopt and leverage the solution.

Overall, ARCS and ARM have many of the same features and functionality. Both the on-premise and cloud versions of Oracle’s account reconciliation tool are global applications that drive standardization and improve visibility throughout the account reconciliation process. However, as the cloud has become the major focus from a research and development perspective, Oracle is developing additional features unique to the cloud application. Also, because ARCS monthly updates are automatically released to the environment, customers receive the latest functionality without having to perform periodic upgrades to the hardware environment. One exciting example of this was the recent release of the Transaction Matching module for ARCS, which is not available in Oracle ARM. Below are some of the key benefits that can be achieved with Oracle ARCS:

5 Benefits of ARCS

• Automation of (dynamic) risk-based reconciliations
• Custom and calculated attributes and more powerful automated rules
• Real-time dashboard reporting on compliance and completion
• Automated transaction matching
• Ability to be fully managed by functional resources

Automating risk-based reconciliations allows the organization to focus effort on reconciling the highest risk accounts while maintaining visibility of the full chart of accounts. Lower risk accounts can be automatically reconciled in most months, while still monitoring account transactions in the reconciliation tool. Performing reconciliations on a set risk-based schedule (e.g., monthly for high-risk accounts, quarterly or semi-annually for lower-risk accounts) allows for periodic detailed review of all accounts over the course of the year. One of the advantages of implementing ARCS is that dynamic risk-based assessment could be introduced. Based on changes in balance, activity and outstanding reconciling items, the tool would automatically update risk level, adding a level of comfort around controls, while at the same time guaranteeing reduction of number of reconciliations to be performed at month end. Reducing the effort spent on lower risk accounts can reduce time and cost of account reconciliation while achieving greater attention to reviewing higher risk areas.

Calculated attributes and automated rules enable increased automation of account reconciliations. These calculations and rules can automate activities such as submitting or approving reconciliations within predefined thresholds, tracking open items in each period until they are closed, governing completion of required fields, or reconciling transactions in different currencies. This rules-based automation not only reduces manual effort but also improves the quality of reconciliations and enforcement of accounting policies through systematically governed standardization.

Dashboards and reports keep track of reconciliation status throughout the organization in real time and help the controllership team monitor aging of reconciliations and transactions. With ARCS, customers get significant dashboards and standardized reports out of the box while retaining the ability to create customized reporting.

One of the most powerful new capabilities with ARCS is the automated Transaction Matching module. Transaction Matching enables the creation of rule sets that automatically match transactions from different datasets based on defined conditions. This functionality can reduce manual effort to match items like intercompany transactions or GL to sub-ledger transactions by more than 90% by automatically matching most transactions and identifying those that require manual review.

A final significant benefit of Oracle cloud applications is that Oracle manages all upgrades and infrastructure maintenance. This reduces customers’ needs for in-house infrastructure support, provides them with the most recent upgrades with the newest functionality as soon as they are available, and eliminates the need for periodic projects to upgrade versions of the software.

As more companies migrate their EPM and BI tools to cloud applications, The Hackett Group is helping our clients reap these benefits and more by using ARCS for their account reconciliation processes.

Case Study – Migration from ARM to ARCS at a Global Financial Services Organization

Hackett is an experienced leader in migrating clients’ account reconciliations process to cloud-based applications.  Hackett partnered with a global financial services client, who sought to migrate their on-premise ARM application to a cloud-based ARCS application as part of a larger strategic move to the cloud. In addition to integrating more effectively with cloud-based ERP, reporting, consolidation, and planning tools that they recently implemented or planned for implementation, ARCS provided this client significant opportunities to deliver improved efficiency and effectiveness in their account reconciliation process.

ARCS ease of migration from ARM is based on very similar structure and configuration, while also offering additional capabilities that were not available in the on-premise application. The first step in successfully migrating to ARCS was to create a new Development and Test ARCS application. Once the application was created, most of the settings, configurations, and formats from the previous on-premise ARM application could be replicated in ARCS, which accelerated the migration process. Reconciliation profiles were easily downloaded from ARM into a flat file and uploaded in ARCS with minimal modification. The minimal changes were required to account for a few new system attributes that provide additional capabilities within ARCS, including:

• Calendars – created a single standardized calendar for the whole organization
• Holiday Rules – loaded holiday dates for 30+ years to automatically align account reconciliation deadlines with the close calendar
• Organizational Units – created an organizational unit for each Region to support reporting requirements

While performing the application migration, Hackett also conducted workshops to discuss account reconciliation best practices and opportunities to implement enhancements using ARCS functionality not available in ARM. We worked with the client to prioritize enhancements for inclusion in their initial release of ARCS as well as prepare a roadmap for future enhancements. This financial services client leveraged ARCS capabilities to achieve immediate performance gains in several areas:

• Introduced automated Transaction Matching for intercompany accounts
• Used auto-reconcile and auto-approve rules for lower risk reconciliations that do not need to be performed monthly, providing improved visibility to each account every period with no additional manual effort
• Automated amortization of transactions to carry transactions over to subsequent periods without manual input
• Created holiday rules and calendars to automatically align with the organizational close calendar
• Incorporated Action Plans into reconciliation templates to improve documentation and follow-up on tasks to complete reconciliations

Our longer-term roadmap for this client recommended additional ways to leverage ARCS functionality to automate more of the reconciliation process and enhance visibility and control over reconciliations.

• Accelerate reconciliation of additional account types including Cash and various sub-ledger accounts (e.g., Accounts Receivable) through ARCS Transaction Matching module
• Standardize report development to reduce manual effort and dependence on Excel while improving reporting controls with standardized, validated reports
• Reduce manual effort and increase focus on high-risk accounts by establishing thresholds for low-risk accounts to automate reconciliation and approval of those accounts if they meet defined conditions
• Develop automated rules to reduce manual effort in the reconciliation process or improve controls and standardization of reconciliation performance

This client achieved significant improvements through a quick six-week project to migrate their account reconciliation application to the cloud. Compared to their legacy on-premise application, ARCS delivered stronger accounting policy enforcement through custom rules, visibility to automated lower risk reconciliations, higher quality reconciliations with custom and calculated attributes including action items documented in the system, and upgrades and system maintenance continuously managed by Oracle. Additionally, we worked with the client to identify solutions to several key pain points in their current ARM application to demonstrate clear benefits from the migration.

In this case, our client chose to migrate from ARM to ARCS to align to a broader organizational vision to adopt cloud for the entire EPM suite. Since many users at the client had already adopted cloud applications for other use cases (e.g., Planning), the changes from ARM to ARCS had minimal impact on users. Therefore, this project required minimal change management focused around user training on the new capabilities. With minimal investment and change management, the client achieved significant gains in functionality and efficiency from their account reconciliation tool by moving to the cloud.

Conclusion

As companies adopt cloud technologies for their EPM/BI suite, they should strongly consider Oracle ARCS to support the strategic approach. Whether a company has already adopted cloud or is looking to start migrating to cloud technologies, Oracle ARCS is a great place to start, and for those already using ARM, the move to ARCS will be accelerated. The ARCS tool provides enhanced automation, standardization, and ease of use for its users.  In addition, the quick implementation timeline allows clients to realize benefits much faster with minimal change impact.

By Caroline Bennett and Michael Hurley