Data Discrepancies Prone to Occur at Month-End in Indonesian Business Systems

At Japanese manufacturing companies in Indonesia, data discrepancies arising during the operation of business systems are typically mismatches between accounts receivable/payable balances and general ledger (GL) balances, discrepancies between accounts receivable listings and sales, or issues related to functional integration within the business system.

Cases Where Data Discrepancies Occur Between Departments

In a business system, each department’s staff uses only the functions necessary for their tasks, with input information relayed from upstream to downstream. During this process, data discrepancies between departments can occur.
However, these discrepancies are rarely due to system malfunctions. Most often, they stem from differences in input/output methods or timing across departments. Analysis typically reveals the following common causes:

Differences Between Accounts Receivable (A/R) and Accounts Payable (A/P) Balances on the General Ledger (G/L) and Aging Reports

Theoretically, the beginning-of-month A/R and A/P balances carried over on the G/L should match the previous month-end balances on the Aging Report, but in practice, they rarely do.

When A/R and A/P Span Multiple Departments

Data discrepancies in business systems often come to light when A/P and A/R balances don’t match G/L balances. This can manifest as either a mismatch in total amounts or a match in total amounts but discrepancies in totals by vendor/customer.
To align A/P and A/R amounts by vendor/customer, similar to departmental asset transfers, accounts are split, and offsetting journal entries are created with a cutoff at a specific month-end.

A/R and Sales Mismatch When Advances Are Processed Under the Completed Contract Method

A sales representative might try to match this month’s sales to specific A/R entries or trace back from A/R to orders to identify which orders generated the sales. However, the sales list on the G/L doesn’t necessarily match the A/R list for that month.
Returns or discounts reported by sales staff can be adjusted from the original A/R data using a credit note. However, exchange gains/losses on foreign currency A/R or tax adjustments are entered by accounting staff at their discretion via G/L transfer vouchers, creating discrepancies between A/R data and G/L A/R balances.
Additionally, when services are processed under the completed contract method, customer advances are recorded in a Down Payment account rather than Sales. If these become sales the following month, comparing sales and A/R on a monthly basis won’t align (A/R will be overstated).

Data Adjustments After Month-End Closing

It’s common to perform foreign exchange revaluation at month-end, complete the closing process, and then realize, “Oops, I forgot to input this paid invoice!”
In such cases, you must cancel the closing process, undo the revaluation, process the invoice settlement, re-run the revaluation, and redo the closing.
If this procedure isn’t clear and the invoice correction is made without canceling the revaluation, the correction won’t be reflected in the revalued amount.

Closing Delays Leading to Premature A/R and A/P Settlement Entries

Foreign exchange revaluation adjusts A/P balances at month-end rates, but since closing often slips into the next month, clearing transactions entered in the interim alter the month-end A/P balance.

Possible Countermeasures

Separating Realized and Unrealized Accounts

Foreign exchange gains/losses come in two forms: realized gains/losses based on the difference between the rate at A/P inception and settlement, and unrealized gains/losses from month-end revaluation. Without separating these into distinct accounts, tracing the transactions causing the gains/losses becomes difficult.

The system distinguishes whether forex gain/loss entries stem from settlements or revaluations, but in general accounting, filtering is typically limited to accounts or vendors/customers. Splitting accounts as above is preferable.

Clarifying Procedures for Irregular Adjustments

Post-closing corrections to A/R and A/P data must include canceling the revaluation; otherwise, the adjustments won’t reflect in the month-end valuation. Clear procedures for irregular adjustments are essential.

Accounting Audits by External Auditors

Generally, “audit” refers to accounting audits by audit firms, but statutory audits are mandatory only for “large companies” as defined by company law.
This definition—“companies with capital of 500 million yen or more or liabilities of 20 billion yen or more”—means a company may become subject to audits as it grows or fall out of scope as it declines.
Even unlisted companies must undergo audits by accounting auditors (audit firms or CPAs) under Company Law Article 328. Failure by applicable large companies to conduct statutory audits is a legal violation subject to fines, though in practice, enforcement seems gray.
In Indonesia, foreign-invested companies (PMA) are all treated as large companies, so even those considered SMEs in Japan must undergo external audits if they are PMA.
As Peter Drucker might say, companies are public instruments of society. However, deteriorating financial statements affect banking reviews, stock prices, and bidding conditions, fostering a habit of crafting statements in the gray zone—“How to black-box it?” or “How to make it look clean?”—with forced efforts piling up. When issues like Toshiba’s surface, the vague term “inappropriate accounting” emerges.

External Operational Audits and Internal Audits

Traditionally, audits meant external accounting audits, but since J-SOX (rules on internal controls in the 2006 Financial Instruments and Exchange Act), operational audits evaluating internal compliance have gained social importance.
Operational audits cover business activities beyond accounting (purchasing, production, logistics, sales) and organizational systems, ultimately linking—directly or indirectly—to ensuring financial statement integrity for shareholder protection.

With today’s systemized operations, IT controls are essential for internal control evaluations. In Indonesia, operational audits of ERP systems focus on these three points:

Work of Accounting Consultant Firms in Indonesia

Many Japanese manufacturing firms in Indonesia contract accounting consultant firms for bookkeeping or advisory services. When implementing accounting systems, the financial statements output after month-end closing are inevitably cross-checked with those prepared by the consultant firm.
The beginning balances needed for system go-live (a term often used in Indonesia) are imported or entered via transfer vouchers based on the trial balance prepared by the consultant firm.
Indonesian accounting consultant firms, regardless of size, generally handle:

The most familiar to Japanese firms is JAC (Japan Asia Consultant). I keep three books by their representative (on company management, tax, and accounting) on my desk as go-to references—my home desk is small, after all…

Data from Accounting Consultant Firms Needed for Accounting System Implementation

When implementing an accounting system for a client contracted with a consultant firm, issues always arise, which I informally call the “three mismatches”:

If a stray invoice is discovered after submitting data to the consultant firm and the correction request isn’t processed in time, the internal invoice-based A/R and A/P balances won’t match the GL balances sent by the consultant firm, requiring time-consuming root cause analysis.
Since the consultant firm’s task is to prepare accurate financial statements per Indonesian company law, managing multiple clients means using standardized accounts to reduce workload—an unavoidable reality.
However, if mapping to local accounts is inadequate, accounting staff struggle to classify gray-area transactions, making month-end account balance reconciliations—and thus closing—impossible.
Moreover, finalized data from the previous month’s closing arrives around the 20th of the following month at the earliest, complicating schedule management for system implementation project managers.