It’s month end, now comes the reconciliation crunch

It’s month end, now comes the reconciliation crunch
It's month end, now comes the reconciliation crunch Appsworld San Diego January 2003 9/5/ :49:15 PM It’s month end, now comes the reconciliation crunch Richard Byrom Oracle Applications Consultant Appsworld January 2003 Thank you for coming to attend my presentation before I start I would like to mention that the latest presentation versions are available on the web. This presentation has been put together based on my experiences I have had whilst implementing ERP systems over the last 5 years and it is my hope that by relating some of these experiences to you I can help you implement your systems more effectively Prepared by : Richard Byrom - RPC Data

Presentation assumptions and objectives. Why and how? Setup issues.
It's month end, now comes the reconciliation crunch Appsworld San Diego January 2003 9/5/ :49:15 PM Agenda Presentation assumptions and objectives. Why and how? Setup issues. Relevant inquiries and reports. Month end close. Conclusion. Questions and Answers. Prepared by : Richard Byrom - RPC Data

Assumptions You are either. Preparing for a new implementation.
It's month end, now comes the reconciliation crunch Appsworld San Diego January 2003 9/5/ :49:15 PM 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. Point 1 I believe that the presentation would be most beneficial for new users who could learn about potential pitfalls that need to be avoided. Point 2 I assume that you would like to understand the reconciliation features surrounding such modules Prepared by : Richard Byrom - RPC Data

It's month end, now comes the reconciliation crunch Appsworld San Diego January 2003
9/5/ :49:15 PM 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. Point 1 With legacy systems users were allowed to get away with reconciling on a monthly basis. However, the advent of ERP and high volume transactional systems makes it necessary to perform reconciliations on a daily to weekly basis depending on the levels of transactions involved. Point 2 I then discuss Oracle specific functionality that will help you in the reconciliation process Prepared by : Richard Byrom - RPC Data

What should be reconciled?
It's month end, now comes the reconciliation crunch Appsworld San Diego January 2003 9/5/ :49:15 PM What should be reconciled? Control Accounts. Inter Modular Movement. Inter-company Accounts. Point 1 These are the points at which each of the sub-ledgers interface to the general ledger. The complexity of this reconciliation will often depend on how these accounts have been setup to deal with varying types of information within the organization. Point 2 With Oracle Applications being a highly integrated system it is essential that movement in one module be reconciled to movement in other modules that it interfaces with. A typical example is Accounts Payable, the difference between the outstanding creditors balance from one month to another should be attributable to new invoices for the month, less any payments and credits for that month. The total payments for a particular month per Accounts Payable should agree to the total from cash management, whilst the movement on payments should be traced to the Bank Account in the General Ledger. Once users gain a complete understanding of the movements in the system, then they can say that they have mastered the skills necessary to manage it. All too often, the system manages the users! Point 3 For companies using multi-org or multiple sets of books it is imperative that cross checks be performed to validate the transactions occurring between different organizations and entities. Prepared by : Richard Byrom - RPC Data

What happens if we don’t reconcile properly?
It's month end, now comes the reconciliation crunch Appsworld San Diego January 2003 9/5/ :49:15 PM 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. You’ve heard that I am from Africa, well this is what we do in our spare time. Here I am jumping off a bridge over the Zambezi River in Zimbabwe – it’s a drop of about 365 feet. You may ask what has this got to do with reconciliations. All that I am trying to illustrate is that not reconciling properly is like jumping off this bridge without the rope attached, that is, it is suicidal. Point 1 In one instance I instructed the client to reconcile their high activity accounts on a daily basis – which they did not do. Two weeks later they noticed the control accounts did not balance and after subsequent investigation we discovered there was a huge data corruption problem. The end result was that we had to go back to the backup from two weeks previous and redo all the work. Point 2 This is a common problem which can distort the view presented in the Financial Statements. This can be resolved by ensuring responsibilities for posting are appropriately assigned. Point 3 This is the worst type of situation to get into yet it seems to be the most common. On one particular site I found that the client had all Payables periods open for the entire year. This is a totally unacceptable situation as it will only result in users posting transactions to the incorrect months. My view is that at the very maximum there should be two periods open at any one point in time. Point 4 In some instances a setup problem or a bug in the system may result in transactions being posted in error to the wrong accounts. If this is a repetitive type of error a massive problem may arise if not detected early. The solution to this is to constantly monitor and reconcile high volume accounts before problems get out of hand. Point 5 This is also a common problem. In their efforts to make control accounts balance users often post non-standard journals to control accounts without taking the time and effort to resolve the error that caused the original difference. In an integrated system this does not work. Unfortunately there are some instances where no short cuts can be taken! In addition to this, applying the appropriate security rules should disable posting of non-standard journals to control accounts. Point 6 In an open items system your problems do not disappear at the end of the year, they come back to haunt you next year if you don’t deal with them. Here’s another payables example. My client settles all their accounts within 30 days and at the time of year end they begin to wonder why their creditors listing is so high. The problem was as a result of duplicate invoices being entered in the system – which is possible if you amend the invoice number by adding a few digits. In this instance the original invoice was being paid whilst the duplicated invoices were left open in the system. This problem would have easily been resolved through standard reconciliation procedures being implemented. Prepared by : Richard Byrom - RPC Data

9/5/ :49:15 PM 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. Point 3 Certainly, whenever I am involved in training I try to ensure that the users get the “big picture” and can understand how to perform reconciliations for the module being taught. Prepared by : Richard Byrom - RPC Data

9/5/ :49:15 PM 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. Point 1.2 Aliases, distribution sets and memo lines are all useful, however, they do limit the users ability to understand the associated accounting entries that are being created with the transactions that they are using. Prepared by : Richard Byrom - RPC Data

9/5/ :49:15 PM 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. An interesting application of this phenomenon is where I was involved in building an interface between a loans management system and Oracle Receivables. Prior to this interface being built summary journals were being posted into the General Ledger. After the interface was built high volumes of transactions began to flow through Receivables on a daily basis. The users were not prepared for such high volumes of transactions and struggled to reconcile the movement between these interfacing systems. This was primarily due to the fact that the clients existing staff compliment was not geared to handle such voluminous levels of transactions flowing through the system. This emphasizes the need to adopt different procedures and acquire the relevant skills when a new system is implemented. Prepared by : Richard Byrom - RPC Data

Why the problems with reconciliation? Bad Management
It's month end, now comes the reconciliation crunch Appsworld San Diego January 2003 9/5/ :49:15 PM Why the problems with reconciliation? Bad Management Controls. 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. When you design a system there are what are called preventative and detective controls in place, if the preventative controls are bypassed the detective controls which is essentially management checking, should fall into place. Prepared by : Richard Byrom - RPC Data

How should we reconcile?
It's month end, now comes the reconciliation crunch Appsworld San Diego January 2003 9/5/ :49:15 PM How should we reconcile? Here we are performing some recreational activities. It’s all really about control, it’s about aligning your people process and technology so that they master the raging waters of your high volume transactional system. People who have experienced – who know the waters and who are well trained and highly skilled Process You have to row in a certain way and you have to row in a team Technology You have to have a decent boat - Oracle Point 1 The standards that are to be adopted and used within your organization should be laid down and documented. These standards should be adopted via meetings and workshops which involve users at all levels. It is important is to get users out of working in “silos” – they must understand that working with an integrated system means that whatever they do in one module is bound to impact another. An awareness should be generated that there is still a need to think despite the fact that your job is more automated now. It always amazes me how logic leaves us when the system takes over! Each user should be given a set of key performance indicators (KPI’s) that they have to adhere to and one of these areas should relate to reconciliations. Once these standards and procedures have been agreed on they should be enforced by management Point 2 Users should understand what inquiries and reports they can generate within the system so as to assist in the reconciliation. Oracle has several types of inquiries and reports which will be highlighted later in the presentation. Point 3 Oracle Applications Desktop Integrator (ADI) is particularly useful for extracting data into spreadsheets to assist in the reconciliation process. Oracle Discoverer, a Relational Online Analytical Processing (ROLAP) tool can be used to extract information at table level from the database where Oracle Reports are not found to be sufficient. Oracle Workflow can be used both as a documentation tool and online to assist users in following the reconciliation process. Oracle Alert can be used to monitor the database activity and provide exception reports – this option is really for organizations that want to get technically sophisticated with their reconciliations. Users need to also be familiar with Excel which they can use analyze query and sort information extracted from the system 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. Prepared by : Richard Byrom - RPC Data

Setup Issues – General Ledger
It's month end, now comes the reconciliation crunch Appsworld San Diego January 2003 9/5/ :49:15 PM 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 is very important because if you get it wrong it can take a lot of work to correct the problem. Point 2.1 Users must understand that when they run the posting in accounts payable what to expect in the general ledger. Oracle has certain terminology that has to be understood Prepared by : Richard Byrom - RPC Data

Setup Issues – Sub Ledgers Master Data
It's month end, now comes the reconciliation crunch Appsworld San Diego January 2003 9/5/ :49:15 PM 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. It’s important to determine before hand how much detail do you want to show in the general ledger I.e. do you want to replicate the same level of information or do you want summarised transactions in the General Ledger. It all depends on the levels of detail that you require in your management reports. If you are dealing with a system like OFA,FSG or any other third party system you need to consider the amount of information in For all the modules with the exception of Receivables, the accounting transactions rules are entered in the master data Prepared by : Richard Byrom - RPC Data

Setup Issues – Sub Ledgers
It's month end, now comes the reconciliation crunch Appsworld San Diego January 2003 9/5/ :49:15 PM 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. Point 1.1 An important consideration is whether you want to group all your data together into one account or weather you want to have everything lumped into one account. Point 1.3 There are a range of accounting options available but what you really need to remember is that for receivables the accounting entries are dictated by auto-accounting rather than embedded in the master data. Prepared by : Richard Byrom - RPC Data

Relevant inquiries and reports
It's month end, now comes the reconciliation crunch Appsworld San Diego January 2003 9/5/ :49:15 PM 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) Oracle is now moving more towards a situation where more in more reports are being written that do the reconciliations for you rather than users having to extract the data and then perform the reconciliation outsied of the system. Prepared by : Richard Byrom - RPC Data

Relevant inquiries and reports – General Ledger
It's month end, now comes the reconciliation crunch Appsworld San Diego January 2003 9/5/ :49:15 PM 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. Prepared by : Richard Byrom - RPC Data

It's month end, now comes the reconciliation crunch Appsworld San Diego January 2003 9/5/ :49:15 PM Relevant inquiries and reports – General Ledger Journals – Line (Demo Output) Prepared by : Richard Byrom - RPC Data

It's month end, now comes the reconciliation crunch Appsworld San Diego January 2003 9/5/ :49:15 PM Relevant inquiries and reports – General Ledger Account analysis (demo output) Prepared by : Richard Byrom - RPC Data

It's month end, now comes the reconciliation crunch Appsworld San Diego January 2003 9/5/ :49:15 PM Relevant inquiries and reports – General Ledger Account Analysis - Sub Ledger Detail Prepared by : Richard Byrom - RPC Data

Relevant Inquiries and Reports - Receivables
It's month end, now comes the reconciliation crunch Appsworld San Diego January 2003 9/5/ :49:15 PM 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. Debtors Report Total Sales Invoices Total Receipts Prepared by : Richard Byrom - RPC Data

Relevant inquiries and reports – Payables
It's month end, now comes the reconciliation crunch Appsworld San Diego January 2003 9/5/ :49:15 PM Relevant inquiries and reports – Payables Accounts Payable Trial Balance (demo output) Prepared by : Richard Byrom - RPC Data

It's month end, now comes the reconciliation crunch Appsworld San Diego January 2003 9/5/ :49:15 PM Relevant inquiries and reports – Payables Payables Account Analysis Report (demo output) Prepared by : Richard Byrom - RPC Data

It's month end, now comes the reconciliation crunch Appsworld San Diego January 2003 9/5/ :49:15 PM Relevant inquiries and reports – Payables Payables Account Entry Reports (demo output) Prepared by : Richard Byrom - RPC Data

Relevant Inquiries and Reports – Fixed Assets
It's month end, now comes the reconciliation crunch Appsworld San Diego January 2003 9/5/ :49:15 PM Relevant Inquiries and Reports – Fixed Assets Account Drill Down Report (Demo Output) Clearing Reconciliation Report (Demo Output) Important aspects with fixed assets is to make sure the sub ledgers tie up to General Ledger Secondly you want to ensure that any purchases that have been applied through payables have been correctly accounted for in assets. WIP must be appropriately transferred to assets once the job is complete Prepared by : Richard Byrom - RPC Data

Relevant Reports and Inquiries – Cash Management
It's month end, now comes the reconciliation crunch Appsworld San Diego January 2003 9/5/ :49:15 PM 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. Ensuring that payments cleared Ensure that cash management transactions tie up to General Ledger transactions Cash Management Reports Payments/Receipts Made Payments/Receipts Made processed through the bank GL Reconciliation Report (reconciles cash to the general ledger) Prepared by : Richard Byrom - RPC Data

9/5/ :49:15 PM 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 for the best white paper to date which covers financial and operational closes. Tutor. Processes. Business Forms. What I want to emphasize here is how month end close helps the reconciliation process. Point 1.1 Checks need to be put in place to ensure that this happens correctly. For month end close there are a set of programs that need to be run It is important to ensure that posting occurs on a regular basis and this can be automated depending on your companies requirements. Posting should be checked to ensure that it has been run properly. Prepared by : Richard Byrom - RPC Data

Conclusion Please come and see my next presentation:
It's month end, now comes the reconciliation crunch Appsworld San Diego January 2003 9/5/ :49:15 PM 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. Point 1 They also give users a detailed understanding of what is happening in the system. Oracle now pushing the Daily Business Close. Point 2 The frequency with which reconciliations are being performed is an important consideration here is there is now a need to ensure that these occur more frequently – Oracle is now pushing the Daily Business Close. I mentioned the how and why but in here there is also a who aspect as well. 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. Prepared by : Richard Byrom - RPC Data

9/5/ :49:15 PM A Q & Prepared by : Richard Byrom - RPC Data

e-mail : richard@rpcdata.com. Company : RPC Data Ltd.
It's month end, now comes the reconciliation crunch Appsworld San Diego January 2003 9/5/ :49:15 PM Speaker Information Name : Richard Byrom. Company : RPC Data Ltd. Web Site : Mobile : Please do not hesitate to contact me. Prepared by : Richard Byrom - RPC Data

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It’s month end, now comes the reconciliation crunch

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