Transcript It's month end, now comes the reconciliation crunch

It’s month end, now comes
the reconciliation crunch
Richard Byrom
Oracle Applications Consultant
Appsworld January 2003
Agenda
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Presentation assumptions and objectives.
Why and how?
Setup issues.
Relevant inquiries and reports.
Month end close.
Conclusion.
Questions and Answers.
Assumptions
• You are either.
– Preparing for a new implementation.
– Presently implementing.
– Have already implemented but could benefit from
enhancements and improvements.
• Most of the areas mentioned will refer to Oracle Financials and the
modules involved.
– General Ledger.
– Accounts Payable.
– Accounts Receivable.
– Cash Management.
– Fixed Assets.
• However, some of the principles shared are generic and cover all
aspects of reconciliation.
Objectives
• This presentation emphasizes the importance of
reconciling so as to ensure improved control over
financial information.
• To discuss different setup issues and how they
may impact your ability to reconcile.
• To highlight various inquiries and reports that can
help you in your reconciliation process.
What should be reconciled?
• Control Accounts.
• Inter Modular Movement.
• Inter-company Accounts.
What happens if we don’t reconcile
properly?
• Potential data corruption not
detected.
• Sub modules may not be posted to
the GL.
• Multiple months may remain open
for a variety of modules.
• Repetitive errors may not be
detected.
• Posting of non standard journals to
control accounts.
• Open item system carries forward
problems to next year.
Why the problem with reconciliations?
Inadequate training/inexperienced users
• Training should not be performed on a generic
system but rather on some form of prototype
which closely models that of the system being
used.
• Unique and pertinent reports should be identified
and understood by all the users within the
organization.
• Users should be specifically trained on how to do
reconciliations, something I have never seen in
my years of consulting.
Why the problem with reconciliations?
Lack of understanding of the system architecture
• System architecture is often determined by
implementation partners/implementers with very
little input from users – result, inadequate system
setup which often complicates the reconciliation
process.
• Inadequate comprehension of the accounting
entries that are created when users process a
transaction.
Why the problems with reconciliation?
Trying to use old procedures for a new system
• After implementing a new system users expect to
have a lot less work, however, in most instances
the transaction volumes and hence levels of work
are actually higher.
• Often, users think they can reconcile in the same
manner as before but they should be reminded
that a new system will definitely require new
procedures.
Why the problems with reconciliation?
Bad Management
• Controls.
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Deterrent (reduce likelihood).
Preventative (protect/reduce impact).
Corrective (reduce effort).
Detective (notify and trigger reaction).
• Managers can blame the clerks all they want for not performing
reconciliations but at the end of the day it comes back to the person
signing that reconciliation.
• Once it has been agreed what reconciliations are to be performed
within an organization, management should ensure that they review
and sign the reconciliations.
• If a user is struggling to prepare a reconciliation it is then up to the
manager to ensure that the user obtains the necessary skills to
perform their job or that someone who can do the work replaces
them.
How should we reconcile?
• Establish your out of system procedures.
• Ensure that all the standard functionality provided
by the system is understood and used.
• Make use of additional tools is necessary.
Setup Issues – General Ledger
• Chart of accounts should be appropriately designed.
– Appropriate groupings and sub grouping by using parent and child
relationships.
– Understandable coding infrastructure.
• Document source and categories.
– Users should understand the existing sources and categories.
– New sources and categories can be defined.
• Sequential numbering of documentation should be taken
into consideration.
– Consider automatic versus manual.
– Consider grouping vs. individual.
Setup Issues – Sub Ledgers
Master Data
• Should be separated according to the different groupings of
debtors available per profile options or supplier types.
• Customers/Suppliers should be given appropriate
hierarchies.
• Customer/Supplier numbering should be done in such a way
that facilitates understanding of the various listings.
• Assets should be given appropriate minor and major
categories.
• Bank accounts should have branches and accounts for each
branch.
Setup Issues – Sub Ledgers
• Transactional Data.
– Document numbering at sub-ledger level.
• Manual vs. Automatic.
– Transaction types.
• Standardized transaction types - categories.
• Customized transaction types.
– Auto-accounting in Receivables.
Relevant inquiries and reports
• Online inquiry/two way drill down
• T Accounts
• Reports
– Listing (demo)
– Extraction Methods
• File Export (online extract)
• Copy file
• ADI – Applications Desktop Integrator (Excel, Text and Web Page
Format)
Relevant inquiries and reports –
General Ledger
• Journals - Document Number (sequence name, doc
number to from).
– Review detailed information for each journal associated with a
specific document sequence.
• Journals – General.
Relevant inquiries and reports –
General Ledger
• Journals – Line (Demo Output)
Relevant inquiries and reports –
General Ledger
• Account analysis (demo output)
Relevant inquiries and reports –
General Ledger
• Account Analysis - Sub Ledger Detail
Relevant Inquiries and Reports Receivables
• AR Reconciliation Report – demo output.
• Journal Entries Report.
– Provides information needed to reconcile your
accounts receivable sub–ledger with the General
Ledger.
• Journal with GL Details Report.
– Identifies the General Ledger journal entries imported
from particular transactions in Receivables.
Transactions that have not been transferred to General
Ledger are marked with an indicator.
Relevant inquiries and reports –
Payables
• Accounts Payable Trial Balance (demo output)
Relevant inquiries and reports –
Payables
• Payables Account Analysis Report (demo output)
Relevant inquiries and reports –
Payables
• Payables Account Entry Reports (demo output)
Relevant Inquiries and Reports –
Fixed Assets
• Account Drill Down Report (Demo Output)
• Clearing Reconciliation Report (Demo Output)
Relevant Reports and Inquiries –
Cash Management
• Cash in Transit
– Receipts and Payments not cleared through the bank
• Cleared Transactions
– Transactions cleared for the related period.
• GL Reconciliation Report
– Reconciles the GL cash account to bank statement
balance.
Month End Close
• Ensures that any transactions which are not correctly
cleared or posted are appropriately dealt with.
– Posting from sub ledger systems to general ledger should occur on
a regular basis and be automated if necessary.
– Each sub module should be closed off on a monthly basis.
– After subsequent closing of these modules the General Ledger
should be closed off.
• Visit http://www.darc.com for the best white paper to date
which covers financial and operational closes.
• Tutor.
– Processes.
– Business Forms.
Conclusion
• Reconciliations are important in order
to identify problem areas and rectify
them on a timely basis.
• Procedures should be put in place to
facilitate reconciliation as well as
ensure that the organisation is making
use of all possible tools.
• Setups as well as inquiry and
reporting tools have a significant
impact on the ease of reconciliation.
Please come and see my next presentation:
• Get more out of Oracle 11i with ADI - Wednesday
January 22nd, 2003 at 01:00 PM in room 31C.
Speaker Information
Name : Richard Byrom.
e-mail : [email protected].
Company : RPC Data Ltd.
Web Site : http://www.rpcdata.com.
Mobile : +267-72111278.