How Transaction Matching & Variance Analysis Bolsters Risk Management Efforts

For many companies, automated account reconciliations and journals, while best known for saving time and costs during the month-end close, also form a backbone for improving risk management through automated audit trails and other functions.

But two automated solutions that are not necessarily on the CFO’s shortlist, transaction matching and variance analysis, are fast coming into their own as additional safeguards against the risk of error or fraud.

They too deliver substantial benefits in time saved and improved decision-making, and also fit nicely into the bigger risk management picture.

BlackLine Transaction Matching compares the detailed transactions that make up any two or more accounts, automatically moving on as each transaction is matched. Customizable workflows channel any unmatched transactions to appropriate personnel for resolution.

This is valuable because transactional details, which can’t be seen at the account-summary level typically used for account reconciliations, are visible to the transaction matching process.

If there’s a difference between the GL and bank balances, the matching process can be used to help explain the reason. For example, a check may be slow to clear, or a reference number may be incorrect.

This makes the process of ticking and tying transparent to the user, showing only those matches that couldn’t be resolved automatically. From there, BlackLine workflows help automate the resolution process, with BlackLine’s matching engine processing millions of transactions every minute, on average.

Logic-driven rules help users set precision levels, and can even “suggest” matches by identifying transactions that may have some but not all of multiple characteristics. Intelligent workflows forward open-item queries to appropriate reviewers for action.

These workflows help raise the visibility of risky transactions to the appropriate reviewers. It doesn’t matter if a reviewer works in a different division or is miles away from the accounting function, because the workflows can travel across any boundaries.

Another feature that helps highlight and describe risk is the solution’s reason-code facility, where user-customizable reason codes facilitate analysis by automatically documenting and categorizing the reasons for missed matches.

Of course, functions such as these can be—and often are—done by humans, and shortness of time is often cited as a reason why errors are made or overlooked.

By automating them, BlackLine’s software not only avoids the extra risk of human error, it also greatly speeds up the process of matching.

Variance analysis is an essential tool for monitoring the effectiveness of internal controls. But to have the greatest impact on managerial decision-making, it should be performed frequently and in a timely manner.

Because it can analyze actual versus projected activities, variance analysis has many uses, from measuring sales price or volume variances to assessing variable or fixed overhead spending and direct-labor overhead.

In a large retail chain, it can compare seasonal performance of retail outlets. In manufacturing, it can help analyze actual versus budgeted overhead costs.

It’s regarded by auditors as a key internal control component for monitoring risk management. But as with manual transaction management, the more quickly it can deliver results, the better for corrective intervention.

BlackLine’s variance analysis solution offers a number of timesaving advantages:

• Immediate results from large data volumes. Users can drill quickly into live data via real-time dashboards and reports that display policy, purpose, and procedure for every identified variance.

• Fast reviews with full documentation. Automated workflows deliver variance results to appropriate reviewers so no time is lost in taking corrective action or initiating further tests.

BlackLine’s process automation features—its end-to-end integration and unified codebase—make it possible for organizations to perform both transaction matching and variance analysis on an ongoing basis, as part of a Continuous Accounting workflow.

This equips accounting professionals to regularly fine-tune processes without holding up the financial close. It also relieves the typical pressure and time constraints caused by manual operations that can lead to errors and increased risk.

Join this webinar on Valentine’s Day to discover how to automate your high-volume reconciliations and help your transactions find their perfect match.