In terms of your organization's financial processes, bank reconciliation is surely top of mind. Reconciliation is a necessity to ensure your records are in order, but this process can be an arduous task for your financial teams. Luckily, with more efficient and powerful solutions in place, your approach can become seamless.
Read on to learn more about the reconciliation process and how advanced solutions can help you optimize your systems.
What Is Bank Reconciliation?
In bookkeeping, bank reconciliation refers to the process by which an account balance in an organization's books is reconciled to the balance reported by the financial institution. Essentially, this bank statement is a summary of banking and business activity, reconciling an entity's financial records with its bank account.
This process is a necessity for organizations to catch errors or discover any unusual account activity. If you're finding discrepancies between your bank balance and cash account balance, you're not alone. Disparities are relatively normal, but what's most important is fixing them — which is where reconciliation comes into play.
Why is bank reconciliation important?
The bank reconciliation process exists as a form of oversight and internal control for companies. Not only does this help entities detect fraud, but also prevents errors from occurring. Most importantly, it validates that the accounting process and the cash on the balance sheet are correct.
Traditionally, bank reconciliation involved a manual process. However, this approach is increasingly inefficient, which could spell trouble for your organization.
The challenges of manual reconciliation
Manual bank reconciliation has served as a sufficient way to manage financial statements over the years, but there are a few problems that companies run into as a result. Most are aware that a manual process is tedious and time-consuming, but this leads to one of most financial team's main issues — reconciliation is inevitably fraught with human error. When dealing with hefty amounts of data, there's significant room for mistakes. Because of this, errors are common in almost any manual financial process, which makes reconciliation even more difficult in the long run.
Another considerable issue in manual reconciliation concerns fraud protection and prevention. Large amounts of data in conjunction with possible reconciliation errors means fraud might not be detected in a timely manner or could possibly go undetected altogether. This can be detrimental to your financial security and will likely have wide-reaching effects throughout your organization. However, with advanced solutions and enhanced software at your disposal, you can quickly streamline your bank reconciliation process.
Improving Your Process With Automatic Bank Reconciliation
Automation is on the rise and it's a progressively sought-after solution for optimizing your current systems. In fact, a 2020 report from McKinsey & Company found that over 50% of organizations are adopting automation for at least one function. As automation continues to grow in use and importance, considering how you can utilize this technology to your advantage will become critical. This will be highly beneficial for your accounting teams.
In terms of account reconciliation, automation leverages technology or software to replace the manual task of overseeing, comparing and managing an entities' financial statements and accounting records. Implementing automatic reconciliation can help your finance teams and your organization see a host of benefits as a result.
The main advantages of automating some of your most onerous financial processes include:
- Saving time: According to a report from Zapier, 60% of knowledge workers use automation to save time, and your bank reconciliation process is no exception. Automation allows you to complete the process significantly faster than if done manually.
- Reducing human error: Even the most competent of financial teams are bound to make mistakes dealing with such hefty amounts of information. However, spotting any discrepancies during reconciliation is a vital part of the process. With the right automation solution in place, your organization can rest assured that any anomalies will be precisely, easily and quickly detected.
- Detecting and preventing fraud efficiently: Managing fraud is increasingly top of mind for companies, as J.P. Morgan reports nearly 75% of organizations were targets of a payments fraud attack in 2020. With manual reconciliation, you're likely to find delays in identifying irregularities or run the risk of not detecting these issues at all. Automated reconciliation can detect these problems swiftly, which can significantly lower your threat of fraud and mitigate damage to your organization.
- Improving visibility over the process: One of the most critical benefits of enhanced reconciliation software is the ability to oversee and manage the process more efficiently. Handling things manually can make it difficult to get a clear overview of what's actually happening, but with automation software, you'll have access to real-time data when you need it most.
- Saving money: Not only is manual reconciliation time-consuming, but inevitable errors can make it costly as well. These costs can come from problems associated with unreconciled transactions or, worse, from cyberattacks that went undetected. A better system is a necessity to save your organization money in the long run.
- Increasing your financial security: Along with fraud protection, automation can be a boon to your overall security. With reconciliation solutions from SK Global, your sensitive banking information isn't released into a cloud but kept in logs. This closed communication loop between the software and your bank accounts can help you feel confident that your information is secure.
While the benefits of automatic bank reconciliation are clear, you might be wondering what exactly the reconciliation process entails. Understanding the general stages involved in this banking activity is important, as well as recognizing what an automated process should look like and include.
How Can You Automate the Reconciliation Process
Traditional reconciliation involves multiple steps to complete the process. These steps typically include:
- Compiling your bank records and business records.
- Determining your starting point.
- Going through your bank deposits.
- Checking the income in your books.
- Running through your bank withdrawals.
- Matching withdrawals to the expenses on your books.
- Verifying your end balance.
However, automation can help your organization complete these steps, all with one simple solution. Automated reconciliation from SK Global aims to empower your financial teams to their fullest potential. Whether your organization deals with a short list of financial institutions or multiple banks, utilizing advanced software can help you efficiently automate cash management while improving your visibility over the entire process.
The cash and bank automation function in the Treasury Automation Suite from SK Global allows you to:
- Automatically reconcile bank statements, fully unattended.
- Improve matching and mapping with configurable rules.
- Automatically import bank statements.
- Improve oversight of multiple bank accounts and legal entities.
- Automatically create reconciling transactions.
If your business has continued manual financial processes over the years, it might be time to consider the switch to a more powerful solution. Take the load off of your finance teams and leave the hard work to capable software, so they can focus on the tasks that actually require human attention.
Utilizing Advanced Solutions for Reconciliation With SK Global
Traditional bank account reconciliation is tedious, repetitive, time-consuming, error-prone and typically inefficient. Fortunately, some traditions are made to be broken, and when it comes to your reconciliation process, there's certainly a better way. Advanced solutions and accounting software from SK Global exist with efficiency and accuracy in mind — so you can quickly streamline your financial systems.
The Treasury Automation Suite for Microsoft Dynamics 365 Finance and Operations includes top-tier automation to simplify your electronic bank statement reconciliation. This allows entities to ensure their bank account and general ledger are balanced, without the strenuous manual work. Account reconciliation software is also a valuable way to reduce errors, save money and improve financial security, all while significantly increasing your efficiency.
If you're ready for an automated reconciliation tool that works for you, explore our cash and bank automation in Microsoft Dynamics 365 and Dynamics AX. Or, contact SK Global today to schedule a demo and get started.