Today, CNH Industrial’s corporate accounting team uses the BlackLine Financial Close Suite for SAP Solutions from SAP partner BlackLine to automate and manage accounts and track close processes. But it wasn’t always this way. Until a few years ago, CNH Industrial relied on a homegrown application and a slew of manual processes to manage account reconciliations. The difference between then and now, to use a farming analogy, is akin to the difference between J. I. Case’s initial threshing machine in 1842 and the modern day combine, equipped with GPS and suited for the operator’s comfort: the previous environment was far more time-consuming and error-prone to the point of being almost unrecognizable from its modern-day equivalent.
“We had experienced accountants spending time printing and copying rather than doing value-added work,” says Jenna Stengert, senior corporate accounting specialist at CNH Industrial. “We wanted much more consistency and visibility than we were getting.”
The homegrown reconciliation application that business replaced was little more than a database, according to John Springsteen, CNH Industrial’s intercompany accounting manager. “One inefficiency with the system was that account preparers, approvers, or reviewers could not attach any supporting documentation to a reconciliation,” he says. Hence, the company’s printers and copy machines were overworked, as account stakeholders stuffed file cabinets with paper-based documentation that had to be retrieved for an audit or other follow-up verification.
A lack of consistency also manifested itself across the 16 industrial locations in North America, along with several R&D facilities, because there wasn’t a standard month-end checklist for precisely what each location had to submit to corporate accounting. Poor visibility for management was compounded due to ambiguous posting rules for the many intercompany transactions between different business units.
“We had to find a better way to gain comfort on the completeness and accuracy of our financial statements,” Stengert says. The BlackLine solution would provide easier access to the underlying support and help the business achieve better consistency and visibility into the processes that are related to maintaining and tracking account reconciliations.
According to Stengert, the business chose BlackLine for two main reasons, the first being its ease of use. “It’s an incredibly simple system to navigate and is very user friendly,” she says. The other reason was ease of integration with SAP ERP. The cloud and web-based Account Reconciliations product provides templates formatted to standard journal entries and general ledger (GL) postings within SAP ERP, which customers can easily configure for company-specific accounting rules for use with SAP’s capabilities for controlling and profitability analysis, the new GL, and other finance functionality.
As system administrators, the corporate accounting team could also set workflow rules and create templates to allow mass uploads of information for future implementations. This made later deployments incrementally easier and less time-consuming for administrators because they had an established workflow and templates to follow.
Streamlined task management. CNH Industrial used Task Management a little differently than most companies, who generally use it to automate a month-end checklist. While the business does use Task Management for this purpose, it expanded the product’s use to include additional workflows, such as storing support and evidence of supplementary schedules on its footnotes to provide even more workflow visibility among preparers, approvers, and reviewers.
Another use, according to Stengert, is driving Sarbanes Oxley (SOX) compliance by loading lists from external auditors—including provided by client (PBC) lists—directly into Task Management. “The task module retains the history of the communication on every PBC item and all the documentation in a nice, usable format with a consistent numbering system,” she says. “So, whether it’s the initial listing, the sample selections, or the support for those sample selections, we can go back to look at prior years for guidance.”
Achieved real-time variance analysis. A centralized workflow view, providing all stakeholders with access to supporting documentation whenever needed, was a unifying theme for CNH Industrial’s BlackLine implementation. This certainly held true for performing variance analysis, which, like the account reconciliation and journal entry processes, previously depended largely on spreadsheets as preparers manually pulled balance sheet and income statements to analyze. The master document for variance analysis, however, was accessible by a few select users, and it could only be edited by one user at a time in Microsoft SharePoint. This restriction proved challenging as users had just a three-day turnaround to identify and explain variances above a predetermined threshold.
“One important thing Variance Analysis allowed us to do was get more people involved with knowledge about the business, with no limitation on the quantity of preparers who can provide their analysis at the same time,” Stengert says. “Dashboards make reporting simple for the administrator as well — to easily track the completion status and send out reminders.”
Automated intercompany transactions. Intercompany Hub was also relatively new when CNH Industrial implemented the product; designed to automate reconciliation of transactions among different sides of the business. For CNH Industrial, intercompany transactions are common between many legal entities within several global instances of SAP ERP. Without the Intercompany Hub, each legal entity would record entries on their respective ledgers, and the company would need to reconcile all timing and calculation differences between the entities.
BlackLine Intercompany Hub automates this workflow much like the other tools; when the transaction is completed, it posts to the ERP systems for both the initiating and receiving legal entities simultaneously, alleviating the challenge of having only one side of the business create a booking, and reducing errors arising from discrepancies. With the Intercompany Hub, postings are automatically booked consistently even if the two sides of the business are working in different instances of SAP ERP Financials.
Added trust and improved standards. One result of introducing automation to account reconciliations was CNH Industrial’s creation of the Account Reconciliation Quality (ARQ) program. With increased transparency of accounting and reconciliations in the SAP ERP and BlackLine solutions, the company has far greater trust in the accuracy of its financial statements. With this confidence and accessibility of information, a newly formed internal quality team known as ARQ can conduct reviews of accounts, regardless of physical location of the preparer or approver and provide training based on the results.
By reviewing the account reconciliation quality, consistency, and adherence to company standards through ARQ, corporate accounting now has a baseline to use as a starting point for potential process improvements. “Once you have that visibility, you can identify your strengths and weaknesses,” Stengert says. “For example, now that account reconciliations are in the BlackLine suite, we can review all the plants’ inventory calculations to confirm they are being calculated consistently and according to company policy. If not, we can investigate the root cause and take steps to mitigate risks.”
Greater consistency also creates efficiencies in the external audit process. “Before BlackLine, locations may have had different types of formats for their reconciliations, making it very difficult to follow—where now, there is consistency across the board,” says Springsteen. “The supporting items and required adjustments are all presented in the same format, which makes it easier for auditors to pick up a reconciliation and follow it from start to finish. We have even given auditors direct access and trained them on BlackLine so they can perform a lot of the work without our input.”