financial_close.jpgMistakes are not uncommon for humans and you may be surprised to find this is the same for accountants too, of course accountants are renowned for diligence and extreme attention to detail, but even they are capable of making the occasional mistake (though you will seldom hear them admit it). Over the course of a year, accounting professionals may process many thousands of transactions, given these vast quantities and complex nature of accountancy it is not unreasonable to expect, come year-end that some mistakes will have been made. Hopefully, all mistakes will be captured and rectified before year-end reports are filed and the data is handed over to the auditors, but unfortunately this is not always the case.

On Wednesday, it was announced that KPMG had withdrawn audit opinions on CFTC (The Commodity Futures Trading Commission) after it had understated liabilities by $194 million in 2014 and $212 million in 2015. CTFC’s management refute KPMG’s findings, but has said that it is investigating to see if any accounting rules were broken. And of course back in 2014, British supermarket giant Tesco was found to be overstating half-year profits by an astonishing £250 million.

Now regardless of whether the mistakes that were made are genuine, or if it’s indeed falsified data being pushed through by individuals displaying what they would like it to be, if these discrepancies are not picked up and are allowed to accumulate year-on-year the repercussions can be catastrophic for all involved, company and employees alike. Corporate reputations take a hit, fines can be imposed, jobs are lost and individuals, depending on the severity, can face prosecution and even prison. It is difficult to say at this early stage what the repercussions will be for the CFTC, but there are many examples where the most severe penalties have been issued and this is likely to increase as governing bodies tighten regulations.

How do you minimise mistakes and prevent fraud at year-end?

  • Dashboard reporting
    The problem with the year-end close for many companies is that most of it is done with spreadsheets; working with spreadsheets almost exclusively makes it difficult to pick up on trends in the data. Having dashboard reports linked directly to the data you are trying to reconcile will provide the opportunity to identify and correct, or justify anomalies.
  • Task lists
    We all know one of the first rules of accountancy is to be consistent! Having a clear, methodical and logical set of tasks, where reminders are set up and individuals are unable to continue the process until all preceding tasks are completed, authorised and accounted for, will prevent vital steps from being missed and potentially erroneous items from being overlooked.
  • Segregation of duties
    Separating duties helps prevent fraud from rogue employees, or mistakes from stressed, tired ones. If each prepared account has to get checked and authorised by a second or third person then it is far more difficult for falsified or erroneous data to pass through undetected.
  • Reinforce the signatories responsibilities
    We are living in an age where every software and app download is accompanied with several pages of terms and conditions with an, ‘I accept the terms and conditions’. However, not many people can honestly say they read them in full or take any great notice of them. While there is no need to go into such detail, a regular, short reminder message for the signatory each time they go to authorise an account stating that they certify this account is correct and that they are responsible for this accounts data integrity, will lead to a more thorough checking of the accounts data.

In order to adopt the necessary steps to avoid mistakes and errors at year-end and reduce the risk of fraud, finance and accounting teams should consider a financial close automation solution. This can provide the visibility and transparency required across the entire close process, improving reporting and assisting with compliance requirements with audit trails and controls. The BlackLine Finance Controls and Automation Suite  comes with standardised templates, checklists, real-time visibility and auto-certification for reconciliations, enabling organisations to automate up to 99% of the reconciliation process.

If you are looking to minimise errors in your close processes view our webinar recording on how to add efficiency, control and visibility to the close process through automated solutions, or send us an email if you require further information:

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