How BlackLine Enables Modern Continuous Cloud Accounting

This article originally appeared on TechnologyEvaluation.com.

Indisputably, the COVID-19 pandemic has created unpredictable situations for finance and accounting teams around the world.

When it comes to finance departments, the pandemic didn’t care where an organization was in its digital transformation journey. It brought an unprecedented wave of disruption that has tested their resilience and agility. Market conditions changed radically, and so did Finance, with a re-equilibration of the operating model overnight.

Finance and accounting leaders need to embrace modern accounting with unified systems, data, and processes to deliver accurate results faster—continuously and in near real time. The goal is to automate routine work to focus on strategic and value-adding business initiatives, and to execute continually to support their businesses in real time.

This theme of the effects of the pandemic on finance and accounting teams was the primary focus of BeyondTheBlack, which took place virtually in late 2020. Formerly called InTheBlack, BeyondTheBlack is BlackLine’s annual user conference.

The new conference name encapsulates the new reality: accountants and other financial professionals are now being called upon to produce value beyond closing the books and verifying that the numbers are accurate. In other words, instead of just making sure organizations are “InTheBlack,” it is the time for accountants to go “BeyondTheBlack” and provide strategic leadership.

A pioneer in the area of cloud-based financial close software, BlackLine is based in Los Angeles, California, with regional headquarters in London, Singapore, and Sydney. It is publicly traded (NASDAQ: BL).

Companies use BlackLine’s cloud-based software solutions to manage and automate their financial close, accounts receivable (AR), and intercompany accounting processes because their traditional manual accounting processes are no longer sustainable.

Many companies struggle to accommodate the aforementioned change and paradigm shifts quickly and effectively. Traditional manually-performed office tasks have long come under pressure, as has the over-reliance on paper documents. Manual journal entries and adjustments, reconciliations in pesky spreadsheets, hunting for paper trails to meet audit demands, and repetitive data extracts from a variety of enterprise resource planning (ERP) systems and subledgers consume a vast amount of talent and resources.

Many of these issues would have been moot if companies had already digitized their processes. The research shows that agile accounting processes that run continuously and in real time were much more responsive to the pandemic’s challenges. A Continuous Accounting approach identifies risks earlier in the reporting cycle, providing more time to remediate them and allowing more time for analysis.

As mentioned above, business fundamentals, i.e., revenue outlooks, liquidity, forecasts, and operations, have immediately changed due to the pandemic. And all this has to be managed in a virtual environment.

By closing the books faster and more predictably, finance and accounting teams can flow clean, consistent, and timely data more readily into downstream budgeting and planning tools.

More than 3,200 customers trust BlackLine to help them close their books faster and with more complete and accurate results. BlackLine is helping more than 280,000 accounting and finance users shift from manual to automated tasks, enabling their processes, teams, and companies to run better and faster (see Figure 1). And they can do so securely from anywhere.

Figure 1. BlackLine’s value proposition

The secret sauce here is the BlackLine Accounting Cloud. A unified cloud solution enables Accounting to centralize, automate, and orchestrate key control activities like general ledger account reconciliations, ad hoc, and routine journal entries, period-end task management, and more—all from a web browser.

Cash is vital to every business, especially in an ongoing global crisis. With working capital becoming more critical, there is a renewed focus on how organizations manage cash. According to PwC, more than $1.5 trillion is trapped on global balance sheets. With continued uncertainty in the market, managing current assets by allocating cash is a cost-effective and quick way to optimize working capital.

Following the recent acquisition of Rimilia, BlackLine has added Rimilia’s artificial intelligence (AI)-powered accounts receivable automation capabilities. BlackLine Cash Application is an AI-powered, cloud-based solution that enables companies to automate more than 75% of cash transactions before their workday starts and more than 90% by mid-morning. AR functions can reportedly reduce up to 85% of manual processes and reduce Days Sales Outstanding (DSO) by over 12 days.

This type of automation repositions talent away from chasing customers for remittances to instead focus on value-adding activities, which can improve the customer experience and even bolster the top line as customer credit accounts are reconciled in minutes. It can also expose credit lines.

Meanwhile, BlackLine Cash Application enables organizations to manage cash flow and cash collection in near real time, simplifying the order-to-cash process by automating both the collection and allocation of the customer company’s cash.

Figure 2. BlackLine Cash Application (formerly Rimilia)

One may wonder whether financial close and AR/cash optimization are closely related, given that the Rimilia acquisition took place right before BeyondTheBlack 2020. In short, yes, they are related, since a substantial part of cash and AR activities are nestled in the financial close. BlackLine’s technology optimizes business outcomes at lower effort (such as cash collections and allocations), allowing for more customer engagement and analytics.

Today, the vendor’s customers have the advantage of implementing the full scope of financial close and cash management activities. So, naturally, its product vision encompasses both products.

As a data-backed organization, BlackLine continuously speaks with its customers and prospects to determine the best ways to build innovative solutions in its product roadmap. This includes integrations both within and outside of BlackLine, thus driving down risk, and increasing automation for a more seamless, touchless experience.

Let’s break down these three financial close components.

Think of checklists as a container that bundles similar tasks together, such as balance sheet reconciliations. When managed in spreadsheets, there are often coordination, communication, and collaboration issues, errors, and delays.

One can refer to this as traditional, manual accounting: it is not sustainable in the current environment. Companies face increasing scrutiny from stakeholders, auditors, and regulators. Finance leaders expect more analysis, agile planning, and business partnering.

The financial close is an umbrella term for all the activities performed each period that result in the production of financial statements. Closing checklists are drawn up to ensure accountability and completion of these activities. A primary focus of the close is to prepare accurate financials, the first time and on-time.

Like general ledger reconciliations, which validate the balance sheet’s status and health, a similar bundle of activities relates to the cash line on the balance sheet (and similarly, AR).

Therefore, from a financial close perspective, these are interconnected. For example, cash and AR are a critical subset of activities that need to be completed as part of the process.

Modern technology solutions like the BlackLine Accounting Cloud enables companies to unify systems and data for a single source of truth, automating repetitive, manual work. The technology solutions shift manual mundane work to higher-value work, making better use of human intelligence via the following capabilities:

• BlackLine Cash Application shifts effort from routine, repetitive, and manual collection and allocation processes to continuous cash forecasting and customer engagement, boosting the top-line with better credit lines and reduced time-to-cash.

• Through Continuous Accounting, open risks such as balance sheet exceptions and variances are explained throughout the month rather than at the end.

• Finance leaders can now access timely, actionable key performance indicators (KPIs) and predictive customer analytics, transforming traditional cash teams into credit analysts and commercial business partners.

BlackLine’s customers are now better positioned to automate their entire financial close process, which now includes AR. By doing so, customers benefit from lower time to value and more opportunities to centralize and automate end-to-end processes in a single cloud environment.

BlackLine, as a truly global organization, supports all this with offices, customer success managers, support teams, and implementations worldwide.

Accounting is always on the hook to verify the balance sheet’s health. Waiting for weeks for a clearer financial picture is not an option in today’s fast-moving economic environment. Continuous Accounting aims to perform as much accounting work as possible throughout the accounting period—continuously, robotically, and systematically. This way, financial data transforms into information that tells a story to stakeholders.

Technology can monitor account balances, exceptions, thresholds, variances, open items, and other areas to flag issues in real time and maximize the time available to investigate discrepancies. To that end, BlackLine Account Analysis is a new solution (with general availability sometime in 2021) that aims to help organizations proactively manage risk by automatically analyzing transactions in complex, high-volume accounts.

Exceptions, such as aged items and errant transactions, will be surfaced, along with clear action plans so they can be investigated, explained, and resolved by the accounting team members. These team members can add notes, comments, and documentation in a fully auditable workflow (again, without using pesky spreadsheets). The new solution enables an even deeper level of detail, categorization, and resolution of exceptions and errant transactions.

Moreover, BlackLine is upgrading its user interface (UI) across the entire platform in an effort to create a more intuitive and streamlined user experience (UX). The new UI is based on a library of elements that are deployed across the solution, giving visual cues for the most important and commonly used items on any given page to assure the ease of use for all users.

BlackLine has also completely redesigned its Unmatched Transaction interface to simplify the process of manually matching transactions.

While ERP agnostic, BlackLine is a certified SAP Solution Extension (SolEx). Solution extensions are strategic third-party software solutions developed by independent software providers offering innovative cross-solution and cross-industry functionalities that complement other SAP business solutions.

SAP sells these solution extensions directly to end customers. Relationships are initiated by SAP and represent an elite group of SAP partners (there are less than 40 solution extensions out of the more than 18,000 SAP partners).

As an SAP solution extension, BlackLine solutions are integrated into the SAP product roadmap, and SAP and BlackLine seamlessly integrates with SAP ECC, SAP S/4HANA, and other native SAP solutions to provide customers an end-to-end offering for Finance & Accounting.

BlackLine regularly enhances its product offerings to add integration to new SAP data sources and recently added inventory and other materials-related data to its supported sources.

In addition, BlackLine recently introduced a real-time link between journal entries created in BlackLine and the associated document posted in SAP. These are just the latest examples of how BlackLine provides SAP customers with one integrated user experience.

Figure 3. BlackLine as SAP’s Solution Extension (SolEx)

Unlike other platforms, BlackLine is also ERP agnostic and has integrated with over 100 different systems, so data seamlessly flows from multiple applications, including ERP, subledgers, tax, treasury, expense, payroll, and external banking systems.

And that means a smooth, frictionless flow of data to and from BlackLine. Without integration, financial close solutions succumb to manual processes, spreadsheet jockeying, and out of date data.

At BeyondTheBlack, BlackLine announced the launch of the BlackLine Developer Hub, so IT teams can explore the scope of fully supported and documented APIs (application programming interface), empowering customers to integrate data, workflows, and communication between BlackLine and other data sources.

In large global organizations, tasks may be handled differently from location to location, and the ownership of some tasks is either not clearly defined or may shift. A key example relates to intercompany transactions—accounting, tax, and treasury management across business units and subsidiaries. As such, intercompany transactions require a holistic approach.

The intersection of transfer pricing policies, accounting, tax regulations, processes, and technologies creates a seemingly chaotic environment with disparate, misaligned, and unintegrated technology environments. Tracking intercompany transactions in the real world is a massive challenge, and it’s no coincidence that these often cause material issues that lead to misstatements in financial reports.

With intercompany processing, timing differences in policies thwart coordination. The buyer and the seller can’t see what’s on each other’s books, and, when problems inevitably surface, it can be unclear who needs to be contacted for a resolution. Inefficiencies and delays can then pile up, potentially triggering costly exposure to foreign exchange (FX) risks and setbacks when earnings are reported.

To that end, BlackLine’s Intercompany Hub (ICH) provides a single location for the processing and management of all intercompany transactions. ICH is a system-agnostic solution designed to manage the full lifecycle of transactions in a cloud-based environment where transactions are initiated, approved, validated, booked, reconciled, and settled.

Audits are also a burden on finance departments even in the best of times. They can be even more challenging when everyone is working remotely and managing PBC (Provided by Client) list requests and statuses using spreadsheets, chasing down supporting documentation, and trying to provide requested documents or evidence.

According to Hyatt, a BlackLine customer, audits are a non-event now. Thanks to Blackline Remote Audit, both Hyatt’s internal and external auditors are self-sufficient, proving considerable time savings.

Removing the manual, repetitive steps helps to alleviate the workload involved in the month-end closing cycle. A centralized hub provides a common platform for users to collaborate on checklists, tasks, dependencies, reviews, supporting documentation, and other close activities to keep everything moving. Another BlackLine customer, eBay, reportedly cut their time to close from ten days to just three with a unified accounting approach.

Read our playbook on intercompany accounting to learn how your organization can conquer the biggest intercompany accounting challenges, and become equipped with common best practices implemented by global enterprises.