Savings? Insight? The far-reaching benefits of subledger systems

Finance functions today face more rigorous demands than ever. The emphasis over the past few years has been on consolidation across business areas and regions, to provide regulators with a full picture. The initial consolidation is only the start. I always remind clients of the need to progress to stage two: Companies must now prove the completeness and accuracy of that consolidated information. This not only requires more automated reconciliation, but tools that allow you to resolve breaks more quickly.

In short, finance today requires systems that reliably provide accurate information, adhere to the highest standards of control, fulfil a range of regulatory and management reporting requirements – and do it all with the utmost transparency. It’s not easy! However, a consolidated, cross-asset sub-ledger solution can drive significant benefits. I believe it’s a case of many birds; one stone.

The problem?

So where can things go wrong and why is reconciliation a tedious process? The culprit: multiple heterogeneous systems feeding data into settlement systems and the general ledger. This spider-web of intersystem connections, delivering transactional data to the General Ledger requires  expensive customisation and support. Every time a change is made somewhere upstream, there is a huge ripple effect on down-stream systems.   Data is also incongruous and requires cleaning up, which is often a slow, manual process resulting in breaks in data flow, slower processing and potential errors. And if you’ve ever experienced journal entries recorded to the wrong account, you’ll know the hassle of reconciliation.

An ideal solution?

A subsidiary ledger or sub-ledger stores specific types of accounting transactions which are then summarised and posted to the general ledger. I like them because they offer far-reaching benefits. For a good overall discussion on sub-ledgers, see the current Accounting Coach blog here.

For me, the main benefits are:

  • Saved time and reduced costs: You can lower implementation and maintenance costs by eliminating the need for expensive customisations. You’ll stop wasting staff time, and money, on reconciliation and tedious manual tasks because data and any changes are auto-filtered down the line.
  • Data integrity: Make bad data a thing of the past so you can rest assured that the general ledger hosts only accurate and uniform data, right across the chain.
  • Transparency and compliance: Imagine easy reconciliation and compliance with a full drilldown to clear, auditable entries? You can administer multiple accounting policies for greater internal control.
  • Accessibility: You’ll continuously and quickly provide key financial information crucial to important business decisions and regulators.
  • Efficiency gains: Finance professionals are free to spend more time focusing on their day job and less time massaging data from one system to another.

The message from our clients is loud and clear. Regulators are becoming much more interested in how financial institutions are managing the process of information consolidation, and not just the overall risk numbers being provided. I appreciate that finance transformation programmes are often huge, complex undertakings, involving multiple stakeholders and systems owners, and can run for years. However, I always advise companies that starting with a reliable sub-ledger system is invaluable in ensuring data quality and consistency across the board – in short, there’s no reason why compliance and reconciliation headaches can’t be a pain of the past.

For greater efficiency across the organisation, find out about the latest Hotsourcing industry trend. It encourages businesses to achieve the ideal mix of in-house and outsourced resources. See my earlier blog and the lead article in ISS-MAG.

July 28, 2014

Jonny Speers

Global Head of Sales, Torstone Technology