This is a topical subject and is a question often asked by SAP Finance users – can Balance Sheet reconciliations be performed in SAP? Within standard SAP functionality, the answer is unfortunately no.
However, it is not all bad news, there is a new product on the market from BEST which offers automated Balance Sheet reconciliations in SAP. The BEST GL reconciliation module offers Balance Sheet reconciliations, approvals, full audit history and reporting across your balance sheet accounts, all within SAP.
But perhaps let’s back up a few steps to see why this is even something that would be required by your organisation.
Why do Balance Sheet Reconciliations at all?
Performing regular and accurate Balance Sheet reconciliations in SAP is not just to help detect fraud and other financial irregularities. It is an undervalued and yet crucial control to ensuring your organisations financial accuracy. Lack of reconciliation, or poorly performed reconciliations, can lead to an inaccurate balance sheet and potential lurking write offs. Balance sheet reconciliations form the foundation of an efficient and accurate month-end close that ultimately leads to more accurate financials – financials that are used as a basis for critical organisational decisions and for satisfying internal and external reporting requirements.
Balance Sheet Reconciliation best practice
If one looks at the Balance Sheet account reconciliation process from a best practices perspective, the following key areas are paramount:
Completeness
- Ensure all the appropriate accounts identified within your organisation are being reconciled, including new accounts.
- Ensure that each balance sheet reconciliation has instructions and procedures on how to complete the reconciliation.
- Relevant supporting documentation should be included or attached to the balance sheet reconciliation to validate the account balance.
Accuracy
- Those preparing and reviewing balance sheet reconciliations should have a basic understanding of the account being reconciled and the nature of the transactions therein. Understanding the nature of the account helps to know what supporting documentation is relevant to the reconciliation.
- Balance Sheet reconciliations in SAP should be current and done regularly.
- The reconciliation must provide accurate insight and information to the account – and not just a listing of line items or balances carried forward.
- Anomalies on the accounts should be looked for and highlighted on the reconciliations.
Standardisation
- Ensuring that the same Balance Sheet reconciliation process in SAP is adopted across the entire organisation is imperative to ensure that the same standard and control is in place across all departments.
Review
- Reviews must be performed on time and a deadline for these reviews should be adhered to.
- Status of your approvals should be tracked to measure completion of the process.
- Categorise Balance Sheet reconciliations according to risk to ensure focus can be applied accordingly.
- Manage anomalies and other metrics such as ageing and tolerances.
Auditable
- Ensure your balance sheet reconciliation process is fully auditable, from preparation through to review.
- Ensure that reconciliations of balance sheet accounts in SAP are readily available for audit review.
Continuously improved process
- Constantly review the Balance Sheet reconciliation steps in SAP to identify improvements and possible bottlenecks that will help drive quality and timeliness.
- Use standard balance sheet reconciliation templates to help drive consistency and speed up review of reconcilliations.
Knowing the Balance Sheet reconciliation best practices is one thing but being able to implement them across your organisation consistently is another thing entirely. The use of Balance Sheet reconciliation software to assist organisations with this process is becoming more important. With the right software, companies can achieve a fast and accurate month-end close that meets the best practices guidelines.
For SAP Financial users, finance systems managers, financial accountants, GL accountants, SAP FI’s, Business Process owners (BPO), and financial systems managers, the BEST GL reconciliation module is designed specifically to meet the Best Practices requirements for balance sheet reconciliations within SAP.
Below outlines some of the functionality offered with the BEST General Ledger Reconciliation module and how it stacks up to the Best Practices requirements:
Completeness
- Being able to set your SAP GL accounts as relevant for reconciliation ensures that you can see at any time which accounts are to be reconciled – you can reconcile both balance sheet and income statement accounts.
- Attachments and reconciliation instructions can be stored on the GL master in SAP – therefore providing important information to both preparers and reviewers of reconciliations.
- Attachments, long texts and reason codes can all be stored on the reconciliation line items to provide additional information to those reviewing the recons.
Accuracy
- Attachments can be made at reconciliation header level so that supporting reports, can be attached to validate the GL balance, i.e. bank statements attached to bank account reconciliations. Reports run from SAP can be attached directly from the spool list without a page needed to be printed.
- Completion of reconciliations can be tracked using control reports to see how far along the approval process reconciliations are. Users can also identify reconciliations that missed reporting deadlines for follow up.
- Use reporting metrics such as categorisation and ageing, meaningful account analysis can be performed to identify items that require attention.
- Use tolerances to automatically flag transactional or balance anomalies.
Standardisation
- Use of Balance Sheet reconciliation software allows for a common approach to be rolled out to all business units using the same SAP instance. All reconciliations follow the same designed rule set and can be reviewed in SAP across all business units.
Review
- Customisable approval strategies ensure that reconciliations are appropriately approved depending on the level of risk.
- Full audit trails are tracked for all approvals and rejections. Accountability drives the appropriate action from preparers and reviewers of reconciliations.
- Monitor reporting deadlines in conjunction with approval timing, and monitor the timing of approvals within the different approval levels to identify any bottlenecks.
- Automatically approve reconciliations based on risk and transactional criteria.
- Attach all supporting documentation to the approval for subsequent review.
- Ad-hoc reviews can be performed by senior management or internal audit.
Auditable
- Full audit history exists for all attachments, reason codes, long texts and approvals made for each reconciliation.
- All balance sheet reconciliations, both historic and current, are available at all times within SAP.
- Ad-hoc reviews, and automatic approvals, are also all stored for subsequent reporting as required.
Continuously improved process
- Using comprehensive control reports and audit trails, exception reporting can be done to identify specific reconciliation anomalies or approval bottlenecks.
- Manage GL master data to ensure all accounts, old and new, are being reconciled.
The BEST GL module is a SAP certified add-on module. Please contact us for a demo.
Source: BEST
