A bank reconciliation statement is a summary of an entity’s banking and business activity that is used to balance accounting records. The statement outlines all activities affecting the account for a specific period, and the objective of reconciling these transactions is to ascertain any differences between the two cash balances. This is essential for businesses to discover any unusual activity while ensuring that operations are functioning properly.
Automatic bank reconciliation, on the other hand, is a relatively new feature that simplifies the process of manual reconciliation for organizations. Automatic systems streamline these actions by collecting the entirety of your financial data and matching the proper transactions for reconciliation. This is essential for the sustainable growth of most businesses — so it’s valuable to understand the importance of these processes and how automation can be utilized for your organization’s benefit.
Why is it important to reconcile your bank statements?
Reconciling your bank statements is a fundamental internal control tool that is significant in determining any abnormalities surrounding activity or transactions. This gives organizations a decent overview of operations and ensures the accuracy and legitimacy of financial information.
Why every business should automate their bank reconciliation
According to a 2017 PWC report on finance effectiveness, 30% of your finance team’s time is spent managing transaction-intensive work. Moreover, around 95% of this effort is wasted on transactions that are already properly aligned, as opposed to focusing on anomalies that require attention. Auto-reconciliation is an efficient way to combat these wasted efforts and offers several key benefits to consider.
Avoids human error
Manual reconciliation is bound to result in errors, especially if there is a large volume of transactions to examine. Automation is helpful to minimize or eliminate these mistakes, while simultaneously removing skilled labor from repetitive administrative tasks. Not only do reduced errors save time but removing manual labor means the organization can employ their workers’ potential elsewhere.
Prevents fraud
An important part of the reconciliation process is determining inaccuracies that could potentially be considered fraud. Fraud often results in a direct financial loss, as well as damage to an organization’s reputation. However, automation is capable of determining any inconsistencies more accurately and much faster so businesses can ensure their money is moving where it is intended to.
Time-efficient
Manually reconciling transactions can be meticulous and time-consuming. Auto-reconciliation is beneficial for efficiently balancing accounts and offering up-to-date information for organizations to utilize.
Cost-effective
According to Forbes, intelligent automation results in cost savings of 40% to 75%. These savings are largely attributed to the reduction in errors and increase in efficiency associated with automation.
Easy access
One of the key benefits of automatic bank reconciliation is the centralization of this data. Everyone in the organization can have access to relevant and up-to-date information at any time during the accounting period.
Increased visibility and improved management
Managing your finances manually may involve an incredibly large paper trail that is difficult to follow. Streamlining these finances allows organizations to keep account records more efficiently and accurately while authorizing access to important information whenever it is needed. This also gives businesses a clear overview of their financial activities. Increased visibility over organizational cash flows and a clear understanding of this data can be utilized by businesses to make strategic decisions for viable growth.
Steps to automate your reconciliation process
- Assess your organization’s needs and capabilities
This involves considering all financial activities within your business and how this labor is being handled. If there is room for improvement in terms of efficiency or labor costs, it is beneficial to create a financial overview for the finance team. This allows the organization to identify where there is room for growth and how automation can enhance these processes.
- Evaluate your options
There are several automation software options available for business accounting. Therefore, it is essential to examine these choices to make the most valuable decision for your organization.
- Properly manage the integration process
A large concern for businesses in the digitization process is the necessary staff training that results. To get the full benefit of your automation software, it is essential to ensure employees are accurately prepared and feel confident using the new system. While this preparation may require some time, the increased productivity and efficiency associated with automation will be well worth it.
Start your automation journey today
A 2020 study by Forrester Consulting on recurring payment friction in the U.S. reported 65% of businesses claimed that matching payments to open invoices was among the most labor-intensive areas of their payments process. These manual reconciliations cost organizations time and money, where automation can maximize efficiency in all financial aspects.
If your organization is considering this digital transformation, it is significant to examine your automatic bank reconciliation options and employ the most effective software. Financial automation allows your business to focus on what’s important — the results instead of the process.
Is your business ready to automate? Contact SK Global today to learn more about our Treasury Automation Suite for Microsoft Dynamics 365 Finance and Operations.