Finding a better way to demonstrate SOX compliance was one of the key drivers that led Scotts Miracle-Gro to explore automating its account reconciliation procedures; internal auditors were increasingly disconcerted by the potential for deficiencies in the company’s spreadsheet-based manual system for reconciliations and pursuant documentation. Like the first sign of a weed sprouting in a lawn or patio, Scotts Miracle-Gro knew that immediate action was needed to prevent a minor issue from spreading.
“A review of our reconciliations found what we considered to be an uncomfortable amount of exceptions and a lack of consistency across the company,” says Laurel Johns, manager of finance consolidation and controls at Scotts Miracle-Gro. Ideas and opinions of what constituted proper account reconciliations differed enterprise wide. Account preparers in locations across the globe might sign off on what they deemed to be a reconciliation, but those in the corporate office viewed as little more than a listing of account activity. An account might also lack proper authorizations or documentation or contain a variance that a preparer might find acceptable that would be flagged elsewhere.
A lack of standardization also created opportunities for inefficiencies in processes around tracking the proper documentation. With all account activity—such as the tasks and journal entries attached to an account—being stored in standalone spreadsheets, binders, notebooks, and filing cabinets, the Finance Consolidation and Controls team was challenged with wading through stacks of paper first to locate and then review the appropriate supporting documents. Open tax audits were a regular occurrence, and Johns says that the team often had to scramble to find and close exceptions to satisfy various requests.
As Scotts Miracle-Gro began to think about requirements for reconciliation best practices, automation was seen as the obvious solution. “The manual processes had involved a lot of investigative time and e-mails to hunt down the right documentation,” says Johns. “Historical data was difficult to review and locate. We could have multiple preparers of an account, and no one knew for sure where the necessary files were stored.”
For Scotts Miracle-Gro, requirements for an automated solution included ease-of-use and a seamless integration with its SAP environment, which would include loading account balances directly from SAP ERP Financials. A search of multiple solutions and vendors identified BlackLine, an SAP partner, for delivering the accounting functionality the business needed. After a phased implementation of the Account Reconciliations and Task Management applications that began with the corporate accounting group, the company added Journal Entry in 2015.
Defined roles and responsibilities. “Defining which users were going to be involved with preparing the reconciliation and the approval added a lot of value; we knew which groups had responsibility for an account, but previously, we weren’t always sure who exactly was preparing or approving them. BlackLine gives us a platform to define roles more effectively,” says Johns.
Auto-certified more than 1,000 accounts. To achieve a best-practice definition for an account reconciliation, Scotts Miracle-Gro started with a consistent view of how the month-end balance in every SAP account is portrayed and worked backward from there, modifying a template based on an account’s specific purpose and procedures.
By firming up procedures on an account-by-account basis, the business was able to achieve auto-certification for more than 1,000 accounts. This includes items such as a monthly lease payment, a relatively stable investment account, or any account with static balances, predictable activity, or a zero balance.
Saved time with standardization. Time savings, though, are not limited to accounts that are auto-certified. The Account Reconciliations solution includes a header tab that shows a preparer, approver, or auditor an account’s history, its procedures, and a brief description of the purpose. “It seems simple, but when thousands of accounts have this validated information all in one place, it saves a lot of time,” Johns says. “And the people who had been performing reconciliations and clerical work are now free to spend that time analyzing the account rather than just putting a number on it.”
Gained a paperless process. In addition to saving time, the business is now saving heaps of paper, too, with its automated process. “Before BlackLine, completing a reconciliation every month required stacks of paper, as we had to re-copy supporting documentation from the previous month,” says Heather Lowe, financial analyst at Scotts Miracle-Gro, who is responsible for hundreds of account reconciliations.
“Now, with a paperless process, in addition to saving a lot of time, space, and paper, there’s no chance of missing anything. When I attach a comment, schedule, or documentation to a reconciliation, it carries forward in the same line item. Without having to worry about any of that, I can now focus on what’s in the account and whether anything needs to be reclassified.”
Simplified audits. Scotts Miracle-Gro uses Task Management to automate and track 18 monthly tasks, 142 quarterly tasks, and 500 annual tasks, most of which are driven by audit or reporting. “We use the application to document and store all requests from internal or external auditors,” Johns says. “When we complete the request, now we can easily provide any of the needed documentation.”
With Journal Entry, the business automated the approval process for all journal activity which, like automated reconciliations, saves a great deal of time from having to track down needed information. Auditors, for example, can search for a journal using just an SAP document number and immediately have access to everything they need — without having to even interact with the finance team.
Prior to the BlackLine platform, finding a misplaced or misfiled journal could be a challenge. With Journal Entry—which the business now uses to automate approximately 1,100 journals—monitoring is nearly effortless. This includes electronic signatures for preparers and approvers, which makes it crystal clear who last touched an account’s journal, compared with having to decipher a handwritten signature that could be one of 150 team members.
But by having automated reconciliations, task management, and journal entries, the very need to hunt for a signatory to find missing information or to question a validation is greatly diminished. “The audit process for many of our SOX controls has become hands-free,” says Shannon Randolph, staff accountant and BlackLine administrator at Scotts Miracle-Gro. “As long as the attached documentation and the information that we provide matches, auditors can complete a monthly audit without even having to contact us.”