Best Practice in Implementing an Enterprise Reconciliation Solution
I was recently asked to download an app by a large organisation which promotes a reward scheme to drive customer loyalty based on the collection of points awarded when I shop for their goods. I am then able to conditionally exchange these points for goods and services as I choose. It takes a long time to build up a meaningful points value and in view of their relatively meagre value, I am addictively and somewhat irrationally over concerned that I ensure I collect these points as and when I shop.
It was the prompting to download the app that inspired me to check that I had been rewarded correctly on a recent shopping trip where I had the opportunity to acquire 10x the normal points than usual. On examination of the data on my app, the rewards scheme organisation had not recompensed my points correctly; I was outraged and determined to do whatever it took to get back that £3.50 I had been ‘swindled’ out of. I had my shopping receipt; they had made a mistake with their system and all was rectified to my smug satisfaction…after 90 minutes on the phone! Small beer financially but it meant a lot to me at the time!
With perhaps a more balanced time/reward approach, we should all be doing the very same thing ourselves; that is, to routinely and frequently check to make sure that our bank or credit card statements accurately reflect our transactions and that what we retain and review by way of receipts, matches our understanding and expectation and if not, why not? The alternative is that we place our personal financial position at risk.
It is a similar picture for businesses, large and small, whose transactional values tend to be of greater volume, value and complexity. However, given the exponentially different transactional scale compared to a personal account, there is substantial potential for far more serious financial risk when there is no effective reconciliation strategy in place.
The position for the overwhelming majority of businesses today, is that they have a smorgasbord of options addressing their wide variety of reconciliation requirements, including; simple manual processes, spreadsheets, local databases, in-house developed applications and/or vendor solutions operating across some or all of the various stages of the reconciliation lifecycle process. The issues this creates are; the inability to manage costs, poor operational risk management, incomplete visibility across the enterprise and the likelihood of compliance mismanagement.
"The position for the overwhelming majority of businesses today, is that they have a smorgasbord of options addressing their wide variety of reconciliation requirements."
However, increasingly, managers are becoming savvy about these issues and recognising the benefits of a single solution approach to addressing reconciliation. For many, cost control is the main driver, either when they are confronted with cost management issues during periods of growth or simply because they want to do more with less. Frequently they believe that there is a plausible risk to their reputational standing which can be addressed by mitigating operational risk though the controls of exception management in the reconciliation process. Most recently, the concern to be complaint with enhanced regulation following the 2008 crash has led executives to implement reconciliation solutions for compliance with such as the Client Assets Sourcebook (CASS).
Broadly, it is an amalgamation of all of these issues that has led to a sea-change in the approach by organisations to these wide varieties of reconciliation processes.
Two things should be on the table for consideration and the rewards can be almost immediate.
The first is a new centralized/devolved hub-and-spoke approach to reconciliation. This starts with a single ‘centre of excellence’ (CoE) to own and handle all reconciliation activities in terms of data collection and manipulation, the defining of appropriate match rules, the matching of such data, and the identification of errors that present risk to the business. The CoE should be able to resolve many of the exceptions. Then, for those exceptions that cannot be resolved centrally, the distribution of errors to the experts who can help identify what needs to be done at a business level unencumbered by the administrative matching activities.
Secondly, the introduction of a single tool that provides a uniform platform and approach across all business units and their reconciliation activities along the entire lifecycle.
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And the benefits?
Organisations that have adopted this approach have been able to summarise the benefits into three main groupings whose ranking will differ based upon industry but all of which are invaluable and often necessary in this current economic and regulatory environment: reduced costs, lower operational risk, better guaranteed compliance. In summary, a ‘win-win-win’.