Author: Author FAO

Processes – Record to Report (R2R) – Reconciliations – Bank

Record to report / R2R – Reconciliations Bank We elaborated on a few items constituting a reconciliation. http://faoblog.com/processes-record-report-r2r-reconciliations-bank-4/ http://faoblog.com/processes-record-report-r2r-reconciliations-bank-5/ Let us look at the rest: Interest credits received but not informed to accounting – Interest credits and certain charges reversals may be credited by the bankers, which will come to light only when a bank statement is compared with the accounting entries. The accounting will pass entries for the same. Also in some cases, for recurring items, automated credits may be triggered in the ERP systems. Amounts credited by bank to some other customer’s account – This is an interesting...

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Processes – Record to Report (R2R) – Reconciliations – Bank

Record to report / R2R – Reconciliations Bank We elaborated on two items constituting a reconciliation. http://faoblog.com/processes-record-report-r2r-reconciliations-bank-4/ Moving on to the next set of items: Standing instructions charged but not recorded – Quite often the accounting department gives standing instructions for certain types of transactions, like EMIs, rental payments, recurring deposits etc. The bank promptly sets up an automated mechanism to execute these instructions, but the accounting department, in most situations, does not automate it in the ERP. The execute these, rather record these manually, which triggers reconciliation requirements. Direct remittances received but not informed – In case of large...

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Processes – Record to Report (R2R) – Reconciliations – General

Record to report / R2R – Reconciliations General Our last post was an introduction to a simple reconciliation process. http://faoblog.com/processes-record-report-r2r-reconciliations-general-2/ Like we mentioned, the first step to note here is “which is the balance you are starting” with. In a bank reconciliation, you could start with the balance given by the bank and arrive at the balance of the same account in your (or your client / principal’s books), or you could start with your balance an reach the bank’s balance. Next, identify all items of difference. Sometimes, you may not get all. Important to note here is that you...

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Processes – Record to Report (R2R) – Reconciliations – General

Record to report / R2R – Reconciliations General We discussed the confusions created by debits and credits in reconciliations in our last post. http://faoblog.com/processes-record-report-r2r-reconciliations-general/ There surely has to be a better way to do this, and it should be simple as well to be effective. Well, the first key thing to note is the balance with which you are starting, for example, for a bank reconciliation it could be the bank balance or it could be your books (your client’s or your principal’s) The next step will be to identify various items of difference. At this stage it is important...

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Processes – Record to Report (R2R) – Reconciliations – Bank

Record to report / R2R – Reconciliations Bank We talked about reconciliations between multiple systems in the last two posts. http://faoblog.com/processes-record-report-r2r-reconciliations-multiple-systems/ http://faoblog.com/processes-record-report-r2r-reconciliations-multiple-systems-2/ To add to the last post, in case of multiple system reconciliations, a brief technological understanding of the system and the fields captured in each system really helps. As mentioned earlier, the process steps remain almost the same, and only the entity will change. Resolutions will not really need approvals as there will be no waiver / write-offs, except in some exceptional cases where details cannot be identified and the differences need to be written off. Coming to...

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Processes – Record to Report (R2R) – Reconciliations – Multiple Systems

Record to report / R2R – Reconciliations Multiple systems We saw situations where companies end up using multiple systems, primarily four in number. http://faoblog.com/processes-record-report-r2r-reconciliations-multiple-systems/ What really makes these reconciliations really challenging is that some legacy systems had limited data capture capabilities. Due to this, the supportings cannot be captured in the system. They have to be maintained separately. But again, due to business criticality, this system will take its own time to get into the main ERP modules. I remember in one of my jobs for the captive of an insurance major, the front end sales team had been doing...

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Processes – Record to Report (R2R) – Reconciliations – Multiple Systems

Record to report / R2R – Reconciliations Multiple systems You have read about the process components of an intercompany reconciliation process: http://faoblog.com/processes-record-report-r2r-reconciliations-intercompany-6/ http://faoblog.com/processes-record-report-r2r-reconciliations-intercompany-7/ http://faoblog.com/processes-record-report-r2r-reconciliations-intercompany-8/ http://faoblog.com/processes-record-report-r2r-reconciliations-2/ Another very interesting set of reconciliations are Multiple Systems. Why do multiple system reconciliations come into play? No company actually wishes to invest heavily in an ERP system, thinking into what they can be in ten years time. At a maximum, they will look at three to four years. So they continue with the legacy systems. As the businesses grow, new and updated systems are brought in. In some cases, they replace the existing systems,...

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Processes – Record to Report (R2R) – Reconciliations

Record to report / R2R – Reconciliations You have read about the process components of an intercompany reconciliation process: http://faoblog.com/processes-record-report-r2r-reconciliations-intercompany-6/ http://faoblog.com/processes-record-report-r2r-reconciliations-intercompany-7/ http://faoblog.com/processes-record-report-r2r-reconciliations-intercompany-8/ These were: Statement collection Balance confirmation Listing of differences Reconciliation Timing differences segregation Resolution Evidence collection Negotiation Approvals Now if you really look at the above processes, are they really only for intercompany reconciliations? Not at all. They, in a generic manner apply to all possible reconciliations with entity variations primarily. Whether you need to reconcile your vendor or your customer accounts, or for that matter Bank accounts, most of the steps will be the same. For vendor...

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Processes – Record to Report (R2R) – Reconciliations – Intercompany

Record to report / R2R – Reconciliations Intercompany You have read about five process components of an intercompany reconciliation process: http://faoblog.com/processes-record-report-r2r-reconciliations-intercompany-6/ http://faoblog.com/processes-record-report-r2r-reconciliations-intercompany-7/ These were: Statement collection Balance confirmation Listing of differences Reconciliation Timing differences segregation As mentioned in the last post, next comes the items needing reconciliation. Now, this constitutes the most important part which we can call resolution. Resolution – There will be a bunch of items which will need a resolution. By resolution we mean that both units will have to match, negotiate and pass correction entries, as may be needed. Now this also has some distinct components....

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Processes – Record to Report (R2R) – Reconciliations – Intercompany

Record to report / R2R – Reconciliations Intercompany I shared 3 process components of an intercompany reconciliation process: http://faoblog.com/processes-record-report-r2r-reconciliations-intercompany-6/ These were: Statement collection Balance confirmation Listing of differences Once you have done these activities, next comes the actual reconciliation: Reconciliation – You now compare the entries and identify differences of the individual entries. The difference between these differences and those mentioned in the last post primarily is that in the previous step, we just create a table of the balances as reported by each unit and compute the difference between these. Here we try to identify the items leading to...

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Processes – Record to Report (R2R) – Reconciliations – Intercompany

Record to report / R2R – Reconciliations Intercompany The concept of the reconciliation dates and periods was discussed in the previous post: http://faoblog.com/processes-record-report-r2r-reconciliations-intercompany-5/   What activities will be performed in an inter-company reconciliation process? Statement collection – The first step would be to collect the statements from various units which have had transactions with the reconciling unit. This will be done by multiple units, so each unit will share its statement for all units it has transacted with or has some debit or credit balance of the other unit. Balance confirmation – Some companies also mandate a balance confirmation to...

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Processes – Record to Report (R2R) – Reconciliations – Intercompany

Record to report / R2R – Reconciliations Intercompany We shared a critical requirement for a reconciliation, i.e. the date. Any reconciliation has to be on a certain date. http://faoblog.com/processes-record-report-r2r-reconciliations-intercompany-4/ Now what would an ideal date be? There can be multiple options, based on the financial policies, spread of business, quantum of business etc. Last day of a financial year – This is one critical date and the reconciliations need to cover the balances on this date for sure Quarter end – For most companies, a quarter end is an important cut off Month end – For larger businesses, a month...

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Processes – Record to Report (R2R) – Reconciliations – Intercompany

Record to report / R2R – Reconciliations Intercompany We shared the following posts on Intercompany reconciliations till now: http://faoblog.com/processes-record-report-r2r-reconciliations-intercompany/ http://faoblog.com/processes-record-report-r2r-reconciliations-intercompany-2/ http://faoblog.com/processes-record-report-r2r-reconciliations-intercompany-3/ So, very simply, like all reconciliations, you have two sets of records by different units and the activity will comprise of comparing the transactions, so that the difference in the balance as on a particular date can be identified, explained and entries passed for the mismatches. Did you read between the lines here? The difference is as on a particular date. Which implies that any reconciliation will be as on a certain date and not for a period. There is a...

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Processes – Record to Report (R2R) – Reconciliations – Intercompany

Record to report / R2R – Reconciliations Intercompany Intercompany reconciliations were startup post and the reasons why reconciliations happened were shared in the following posts: http://faoblog.com/processes-record-report-r2r-reconciliations-intercompany/ http://faoblog.com/processes-record-report-r2r-reconciliations-intercompany-2/ I had left you with a question, why will companies do inter-company business? Based on the mode of structuring an organization, there can be different reasons of having multiple units: Geographical – this is usually the most probable reason, where a business wishes to be closer to its customer or client and will base its multiple units in different cities, states, countries and continents Functional – A warehouse may be separated from manufacturing,...

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Processes – Record to Report (R2R) – Reconciliations – Intercompany

Record to report / R2R – Reconciliations Intercompany Intercompany reconciliations were started in the last post http://faoblog.com/processes-record-report-r2r-reconciliations-intercompany/ As different units of your client conduct their business, and there are transactions between the units, there will always be differences between the financial numbers recorded by them. Ideally these differences should not exist. So, why do these differences happen? There could be thousands of reasons for this, some of the more regular ones are listed below: Timing difference – one most popular cause – material may be in transit, the advice for the entry takes time to reach, month end entry intimation...

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Processes – Record to Report (R2R) – Reconciliations – Intercompany

Record to report / R2R – Reconciliations We introduced you to the types of reconciliations in the last post. http://faoblog.com/processes-record-report-r2r-reconciliations/ The first in the list was “Intercompany”. When a client has outsourced some accounting work to you as an outsourcer or as a back office, the first fundamental presumption is that it has a certain critical size. Logically, it could be spread across multiple locations, cities and countries as well. As organizations grow, they do not blindly invest in an accounting system which is centralized and caters to all geographical diversities right upfront. In most of the cases, as locations...

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Processes – Record to Report (R2R) – Reconciliations

Record to report / R2R – Reconciliations  In the record to report (R2R) segment, we started by listing a bunch of processes that may be a part of this segment. The links are given below for a quick reference: http://faoblog.com/processes-record-report-r2r/ http://faoblog.com/processes-record-report-r2r-2/ http://faoblog.com/processes-record-report-r2r-3/  http://faoblog.com/record-report-r2r/ http://faoblog.com/processes-record-report-r2r-4/ http://faoblog.com/processes-record-report-r2r-5/ Let us start today with detailed process understandings of the R2R processes, commencing with the simplest, yet most tedious, i.e. reconciliations. Some of you, who have been following the blog closely will come back to me and say, we covered reconciliations in the accounts receivable…. Yes we did, but we looked at only customer...

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Processes – Record to Report (R2R)

On R2R, this was the first list which was shared… http://faoblog.com/processes-record-report-r2r/ The 2nd list can be viewed at: http://faoblog.com/processes-record-report-r2r-2/ The 3rd list was – http://faoblog.com/processes-record-report-r2r-3/ The next was: http://faoblog.com/record-report-r2r/ Let’s look at analytics. The process in this can be/: Analytics Marketing Analytics Financial Analytics Investment Analytics Business Competition Analytics Vendor / Customer Credit Analytics Operation Analytics Credit Rating Analytics Location Analytics Equity Research Analytics Customer Requirement Analytics Patent Research Analytics Legal Analytics Intellectual Property Analytics Today we further list some more critical CFO functions. For the 3 key functions listed today, the CFO organization in most countries is legally...

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Record to report / R2R

Did you pick up your free report from Saturday’s post?  http://faoblog.com/6-steps-automation-success/ This is the first list which was shared… http://faoblog.com/processes-record-report-r2r/ The 2nd list  can be viewed at: http://faoblog.com/processes-record-report-r2r-2/ The 3rd list was – http://faoblog.com/processes-record-report-r2r-3/   Adding to the last post, these functions go higher up in the complexity and criticality chain for the CFO and other organizational groups. Management Reporting and Analysis P & L preparation Schedule preparation Cash flow & fund flows Financial statement preparation Final statements of accounts GAAP Analysis Regulatory reporting and compliance Filing of statements of accounts Financial statement presentation Stakeholder query handling & resolution...

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Processes – Record to Report (R2R)

Record to report / R2R This is the first list which was shared… http://faoblog.com/processes-record-report-r2r/ The 2nd list  can be viewed at: http://faoblog.com/processes-record-report-r2r-2/ We continue with other processes, which at times do get classified as “Record to Report”, but are usually classified separately by most of the organizations. Treasury & Risk Management Accounting debits, credits & transfers Authorizing debits, credits & transfers Cash Management & forecasting Bank administration Investment recording and management Investment decision making Debt management Foreign exchange management Foreign exchange conversion impact management Treasury Risk Management Hedging Taxation Tax accounting Tax Audit Tax compliance Tax planning and analysis...

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