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Updated at 14:42

The account reconciliation process is one responsibility that is integral for ensuring that the total amount leaving a particular account aligns precisely with the amount that has been expended.

This is not just a routine financial chore; it's fundamental for accurate reporting and robust risk management. While it may appear to be a time-consuming and difficult process, several software solutions can remarkably simplify and expedite it. In this article, let’s explore how your business can simplify reconciliation tasks with software.

What Is Reconciliation Software?

Reconciliation software serves as an automation tool designed to streamline the account reconciliation process. It encompasses tasks such as data entry, verification of account balances, and the detection of errors or omissions in financial transactions.

One of its primary functions is to compare a corporation's internal records with those in its external accounting system. This meticulous examination ensures the accuracy of account balances.

Users can electronically verify and complete reconciliations, which are subsequently routed to approvers for review. The reconciled data is securely stored in a centralized database once it is certified.

Why Is Reconciliation Important?

Account reconciliation serves as the hub for ensuring that a company's transactions and reports align seamlessly with those from independent third parties. It assures that both accounts balance harmoniously after the accounting period and that the total expenditure from an account is matching with the total amount spent.

While balance sheet reconciliation is the most conventional method, reconciling credit card and bank statements is also quite prevalent. For businesses managing several bank accounts and executing complex financial closure processes, frequent reconciliations are vital. This is a proactive measure that guarantees the accuracy, currency, and regulatory compliance of a company's internal financial data. It equips businesses to take preemptive actions in averting potential financial losses.

Benefits of Using Account Reconciliation Software

Streamlining and Automation

Reconciliation software takes on the burden of automating labour-intensive and repetitive tasks, thus eliminating manual processes. This not only accelerates the overall financial process but also upholds data accuracy, particularly in the case of data.

Focus on Other Tasks

By helping accounting teams from the shackles of manual processes, account reconciliation software lets them focus on value-added tasks, scrutinize open entries, and devise strategic initiatives.

Ensuring Reporting Accuracy

Reconciliation software furnishes a comprehensive overview of all financial transactions and ensures data precision and the reliability of financial reports. An additional advantage is the swift identification and rectification of any irregularities within financial records. It can also provide real-time cash flow insights, enabling business leaders to make informed financial decisions.

How to Select the Ideal Reconciliation Software

Selecting the most suitable reconciliation software is a pivotal decision. As a result, it's important to outline your company's specific needs and then assess whether the software aligns with those requirements. Key features to look for include:

This week Finance Monthly benefits from an exclusive analysis by Eric Werab, Global Product Line Owner, Financial Control Solutions, Fiserv. Eric details his thoughts on the value of streamlining reconciliation, the overall benefits and the best ways to go about it.

In today’s increasingly digital world, financial departments are receiving more and more data on a daily basis that needs to be managed and processed effectively and efficiently. Many institutions still take a disjointed, departmental approach to reconciliation that constitutes multiple systems and manual interventions. When financial controls fail or are absent, the damage to reputation and bottom line is undeniable. CFOs need to have access to a single view of any balance sheet at any time, which need to be accurate and up-to-date. However, with multiple systems and various teams managing different aspects of the reconciliation process, providing the most current information is extremely difficult, if not impossible.

Automating and streamlining the reconciliation process so that it is enterprise-wide can save on valuable man-hours and increase the likelihood that exceptions are identified and rectified quickly.  This strategy also ensures that organisations have the ability to stay ahead of the competition and remain compliant with industry standards, as well as deliver a high level of service to customers.

Digitisation and Cost-Effectiveness

Traditional reconciliation processes are spread out across teams resulting in errors being missed, and making it virtually impossible to compile a full picture of accounts. By automating the process, data is displayed in one single place and anomalies are more easily identified, and costs are reduced. Digitising the reconciliation process can help alleviate some of these costs as errors, late closings or being out of compliance with corporate policies can be avoided with an automated system, again saving on billable hours that can be reallocated to add value elsewhere.

It is not just financially that automating the reconciliation process can benefit an organisation. Key aspects of back-office processes can be simplified and secured with the use of technology. A large benefit to streamlining the reconciliation process is that the full range of financial instruments is supported by automation, ensuring that discrepancies and exceptions are more easily spotted and secured. Additional securities, inter-company transactions and trades are also built into this system and ensure that only one platform is necessary. This single-screen approach ensures that executives are able to see and identify exactly what is happening, in what area of the business and when it occurs; all helping mitigate balance sheet attestation and account certification risks.

Value of Streamlining Reconciliation

The first step in implementing an automated reconciliation process is realises the true projected expense of a manual system. Bringing together transaction-level and balance-level data in a single system is a key benefit to introducing a comprehensive reconciliation solution, as it provides detailed information on why exceptions have occurred and how they can be resolved quickly and easily. Using technology to identify these errors, rather than manually searching for them, improves effectiveness within organisations and lowers operational costs.

Workflows are used to fully automate the process and a series of automated checks ensure organisations remain compliant with corporate and industry controls. By automating the end-to-end reconciliation process, companies can track exceptions through to resolution quickly and cost-effectively.

Intangible Benefits

In addition to these measurable savings, there are advantages that can be harder to determine but that provide significant value to an organisation that has opted for an automated system. Increasing visibility and transparency by utilising automated reconciliation processes impacts the confidence that executives have in the accuracy of financial reporting.

Increased clarity also helps an organisation significantly lower compliance and reputational risks. With an automated reconciliation system CFOs and accounting teams can be sure that all of their accounting information is accurate, thereby improving the visibility of business performance, but also reducing the risk of error during monthly and quarterly financial close periods. Businesses will also gain peace of mind that their financial control has improved, while also allowing their teams to adopt the best practice across financial processes with ease. Finally, teams can focus on more profitable activities, as less time will be spent on closings, exception management, routine compliance and financial governance activities.

Choosing the Right Platform

Individual systems contribute to the overall reconciliation process, therefore choosing a technology to combine all, including the general ledger system and the trading system, is vital. The need to provide a single version of the truth for senior management is one of the most significant points in the business case for streamlining the reconciliation process.

Another factor to consider when integrating an automated reconciliation system is the ongoing reconciliation management, as this will need updating from the management of manual processes. Reconciliation specialists from across the business should establish a set of rules that remain consistent; the rules should be laid out and defined using comprehensive process templates so that there is clarity and transparency across the whole business.

The scope and scalability of a reconciliation system are   important factors in selection. Being flexible to meet any change in transaction size is essential when incorporating an automated reconciliation system. The technology that shared services depend upon should not be a barrier to business growth. Being able to easily integrate new acquisitions or business lines into the system to support growth objectives with ease is imperative to the success of a streamlined reconciliation system.

By centralising the reconciliation process through a single service model so balance sheets are more accessible, accurate and compliant provides organisations with a major increase in operational efficiency. The cost benefits of a streamlined system allow value to be added elsewhere, while simultaneously reducing compliance risk. In addition, it allows a company to provide a better experience to customers who expect an effective, real-time service whenever they demand it.

Before financial institutions embark on implementing a shared services strategy for streamlining reconciliation, it is important that they define exactly what they would like to achieve in the future. By building bridges with all departments and keeping the lines of communication open, it’s possible to identify areas for improvement and collectively agree changes that add value to the organisation in the future.

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