Family office accountants are faced with the unique challenge of balancing their data management workload with the demand for up-to-date, accurate reporting in the GL. Waiting for custodian data, ensuring accuracy in reporting, generating reports that match the investment systems, and resorting to compromises between report speed and data detail all conspire to make for sleepless nights.
We know. We’ve seen it all. We have worked side-by-side with these accountants for decades, helping them streamline their workflows. Through the years we have seen a handful of these issues arise consistently across offices. Let’s take a closer look at the top four (4) concerns.
The Period-End Frustration Where ‘Data Entry’ Does Battle with the ‘Demand for Speed’
Talk with any member of an accounting team and you’ll hear them complain that “updating and reconciling the general ledger is a painfully slow process” followed closely by “I hate this part of the job”. Sound familiar?
The process is made even more painful because highly skilled accountants are spending a large portion of their time doing basic data entry. Important though the data is, it does not demand the qualifications of an accountant.
This is mundane, tedious work that can result in team burn-out if left unchecked.
Adding to the stress is the need for this work to be done very quickly in a compressed time window resulting from delays in receiving the statements from custodians or other source systems. These statements could be weeks out of sync in comparison to the actual period end—and delayed in comparison to the updated reports available much more quickly in the investment system.
While team members realize that the GL may never be as fast as an investment system, they will tell you that it should be faster, and should be accomplished with less effort.
No Real Separation of Powers, Increasing Your Risk of Inaccuracy
Think of your current approach to internal control and reconciliation.
If you’re like many offices, you have the same staff members entering the GL data and checking the accuracy of that data. Or, if a different member of your team checks the data after entry, they are still likely entering data from a source, only to then check it against that same source!
We refer to ‘separation of powers’ above because of the long-accepted benefit of assigning different tasks and responsibilities to different people or entities and allowing them to check each other.
If the same staff that enters your GL data also checks the accuracy of that data, are you really optimizing your reconciliation options? No.
Can you reduce the possibility of human error and improve both the effectiveness and the efficiency of your process? The answer to all three is a resounding “Yes”.
A GL That is So ‘High Level’ That You Can’t See the Real Story
Another thing we repeatedly hear is “we only enter summary journal entries.” This makes sense you are waiting for the data, so you are already under a time pressure. Once your data arrives, you summarize it into the “view from 30,000 feet” – without detail.
Once again, we hear “this is the way it’s always been done”. We think that is too simple an answer. After all, you are no longer using typewriters, carbon paper, or an abacus (hopefully). So just imagine what you can do if your GL contains more detail and produces reporting that informs and supports better decisions.
Are you missing something with a summary journal entry approach? Yes.
Would more detailed GL entries add value? Yes.
Can you achieve a higher level of detail? You certainly can.
A GL That Does Not Match the Investment System
The final issue on our list arises from the interplay between “closed book” and “open book” systems. We sometimes hear “The performance side of my office wants me to match the PE statement, but I know the cash went out weeks before, and I think that’s how it should be booked.”
Or some variation of “Remember when the client thought we ‘lost’ that capital call because of the timing of the checking account entry vs. the GL reporting? Let’s never have that conversation again.”
What is the issue here? And are there ways to address the fact that your GL doesn’t match your performance-based system?
Suggestions to address this issue will vary by office, but we’ve found that there are valid reasons for the differences between systems, and they can be explained. Dealing with this issue may be as straightforward as documenting the distinctions and ensuring that everyone remembers them, rather than wasting HUGE amounts of time trying to “fix” one system or the other to make them match.
Is This the Future?
None of these issues need to be the persistent pains that they are. This isn’t how it has to be. There are ways to address each of these problems.
A common denominator to possible solutions is the proper use of technology. Specifically, employing technology that addresses these business demands, and can:
- Maximize efficiency in workflows
- Optimize use of important (and costly, highly trained) staff and resources
- Ensure accuracy in data transfer and reporting
- Improve the speed of report generation
“US family office portfolios tend to be far more diversified these days… Infusing the finance function with automation and real-time insights to drive efficiencies can be game changing.” – Diana Ermini, Director of Financial Services, Sage Intacct
Here at KnowLedger, we’re experienced in raising the visibility of these issues so that we can help accounting teams clarify their frustrations, identify and address inefficient workflows, and eliminate tedious activity. If any of these issues resonates – and, in fact, is a recurring cause of your 3 a.m. thoughts – wake up the next morning and contact us. We’d be happy to show you an alternate way of running your monthly operations that leverages smart technology to meet the needs of your clients, keeps your staff happy and motivated, and gives you peace of mind—not to mention your first good night’s sleep!
For more information about KnowLedger, please visit KnowLedger.com.