Part 9 of our Finance Transformation blog series. Read the full series here.
One of the many challenges for accounting departments is the time spent on journal entries: manually preparing, posting, approving, and substantiating. Many financial postings can be automated, such as inventory movements or foreign currency revaluations.
However, US GAAP and other accounting regulations, among other factors, create scenarios that cannot be fully automated within an SAP environment. These drive the need for manual journal entries, which are typically managed, prepared, and posted by accounting and finance teams.
The manual effort of recording journal entries is compounded by checklists, e-mails, and hard copy signoffs needed for completeness, internal controls, and auditability.
Despite organizations’ best efforts to manage all this, the process puts an unnecessary strain on valuable resources and introduces the risk of error.
SAP’s Universal Journal & BlackLine’s Journal Entry Solution
The introduction of SAP S/4HANA’s Universal Journal has raised questions about whether there’s an overlap with BlackLine’s Journal Entry solution. Some organizations mistakenly assume that SAP’s new innovation eliminates manual journal entries.
But there is no overlap.
The Universal Journal consolidates transactional data previously stored in multiple tables into one large table that covers the GL and subledgers, including AP, AR, and fixed assets as well as controlling tables, such as cost center, project, and internal order data.
It also encompasses the material ledger and account-based profitability analytics, and includes operational information such as customer and product IDs for more granularity in financial reporting. This allows for simplification of finance master data and reduces the need to “tick and tie” data between tables within SAP.
But it doesn’t address the process of creating and posting journal entries.
Even with the Universal Journal in place, companies running SAP (and any ERP) must still perform core accounting activities on a monthly and/or quarterly basis, and accounting and finance teams still need to substantiate all balance sheet accounts, among other critical tasks.
BlackLine Journal Entry drives workflows and captures all supporting documentation. The solution also fully automates certain entries, posting them directly to the general ledger within the ERP.
BlackLine’s configurable rules, thresholds, and other features ensure that entries are posted correctly and properly supported, reducing the risk of manual processes and adding efficiency and confidence to the audit process.
You may also be wondering how SAP’s Park and Post functionality compares with BlackLine Journal entry. You can read the full blog here.
What’s Different About BlackLine Journals?
The biggest differentiator is that BlackLine’s Journal Entry solution integrates with other Blackline solutions to create a true end-to-end process and audit trail.
For example, any journal entry that impacts the balance sheet will likely need to be substantiated at the end of the period, and SAP doesn’t have its own solution for balance sheet substantiation.
BlackLine streamlines this process. You can prepare, support, and approve your journal entry in the BlackLine platform and connect that journal entry to the related balance sheet account reconciliation that also needs to be prepared and approved.
Supporting documentation only needs to be attached once, creating a connection and audit trail between those two parts of the process. Without a unified platform like BlackLine, these would likely be disparate steps completed in spreadsheets or in other point solutions that require data manipulation and multiple touch points.
Isolating Manual Journal Entries for Audit Purposes
Many companies who run SAP have cited difficulties with isolating a population of manual journal entries for their auditors. This becomes particularly problematic during peak times like year-end close when external auditors ask for a list or population of all manual journal entries to perform substantive testing.
There is no clear indicator within SAP to identify a manual journal entry. Document types and other criteria may represent a majority of the entries, but segregation of duties or access concerns often prevent SAP criteria from being a silver bullet. It’s therefore very difficult, if not impossible, to prove that population from an audit perspective using SAP alone.
If BlackLine is the single starting point for all manual journal entries, this solves a significant audit challenge and easily isolates the population. BlackLine also allows auditors read-only access to the population at the push of a button, eliminating the time accountants would spend on pulling supporting documentation.
This is, in fact, one of the biggest benefits our clients say they’ve received, in addition to increased visibility and automation.
Read this white paper to learn more about how BlackLine can add value throughout your organization’s SAP journey.