Unlocking an Instrument-Level Ledger Strategy with Oracle Accounting Foundation Cloud Service.

The main goal of modernising finance for financial institutions is to enable business transformation by improving efficiency and providing ready access to more granular data and insights. This involves centralising core accounting processes and interrogating data at the lowest level grain of data, leading to improved efficiency, better control, and faster closing times.

When combined with Oracle’s Accounting Hub, Oracle's Accounting Foundation Cloud Service (AFCS) offers a transformative approach to unlocking an instrument-level ledger. 
In this blog, we provide an overview of AFCS's core capabilities and benefits.

[Disclosure: This blog was written in collaboration with Revvy, a ChatGPT created by Revvence that is trained exclusively on finance systems transformation and related content.  You can try Revvy here.]

Understanding Oracle Accounting Foundation Cloud Service

Oracle Accounting Foundation Cloud Service is a cloud-based software-as-a-service (SaaS) platform created to streamline and improve financial operations. This service seamlessly integrates with Oracle's range of financial products and other general ledgers, such as SAP, allowing financial institutions to gather, organise, and analyse data from different sources at a highly detailed level. AFCS can support various financial processes, including ledger balance computation, reconciliation, and financial reporting.

Key Features of AFCS

Data Integration and Management

AFCS specialises in data integration, enabling institutions to collect data from various sources, such as transactional systems, core banking systems, and external sources. The data is ingested as ASCII text files in Oracle's Object Store, then mapped to the appropriate data structures and processed using AFCS's powerful Data Integration feature. This capability ensures accurate capture, validation, management, and storage of financial data critical to revealing core insights for global banks.

• Data Ingestion: The process begins with data ingestion through Oracle's Object Store. AFCS can handle various data types, including transactional data, core banking information, journals, customer and market information, and data from Oracle applications. This flexibility ensures that all relevant financial data can be centralised within the system.
• Mapping and Transformation: Once ingested, data is mapped to the service's data structures. AFCS supports complex data transformations, including conversions, lookup substitutions, and in-flight transformations. This approach ensures that data is standardised and ready for further processing.
• Data Management: AFCS includes comprehensive data management features, allowing institutions to perform data repairs, move data within the Data Store, and provision data for external use. This ensures that all data remains accurate and accessible throughout its lifecycle.

Comprehensive Data Catalog

The Data Catalog is a core pillar of AFCS. It contains essential business terms and descriptions for financial services. This catalogue is linked to different subject areas and business domains, like banking and insurance. It provides a well-organised way to manage data. The catalogue has meta information and physical properties needed to ensure data quality and move it around within the service.

• Business Terms and Subject Areas: The Data Catalog contains detailed business terms associated with specific subject areas, such as banking, life insurance, property and casualty insurance, and health insurance. These terms are crucial for ensuring consistent data usage across the bank.
• Glossary and Meta-Information: The catalogue includes a comprehensive glossary of business terms, supporting entities, attributes, and applicable meta-information. This capability ensures that all data elements are well-defined and consistently used across the financial processes.
• Data Quality Checks: AFCS ensures data quality checks within the Data Catalog, guaranteeing that all ingested data meets high standards of accuracy and reliability. This includes processes for creating and deploying data quality checks and other necessary data movement instructions.
• Physical Properties: The catalogue also manages data's physical properties, which are relevant for storage and management. This includes instructions for physicalisation and processes for maintaining data quality and consistency.
  
  

Balance Computation and Reconciliation

AFCS offers sophisticated balance computation features, allowing banks to calculate accounting balances at a granular level, such as customer accounts. These computations are based on journals from ERP accounting systems. The reconciliation feature compares balance information from the general ledger with data from transactional systems, identifying discrepancies and facilitating necessary adjustments through a managed workflow.

• Balance Computation: AFCS can compute accounting balances at the grain of instruments, typically customer accounts. This computation is based on journals obtained from the ERP accounting system, ensuring that all financial data is accurately reflected.
• Revaluation and Translation: The Management Ledger balance computation engine supports revaluation and translation steps using information on currency conversion rates and rate types. This ensures accurate balance calculations across different currencies and periods.
• Reconciliation: Reconciliation is a crucial aspect of AFCS, allowing institutions to compare balance information from the general ledger with data from transactional systems. The service facilitates ledger-to-ledger and ledger-to-product processor reconciliation, identifying differences and enabling necessary adjustments.
• Adjustment Framework: The reconciliation feature includes a framework for performing adjustments when discrepancies are identified. This framework supports multiple reconciliation rules and provides tools for managing adjustments through a workflow.
  
  
  
  

AFCS System Overview

Event and Subledger Applications (SLA) Configuration

AFCS supports detailed configuration of sub-ledger applications (SLAs) and event types. Banks can register SLAs based on contract types and transactions, enabling precise tracking and managing financial events. The event configuration feature allows for the declaration and publication of events, ensuring seamless integration with the Accounting Hub.

• SLA Configuration: AFCS allows institutions to configure SLAs based on a set of contract types and types of transactions. This involves defining the necessary attributes, their sequence, and methods for obtaining these attributes from the service's data store.
• Event Configuration: The event configuration feature allows institutions to declare a set of event types for each sub-ledger application. These events can be registered with the Accounting Hub for publishing and managing financial events.
• Integration with ERP Financials Cloud: AFCS facilitates seamless integration with Oracle ERP Financials Cloud and other GLs, such as SAP, allowing for exchanging events and journals. This integration ensures that all financial data is consistently updated and available across the bank.
  
  
  

Governance and Analytical Content

Effective governance is critical for financial institutions, and AFCS provides robust governance functions. These functions help track performance, identify key indicators, and manage issues and actions related to essential elements of data. Additionally, AFCS offers out-of-the-box analytical content, delivering valuable insights into financial data and supporting better decision-making.

• Governance Functions: AFCS includes comprehensive governance features, allowing institutions to track performance, identify key indicators, and manage issues and actions. This includes monitoring variance in key performance indicators and managing controls over critical data elements.
• Analytical Content: AFCS offers a set of pre-built dashboards and reports that provide insights into various aspects of financial performance. These tools allow institutions to monitor key metrics, identify trends, and make informed decisions based on real-time data.
  
  
  

Pre-Built Analytics in AFCS

Here are some examples of the pre-built analytics in AFCS:

 1. Balance Reconciliation Analytics:

• Ledger-to-Ledger Reconciliation: This analytic helps institutions compare and reconcile balances between different ledgers. It identifies discrepancies and provides detailed reports on variances, assisting institutions to maintain accurate financial records.
• Ledger-to-Product Processor Reconciliation: This analytic compares balances between the general ledger and product processors, identifying mismatches and facilitating necessary adjustments.
   

2. Financial Performance Analytics:

• Period and Average Balance Computation: These analytics provide insights into the financial performance over specific periods, including average balances. This helps in understanding trends and making strategic decisions.
• Revaluation and Translation Reports: These reports provide insights into the impact of currency fluctuations on financial statements, helping institutions manage foreign exchange risk effectively.
   

3. Governance and Compliance Analytics:

• Key Performance Indicators (KPIs) Monitoring: This analytics tracks financial and operational performance KPIs, ensuring that the institution meets its strategic goals and regulatory requirements.
• Variance Analysis: This report identifies critical metrics variances, helping banks understand the underlying causes and take corrective actions.
   

4. Risk Management Analytics:

• Credit Risk Analysis: This analysis provides insights into credit risk exposure, helping institutions to manage and mitigate risk effectively.
• Liquidity Risk Reports: These reports help institutions monitor and manage liquidity risk by providing detailed insights into cash flow positions and liquidity metrics.

5. Customer and Product Analytics:

• Customer Account Balance Reports: These analytics provide detailed insights into customer account balances, helping institutions manage customer relationships and identify opportunities for cross-selling and up-selling.
• Product Performance Analysis: This report provides insights into the performance of various financial products, helping banks to optimise their product offerings and pricing strategies.

6. Operational Efficiency Analytics:

• Process Efficiency Reports: These analytics provide insights into the efficiency of various financial and operational processes, helping institutions to identify bottlenecks and improve overall efficiency.
• Error and Exception Reports: These reports identify errors and exceptions in financial processes, helping institutions address issues promptly and maintain high data accuracy and integrity standards.

Integration with Oracle Fusion Accounting Hub

Oracle Fusion Accounting Hub (OFAH) is critical in delivering a scalable solution for banks. This integration ensures that all financial data flows smoothly between systems, enhancing efficiency and accuracy.

• Data Exchange: AFCS and OFAH exchange data through well-defined processes. Data from various sources, such as transactional systems, core systems, and external sources, is ingested into AFCS. This data is then standardised and transformed within AFCS before being passed to OFAH.
• Event Publication: Events configured within AFCS are published to OFAH. These events can include financial transactions, adjustments, and other critical accounting events. The publication of events ensures that all financial activities are accurately recorded and reflected in OFAH.
• Pass-through Journals: AFCS supports the pass-through of journals to OFAH. Journals, which represent detailed records of financial transactions, are essential for accurate financial reporting. Bypassing these journals to OFAH, institutions ensure that their financial records are comprehensive and up-to-date.
• Ledger Balance and Posted Journals: OFAH provides AFCS with ledger balances and posted journals. This data exchange ensures that AFCS can access current financial information, allowing for accurate balance computation and reconciliation.
• Reconciliation and Adjustments: The integration supports detailed reconciliation processes. Discrepancies identified during reconciliation in AFCS are communicated to OFAH, where necessary adjustments can be made. This ensures that both systems remain in sync and that financial records are accurate.
• Governance and Compliance: AFCS and OFAH's integrated governance features allow banks to track and manage compliance with regulatory requirements. Key performance indicators and governance metrics are shared between systems, ensuring that all critical data elements are monitored and controlled.
• Real-time Analytics: The analytical content from both AFCS and OFAH is combined to provide a comprehensive view of financial performance. Banks can leverage real-time data from both systems to generate detailed reports, monitor trends, and make informed decisions.
  
  
  

Management Ledger Capabilities

The AFCS Management Ledger capabilities provide comprehensive and detailed insights into an institution’s financial data, ensuring accurate financial reporting, compliance, and strategic decision-making. The Management Ledger is a crucial tool for financial institutions, allowing them to track, compute, and analyse financial balances at various granularities.


Balance Computation: 

AFCS provides robust balance computation features, enabling institutions to calculate accounting balances at the granular level, such as individual customer accounts or financial instruments. The balance computation process includes the following:

• Instrument-Level Balances: AFCS computes balances at the level of individual financial instruments or customer accounts. This ensures detailed tracking and management of financial positions.
• Period Balances: The system calculates period balances, which include balances for specific accounting periods. This is essential for periodic financial reporting and compliance with regulatory requirements.
• Average Period Balances: AFCS can compute average balances over specific periods, providing insights into trends and variations in financial positions.
• Revaluation and Translation: The management ledger supports revaluation and translation of balances based on currency conversion rates and rate types. This ensures accurate financial reporting across multiple currencies and geographies.
  
  

Reconciliation:

Reconciliation is a critical aspect of the management ledger capabilities, ensuring consistency and accuracy in financial data. AFCS supports multiple types of reconciliation, including:

• Ledger-to-Ledger Reconciliation: This involves comparing balance information between different general ledgers to identify discrepancies and ensure consistency.
• Ledger-to-Product Processor Reconciliation: AFCS compares balance information from the general ledger with data from product processors, identifying discrepancies and facilitating necessary adjustments.
• Reconciliation Rules: Banks can configure reconciliation rules to identify discrepancies and automate the reconciliation process. These rules ensure that any inconsistencies are promptly addressed and corrected.
• Adjustment Framework: The reconciliation feature includes a framework for performing adjustments when discrepancies are identified. This framework supports multiple reconciliation rules and provides tools for managing adjustments through a workflow.

Example Use Cases

1. Global Bank Reconciliation:

A large global bank uses AFCS to reconcile its general ledger with various product processors across different regions. The bank configures reconciliation rules to compare balance information and identify discrepancies. AFCS automates the reconciliation process, flagging any inconsistencies and facilitating adjustments. This ensures that the bank’s financial records are accurate and compliant with regulatory requirements.


2. Currency Revaluation for a Multinational Corporation:

A multinational corporation operates in multiple currencies and must regularly revalue its balances. AFCS supports revaluation and translation using currency conversion rates and rate types. The corporation configures the system to perform revaluation at the end of each accounting period, ensuring accurate financial reporting across all currencies and geographies.


3. Customer Account Balance Management:

A financial institution uses AFCS to compute and manage balances at the customer account level. The system calculates each customer's period and average balances, providing detailed insights into customer financial positions. This information is used for strategic decision-making, such as offering tailored financial products or managing credit risk.

Benefits of AFCS for Global Banks

Enhanced Data Accuracy and Integrity

With its advanced data integration and management capabilities, AFCS ensures that financial data is accurate, consistent, and reliable. This reduces the risk of errors and enhances the integrity of financial reporting. The robust data quality checks and governance features further ensure that all data meets high standards of accuracy and compliance.


Streamlined Financial Processes

AFCS automates many financial processes, from data ingestion to balance computation and reconciliation. This automation saves time, reduces manual effort, and improves operational efficiency. The system's ability to handle complex financial data and processes ensures that institutions can focus on strategic activities rather than manual data management.


Improved Financial Reporting

The platform's powerful analytical tools and comprehensive data catalogue support detailed financial reporting and analysis. Banks can generate accurate, real-time reports that provide valuable insights into their financial performance. The pre-built dashboards and reports enable quick access to key metrics and trends, supporting informed decision-making.


Seamless Integration

If you are an Oracle ERP user, AFCS integrates seamlessly with Oracle's ERP Financials Cloud and Accounting Hub Cloud Service, providing a cohesive ecosystem for managing all financial data and processes. This integration facilitates smooth data flow and enhances overall system efficiency. The ability to pass through events and journals between AFCS and ERP Financials Cloud ensures that all financial data is consistently updated and available across the bank.

The integration with other ERP platforms, such as SAP, is also a straightforward integration process and there are several case studies of AFCS integration with a SAP GL.


Capabilities for the Future

As the financial industry evolves, AFCS is designed to adapt and grow with your institution. Its flexible architecture allows for customisation and extension, ensuring that it can meet your business's unique needs. Whether in banking, insurance, or capital markets, AFCS provides the tools to stay ahead in a competitive landscape.

AFCS's ability to support new financial products, integrate with emerging technologies, and comply with changing regulatory requirements ensures that it remains a valuable asset for financial institutions. The platform's scalability and flexibility make it an ideal solution for institutions looking to future-proof their financial operations.

Conclusion

Revvence is committed to helping our clients improve their profitability using advanced technologies like AFCS. AFCS is more than just a tool; it's a comprehensive solution designed to meet financial institutions' diverse and evolving needs. With its powerful features, flexible architecture, and strong integration capabilities, AFCS empowers banks to optimise finance processes, enhance data insights, and make better decisions based on the lowest level of granular data.

How can we help?

Revvence can help in several valuable ways:

• Review your existing ledger challenges and create a roadmap for change.
• Create a proof-of-concept to show you the art of the possible and help you build your business case for change.
• The design and delivery of end-to-end ledger transformation solutions.
• Check out Revvy, our Narrow-GPT for Finance Transformation. Read all about Revvy here.