Revolutionize your back office efficiency by using Bricknode Broker for reconciliations

May 9, 2017

As with any software solution it is of the utmost importance that it is being used conceptually correct in order for the user to gain the most value from it. This is true in every sense when it comes to Bricknode Broker and thus we want to emphasis some powerful features in this article.

The most important daily task for the back office team is to conduct reconciliations to make sure that the assets and liabilities that are listed in Bricknode Broker agrees with the rest of the world. To help automate this we have developed two distinct account worlds in Bricknode Broker, one world is called BFS-accounts and the other world is called Custody-accounts.

Everything that resides within a BFS-account should be viewed by you as a liability. For example, if a customer of yours has 100 EUR in their account this means that You are on the hook for these 100 EUR. No matter what happens you need to make sure that you have these 100 EUR on your own bank account or in a segregated client account with your bank. You could also have another asset with an equivalent value placed somewhere but you have to make sure that your assets at least match your liabilities to your customers.

The Custody-accounts that you should have set up within Bricknode Broker reflects how much assets you have with your custodians (banks, brokers etc. where you have placed your assets). If you have lower assets in your Custody-accounts compared to your liabilities in the BFS-accounts you have a problem and a loss for your company since you have to cover this difference.

Within Bricknoder Broker it is very important to always use the correct Custody account when you perform any transactions that will move assets from one Custody account to another. If you move assets between BFS-accounts it is not certain that you will have to perform a move of those assets in the outside world and thus you will not have to make the same transaction in the Custody world.

Bricknode Broker is called a Sub-ledger system. This means that it should function as a Sub-ledger to the general ledger of your company.

For example, if you have 100 customers with total assets of 100,000 EUR where each customer owns, or has the right to, 1,000 EUR each you should not create one accounting account for each customer in your general ledger system but instead have one accounting account in the general ledger system which might be called Client Assets and use a liability account in your accounting.

The general ledger system will not have any idea of who these 100 customers are, and it does not care! All the individual accounts are created and managed within Bricknode Broker as the Sub-ledger system which keeps track of who owns what on an individual level.

Traditionally a financial institution would have summarized each asset in the liability accounts (like BFS-accounts) in a report and then compared these to the account statements from the custodians. With Bricknode Broker, used correctly, the user only has to list the aggregated assets of the Custody-accounts and then compare these to each account with the custodian.

For those users that utilize MFEX (Mutual Funds Exchange) as a custodian for their investment fund holdings there is an automated function for reconciliation. Bricknode Broker simply contacts the MFEX system and retrieves a list of holdings from the custodian which it then shows in Bricknode Broker and highlights any differences between the Custody-accounts in Bricknode Broker compared to MFEX.

In the near future we will enable this feature for other institutions and then have the whole reconciliation process fully automated for our users.

The transition to fully automated reconciliation will be much easier if the user already is using the Custody-account function of Bricknode Broker and thus we highly recommend that you follow this recommendation.

To actually list the positions in your Custody-accounts you simply navigate to All Positions and then select the account type called Custody Account.

No need to first summarize the total assets for each individual BFS-account but simply list the Custody-account assets and you are done! Custody-account management is included in the core components of Bricknode Broker and if you have not tried it you can sign up for a free trial today!

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