Oracle Financial Accounting Hub in Banking Industry
Guest Blog by Ashish Gupta Principal Consultant FSORC
Oracle Financial Accounting Hub (FAH) is the latest buzzword in FSI Industry, especially in the Banking sector. Most of the banks, across geographies, are looking to replace their traditionally old accounting engines and are looking at Oracle FAH for the same. The banking industry is constantly evolving due to intense competition and increasing complexity of business; adapting to latest technologies is a must for survival.
FAH is an accounting platform that integrates with product systems to create accounting journals in general ledgers (e.g. Fusion, E-Business Suite, PeopleSoft etc.). FAH standardizes accounting from various external applications and meets accounting standards and principles. FAH acts as a central repository of accounting rules for non-oracle sub-ledgers. Accounting journals are created with transparent rules, validated and stored in auditable format and in a single location. FAH increases the internal controls, makes reconciliations with product systems more efficient and meets diverse accounting requirements. This rules engine will convert transaction information from external applications to create precise, thorough and auditable accounting entries to meet Statutory Compliances, Accounting Principles and Management reporting needs.
Technologies, product systems, accounting engines and reporting tools differs from bank to bank, but in general the typical IT landscape for any retail bank primarily consists of:
Source Systems - These systems are the core banking systems where the day to day operations take place. These are front end, customer and product based systems. Generally these systems are customized and based on mainframes but different core banking products like FINACLE, FLEXCUBE, TEMENOS etc. are leading the market here.
Accounting Engine - Above source systems generates transactions and Accounting Engine convert these transactions into accounting entries. The integration of source systems with general ledger is done by the accounting engines. These engines convert the raw transactions to accounting entries and these entries are placed in the general ledger for financial and statutory reporting
Data warehouse - Data warehouse is an integral part of the IT landscape for banking industry. There are multiple reporting, reconciliation with product systems, data storage etc. carried out from the data warehouse. Each bank uses this data warehouses in a different way.
Reporting Systems - Multiple reporting systems and tools are used for day to day reporting, financial and statutory reporting like BI Publisher, OFSAA, OLAP cubes mainframe based reporting systems etc.
Mobile Technology -Internet enabled mobile devices are the new technology in banking industry. This is primarily used for the customer based processes and transactions. Mainly retail banking uses this technology.
In the above described landscape, FAH comes into play when there is a need to replace the accounting engine. The accounting transformational capacity of FAH makes it a good fit in banking industry and as per the latest trends in market FAH is replacing the existing accounting engine in the IT landscape of Banking Industries. FAH acts as a Central Rules Repository for the configuration and maintenance of accounting and business rules. This rule based transformation engine generates, validates and stocks the accounting lines and it acts as an exhaustive accounting repository that can used to reconciliation mechanism with product systems to source systems.
Banking is predominantly a high transactional volume industry and FAH, as an accounting integration platform can handle large volume transactions and processes large number of business rules.
Unlike mainframe based accounting wherein the accounting and business rules are written as part of code, there is no mechanism to view the transformation processes and often it is difficult to change or alter the codes. To combat this, FAH provides a User Interface (UI) wherein all configurations including the business and accounting rules and conditions can be created. Since it is user driven, it becomes easy to amend the conditions or the codes.
There are some additional features that make FAH more promising than the traditional accounting engine like detailed level of accounting, storing additional references, calculating balances in addition to account level balances in GL etc. These features provide the most granular level of accounting and it makes product wise reconciliation more easy and accurate.
In summary this UI driven accounting engine is the prevalent choice in the Banking market segment and many organizations are adopting this new technology
Glimpse of FAH benefits:
Ø Centralized accounting engine: With FAH in place all accounting entries across E-Business Suite gets stored in common place i.e. Sub-Ledger Accounting. SLA is the central repository of all accounting journals
Ø Flexibility with User Configurable Rules: Flexibility in generating accounting entries with complex conditions and configure rules based on different attributes of the raw transaction
Ø Swift systems integration: With FAH external system configuration is fast. FAH is flexible to accommodate both journal pass through approach as well as account derivation approach
Ø Multiple accounting representations: With FAH accounting can be interfaced with multiple ledgers in different accounting representations. Multiple GAAP requirement can be fulfilled with FAH
Ø Store additional information and references: Supporting References features in FAH stores additional information in FAH without muddling general ledger with additional details
Ø Complete Auditability from General Ledger to SLA: The drilldown feature permits users to trace transaction from GL to SLA with complete auditability into the business events