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Designing an effective account review framework



Would the administrative process of Account Review Statements gain its due importance, if they were to tell us


· How customers would rate our services

· How effective is our partnership with vendors

· How compliant are we towards statutory and regulatory provisions

· How relevant our policies are

· What’s our collection effectiveness index

· How prudent is our cash management

· How integrated and mature our processes are

· How fast and effective our internal communication channels are

· What our automation or digitization needs are


Defining these objectives as a backdrop can help design an effective Account Framework which can go beyond numeric representation of revie statements and help discover and prioritize areas of improvement.


Here is a 6-point plan to design and implement an effective Account Review Framework. While the framework can generally fit into any organization, the standards, process and action plan can be customised to the organization objectives and priority.




Set Account Context

The chart of accounts is customized to every organization depending on the business, process & system landscape. However, the classification of accounts can well be standardized across organizations and industries. Some examples are : Control/Clearing Accounts, Payable/Receivable Accounts, Statutory Due Accounts, Provision Accounts and so on. The classification of accounts sets the objectivity for the standards to be defined in the next stage of the framework design.

Assigning the upstream and downstream processes to each of the accounts helps determine the root cause and the resulting risk of any exceptions noted.


Define Standards

Based on the classification of the accounts, the following yardstick can be used to assess the balances in these accounts and the corrective action required.

· Ageing of Balances

· Balance matching with Source Transaction Records

· Appropriate representation in Financial Statement Schedules

· Provisioning Requirements based on the Ageing of Balances

· Reclassification requirements based on nature of balances


Create Process

The successful implementation of a framework is heavily dependent on the definition of the detailed process to be adopted. The account statement preparation requires to detail out the

  • Input Data Reports – Define and agree on the dataset that needs to be used to prepare the account statements to deliver a reliable output.

  • Tool to churn out the statements - Some of them can be automated if the parameters of reporting are well defined.

  • Primary Keys for Balance Reconciliation – Any gaps in the primary key for reconciliation can leave the reconciliation exercise incomplete and open to incorrect interpretation.

Reporting Standards

Adherence to standards requires that the frequency, stakeholders involved and the formats be well defined. This helps standardization and continuity of the process.


Set Interpretation expectations

The benefit of the account review framework is redeemed only if the interpretation expectations are set well. The numeric representation of data, will by itself, not help is invoking the required action. The following can render the statements more meaningful.

  • Highlighted Outliers

  • Affected Processes

  • Suggestive RCA

  • Risks emanating from the exception

  • Stakeholder departments

Review & Action

Very often, the account review process is deemed as an exercise owned by the Finance & Accounts department. On the contrary, it is imperative to make this process a cross functional exercise to derive the appropriate benefits. An appropriate review audience can bring long term benefits in the form of process changes, policy reviews, technology upgrades and not limit it to corrective action only for the exceptions/outliers.

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