With hundreds of legal entities worldwide, each generating transactional records for thousands of general ledger accounts, The Dow Chemical Company has about 1,000 employees prepare and submit roughly 250,000 account reconciliations each quarter.
Two situations conspired to put additional pressure on Dow’s existing reconciliation processes and transform what had been a relatively uneventful, if stressful, financial close.
First, Dow acquired specialty chemical manufacturer Rohm and Haas, itself a global Fortune 500 company with numerous legal entities, representing a sizable increase in the number of account reconciliations that Dow would now have to process. Second, integrating the recent acquisition of Rohm and Haas employees and systems—as well as those coming from other smaller mergers and acquisitions—was occurring in parallel with a major IT project. Dow had started a global initiative to phase out multiple instances of its SAP R/2 legacy mainframe in a migration to the SAP ERP 6.0 platform. This project was putting additional strain on Dow’s accounting resources who already had their hands full navigating the account reconciliations.
One significant challenge was a lack of standardization. Data was extracted from the SAP system and transferred to spreadsheets, with supporting documents stored on file servers or in file folders. For many teams, printing copies of account reconciliations was standard practice. Each team had its own processes, as well as unique customizations to the spreadsheets. All of this made it difficult for managers signing off on the reconciliations to verify if they were prepared correctly, or to locate any needed supporting documents.
Dow realized that making small changes to existing manual processes—such as requiring a uniform spreadsheet format or tightening supporting documentation procedures—wouldn’t address the larger challenge of having a manual reconciliation system that was prone to data-entry errors. And because the upgrade to SAP ERP Financials would be unlocking an enterprise-wide view of transactional data, the business needed to move away from a process that involved hunting for information in three-ring binders. “We revisited our policies and processes and knew that small changes weren’t going to deliver the productivity improvements we needed,” says Pat Withrow, accounting director at Dow.
Once Dow decided to automate its account reconciliation processes, it created a top-10 list of requirements for an automation tool. Chief among them were speed to implementation, ease of use, and compatibility with Dow’s existing policies, such as its preparation and certification timelines for key accounts. Another requirement was compatibility with both SAP R/2 and SAP ERP, as Dow’s intent was to automate reconciliations for its various businesses and operating divisions irrespective of where each division stood in its SAP ERP upgrade.
After demoing account reconciliation software from several vendors, Dow decided to implement the Financial Close Suite for SAP Solutions from SAP Solution Extension partner BlackLine.
Any concerns over cloud security were mitigated quickly when BlackLine demonstrated its encryption procedures and overall data security measures for safe off-premise data storage. “Our IT people were involved very early on with a very extensive review of those security measures and came away satisfied,” Withrow says. “The way BlackLine rolls out new versions and addresses potential security breaches became clear selling points.”
The software’s auto-certification functionality in the Account Reconciliations module was appealing to Dow because it offered an out-of-the-box configuration similar to the rule sets and policies the business already had in place for many of its key accounts, albeit in a manual checklist. This meant that Dow could quickly automate its key accounts without having to spend a lot of time setting up new auto-certification rule sets.
“The fact that we didn’t have to make any process changes was one of the key efficiencies,” Withrow says. “Having well-defined policies in place, with rules already established for four different buckets of accounts, meant that when we rolled out BlackLine, we didn’t have to put in a more structured policy framework.”
Auto-certification. At implementation, Dow auto-certified more than 50% of its key accounts and more than 60% of its overall accounts through the BlackLine Account Reconciliations module, significantly reducing workloads and allowing for teams to shift toward more value-added activities related to the SAP ERP upgrade.
Improved transparency. Unlike with spreadsheet-based accounting, with the BlackLine central repository, Dow can easily see the percentage of accounts that are being reconciled on time and in accordance with its policies; reviewers can see the status of any reconciliation at any time.
Improved auditability and enhanced finance controls. The visibility that comes with automation means that internal or external auditors have clear audit traceability; reconciliation printouts and piles of supporting documents are all in one location, which helps ensure compliance.
“With these benefits, we’re now, for the first time, able to put metrics around the processes, which also helps drive other opportunities for improvement,” Withrow says. “In addition to freeing up resources to divert to the SAP ERP implementation, we’re also finding that teams are now spending more time during the closing process performing analysis, drilling down into balance sheet fluctuations, and conducting other valuable activities there hadn’t been time for previously.”