In today’s increasingly competitive market, issuing stock-based compensation is a powerful and essential tool to attract and retain talent. As companies continue to enhance and grow these programs, often while also expanding their geographic footprint, essential data reconciliation is becoming increasingly challenging and complex.

This is especially true for companies that issue stock-based compensation and utilize multiple systems and touchpoints to track the award lifecycle—from issuing awards, to posting details for employees on the equity platform, to monitoring when employees take action on the awards. Because the typical stock-based grant lifecycle can span several years, companies can spend countless hours of valuable employee time reconciling data across the systems. 

To address this, some companies are working to eliminate a reactive approach to data reconciliation errors and applying a more proactive one that identifies and solves the root cause of the problem. A crucial part of this transition involves developing and implementing reconciliation processes and tools.

Here, we outline how poor reconciliation processes or tools can exacerbate challenges and highlight how an effective reconciliation process can help your company apply data insight to its stock-based compensation program. 

Risks and Consequences of Reconciliation

When companies don’t employ effective reconciliation processes and tools, it creates undue risk and unintended consequences, including:

• Inefficient manual processes that are prone to human error
• Wasted valuable resources and increased non-value-added activities
• Unidentified issues and root causes
• A reactive environment that is prone to repeated errors
• Increased risk of exposure during high-volume periods
• Backlogged priorities
• Employee burnout

Benefits of Effective Reconciliation Processes and Tools

One way to address reconciliation risks and challenges is to proactively approach implementing effective processes and tools. Companies can often drive benefits by automating reconciliation processes with tools that reduce human involvement and errors. No matter how big your company is, it’s likely this approach is applicable and could help reduce errors.

By developing a process that quickly identifies a reconciliation issue, management can change the underlying process, eliminate the problem at the source, and continue to monitor it going forward. In other words, effective reconciliation processes allow management to proactively address issues and prevent them from reoccurring.

A reconciliation process could offer several benefits, including:

• Reduced interruption of last-minute requests or urgent data issues
• Less time spent creating spreadsheets that add little value
• Improved employee work quality
• Less time spent on operational, low-value efforts and more time spent on strategic, high-value initiatives
• Dedicated problem solving and increased focus on systemic issues and big picture perspective

Reconciliation Solutions

There are several approaches to help companies streamline data processes.

Leverage Existing Systems and Vendor Services

Work with your vendors to implement recommendations and best practices, streamline data flows, and automate processes where possible.

While not every vendor will have automated solutions, they’ll likely still have solutions that can reduce manual efforts. For example, a vendor may be able to automatically post general ledger (GL) entries from a broker system to an enterprise resource planning (ERP) package. This would allow month-end GL entries to automatically feed into the ERP instead of needing to be manually downloaded, reconciled, and posted to the GL. This solution is most appropriate for companies with a relatively simple structure.

Automate Reconciliation Procedures

While spreadsheets are a common tool for tracking information, they’re prone to risk and often require an inordinate amount of human efforts to prepare and review. Robotic process automation (RPA) tools can help reduce the manual efforts of spreadsheet procedures by automating the manual procedures that are typically performed by a human. This includes loading the data, preforming the comparisons, and identifying the unreconciled items for further research.

Companies that benefit from this approach typically have determined their existing vendor-related tools aren’t sufficient for their reconciliation requirements. They’ve also lost a significant amount of time each month manually downloading, transforming, reconciling, and reviewing transactions in spreadsheets. 

Build a Custom Platform

Some companies may find that the first two options are insufficient if they’re planning to grow at an exponential rate. In these cases, a custom-built solution can help them implement processes designed to meet their specific requirements, while evolving with their growth rate and future plans and reducing the likelihood of inefficiencies.  

Next Steps

With so many factors to consider, implementing the right reconciliation process and tools for your company can be overwhelming. It may be worthwhile to invest in an outside assessment, which can provide an objective overview of your organization’s processes and help you determine where to allocate resources and improve business operations.

We’re Here to Help

Regardless of your size, if your company has stock-based compensation, an initial assessment process can help you identify areas where more effective solutions can reduce the risks associated with reconciliations. To have an assessment performed, or to address questions about data reconciliation processes, contact your Moss Adams professional.