Maximize Efficiency with Automated Reconciliations: A Guide to Full Automation

There’s a lot of moving pieces, including massive amounts of data, in the account reconciliation process. With automated reconciliations, your team can save time, maximize productivity and reduce compliance risk. 

There’s really no reason why not to use reconciliation tools, so let’s talk about all the reasons why you should be incorporating this technology within your organization and how to do it seamlessly. 

Coming Up

1. Understanding Account Reconciliation

2. Benefits of Account Reconciliation

3. What is Robotic Process Automation (RPA)?

4. What are Automated Reconciliations?

5. Examples of Automated Reconciliation Processes

6. Importance and Value of Automated Reconciliations

7. Challenges of Manual Reconciliations

8. Steps to Implement Automated Reconciliation

9. Case Studies and Success Stories

10. New Technologies in Financial Automation

11. The Bottom Line

Understanding Account Reconciliation

Account reconciliation is the process of matching your organization’s general ledger and its respective financial statements with external financial statements, like bank accounts and credit cards, for example. 

This process is naturally time-intensive and requires utmost attention to detail. It’s been reserved for bookkeepers and accountants, but with bank reconciliation automation, software can handle the heavy lifting. In turn, your valuable employees can use their time more wisely by applying their expertise to business challenges and solutions, rather than the tedious and repetitive tasks of reconciliations. 

Benefits of Account Reconciliation

If you’re working in finance, then account reconciliation is typically regulated and mandatory. But, even if it weren’t, most businesses would still choose to perform this duty because of its immense benefits, namely:

• Reduces errors: It’s possible for internal financial statements to have errors. It’s also possible that your bank makes an error with your transactions. Account reconciliation is a surefire method to help highlight any errors and rectify them in a timely manner. 

• Tracks expenses: You’re probably paying lots of bills and vendors on the daily. But, these payments don’t get deducted immediately, so you may forget they’ve been made. You can better track deductions from your account with recurring reconciliations. 
  

• Saves money: Reconciling accounts can save you money directly. Without the process, you may never realize that you’re being charged bank fees or hidden expenses. If you know these avoidable expenses exist, you can help to avoid having to pay them. 
  

• Avoids financial issues: It’s understandable that humans make mistakes. But, when it comes to business doings, it could be detrimental to your bottom line and your reputation. You always want to make sure that you have enough to cover expenses, and by conducting at least monthly reconciliations, you can successfully track revenue and expenses. 

What is Robotic Process Automation (RPA)? 

The extensive use cases for finance automation software can be traced back to robotic process automation (RPA). Robotic process automation is the driving force and technology that makes it possible for computers and software to perform repetitive tasks. In most cases, there’s barely any need for human intervention once the software has been trained on what to do by following a human’s pattern. 

RPA robots capture data, can trigger responses and also integrate with other systems and communicate inputs to reap outputs. They can log in, copy and paste data, move files, fill in form fields, and pull structured data from existing documents or browsers, to name a few functions.

Their main application is for repetitive tasks that happen continuously and have expected outcomes. This is why RPA is so perfectly fitting for financial departments. Most of the daily duties of any finance team is filled with manual, repetitive, data-heavy and timely responsibilities. RPA alleviates these tasks and manages them so that your human workforce can focus on more pressing measures. 

What are Automated Reconciliations?

Automated reconciliations streamline the bank reconciliation process by using advanced software to pull data from your financial statements and compare it with external data sources, such as bank statements. This automation reduces the need for manual data entry and ensures a higher degree of accuracy.

With automated reconciliation, you can expedite the financial close process. Furthermore, you can rest assured on the accuracy of the data because there’s no possibility of human error. Accountants are able to quickly compare statements and are alerted if there’s any anomalies. The system will trigger human intervention if there’s any need to investigate discrepancies. Humans work with the system to upload documentation, if needed, to resolve any mistaken records.

Examples of Automated Reconciliation Processes

There’s a lot of different accounts to manage when running a business. Whether you’re dealing with various currencies, a multitude of suppliers, direct payments or the like, automated account reconciliations can be utilized for whatever type of reconciliation process you may need. No matter the frequency and complexity, automation such as RPA helps to lighten your load.

Some examples of automated reconciliations include:

Bank Reconciliation

‍One of the most crucial aspects of financial management is ensuring that your internal records align with your bank statements. Traditionally, this process involved manually comparing transactions and identifying discrepancies, which is time-consuming and prone to errors. With automated bank reconciliation, software can seamlessly integrate with your banking systems, automatically importing and matching transactions. This not only saves valuable time but also ensures a high level of accuracy, reducing the risk of financial misstatements.

Direct Payments

‍As businesses grow, the volume of direct payments they receive can increase significantly. Each payment often comes with multi-page statements that need to be meticulously checked and reconciled. Automated reconciliation tools can extract relevant data from these statements, match them against your internal records, and flag any inconsistencies. This streamlined process eliminates the need for manual data entry and verification, allowing your team to focus on more strategic tasks.

Foreign Currency Accounts

‍In today's globalized economy, many businesses deal with multiple currencies. Managing foreign currency accounts can be particularly challenging due to the constant fluctuations in exchange rates. Automated reconciliation software can handle this complexity by automatically converting transactions into your base currency and applying the appropriate exchange rates. This ensures that your financial statements accurately reflect the true value of your foreign currency holdings, minimizing the risk of financial losses due to currency fluctuations.

Balance Sheet Substantiations

‍As organizations expand, they often operate across multiple companies, banks, and accounts. Keeping track of all the figures and ensuring that your balance sheet is accurate can be a daunting task. Automated balance sheet substantiations simplify this process by consolidating data from various sources and providing a comprehensive view of your financial position. With real-time updates and automated reconciliations, you can have confidence in the accuracy of your balance sheet, even as your business grows in complexity.

Inter-Company Accounts

‍For businesses that operate across multiple entities or currencies, inter-company transactions can introduce significant complexity into the reconciliation process. Automated reconciliation tools can seamlessly handle these transactions, ensuring that balances between entities are accurately recorded and reconciled. By automating inter-company reconciliations, you can reduce the risk of errors, improve transparency, and streamline the consolidation process.

External Suppliers

‍Maintaining strong relationships with external suppliers and vendors is crucial for the smooth operation of any business. However, managing payments and reconciling accounts with numerous suppliers can be a time-consuming and error-prone process. Automated reconciliation tools can integrate with your supplier systems, automatically matching invoices and payments, and identifying any discrepancies. This ensures that you pay your suppliers on time and accurately, fostering trust and long-term partnerships.

Importance and Value of Automated Reconciliations

Automated reconciliations are helping finance teams be more productive. Even more so, automated reconciliations serve as one step along the journey to achieve digital finance transformation. With the ability to automate repetitive tasks, finance professionals can expand their roles as advisors and strategic business allies. 

Here’s a review of some of the main benefits of using reconciliation tools: 

• Standardization: Since the reconciliation happens continuously, it’s really important that the process be standardized across an organization. Whether your organization takes advantage of finance shared services or has disparate finance teams around the world, automating the process inherently translates to standardization.
  

• Visibility: Reconciliations aid the finance department in ensuring activities and transactions are taking place as they should be. But, they also play a larger role in showcasing the financial health of a business. As such, key stakeholders will want access to this information, as will investors. Automated solutions like SolveXia offer an easy way to share reconciliations either automatically or on a schedule with those who need to be privy to the information. 
  

• Processing time: One of the most easily noticeable benefits of finance automation tools is the time they save. For example, reconciliation tools like SolveXia’s automation software has been shown to have 10x productivity because of the speed at which it can process records and data. 
  

• Centralization: Reconciliations provide valuable historical data that can be used for forecasts and modeling. Additionally, they may be required for audits. As such, it’s best to have all reconciliations centrally stored in a repository for easy access at a moment’s notice.  
  

• Accuracy: If you use a manual process to double check other manual processes, you’re not fully eliminating the risk of errors. Instead, utilize the power of RPA and automated reconciliations to ensure data accuracy, in turn, also minimizing compliance risk. 

Challenges of Manual Reconciliations 

With every external system and transaction that takes place, there is room for manual error. Manual reconciliations turn out to be one of the most time-consuming, and in turn, costly processes that companies must perform. 

What’s worse is that most of the time, this effort is spent matching transactions that are actually correct. In which, time feels ever more wasted. 

Besides the error-prone risk of a manual reconciliation process, your organization may also suffer from:

• Allocating and separating duties 
• Complicated formatting 
• Miscommunication between teams 
• Sticky procedures that are hard to modify when need be 
• Data loss and missing information 
• Governance and compliance risks 
• Complexity when trying to collaborate or share information (i.e. problems with version control)
• Difficulty creating reports 
• Missed deadlines 
  

Steps to Implement Automated Reconciliation

Implementing automated reconciliation can be a game-changer for businesses looking to streamline their financial processes and enhance accuracy. However, to ensure a successful transition, it's essential to follow best practices and have a well-defined implementation guide. In this section, we'll provide practical advice and actionable steps to help you get started with automated reconciliations.

Preparing Your Organization for Automation

Before embarking on your automation strategy, it's crucial to prepare your organization for the change. Here's a checklist of steps to ensure a smooth transition:

1. Assess your current needs, capabilities, and goals
2. Outline your current account reconciliation process
3. Highlight where there are gaps or room for improvement
4. Engage stakeholders and secure buy-in from key decision-makers
5. Establish clear communication channels to keep everyone informed
6. Identify the resources and budget required for implementation
7. Define success metrics and KPIs to measure the impact of automation

By following these preparatory steps, you'll lay a strong foundation for a successful automated reconciliation implementation.

Choosing the Right Reconciliation Software

Selecting the right reconciliation software is a critical decision that can impact the success of your automation strategy. Consider the following factors when evaluating different solutions:

• Functionality and features that align with your specific requirements
• Scalability to accommodate future growth and increased transaction volumes
• Integration capabilities with your existing financial systems
• User-friendliness and ease of use for your team
• Robust security measures to protect sensitive financial data
• Vendor reputation, customer support, and ongoing maintenance
• Total cost of ownership, including implementation, training, and support costs

Take the time to research and compare different reconciliation software options, such as SolveXia, to find the best fit for your organization.

Training and Support for Smooth Implementation

Effective training and ongoing support are essential for a smooth implementation of automated reconciliation. Here are some tips for creating a successful training program:

1. Tailor training sessions to the specific roles and responsibilities of your team members
2. Use a mix of hands-on exercises, demonstrations, and real-world scenarios
3. Provide comprehensive documentation and user guides for reference
4. Encourage open communication and feedback throughout the training process
5. Offer ongoing support and refresher sessions to reinforce learning and address any challenges

In addition to internal training, leverage the support and resources provided by your chosen reconciliation software vendor. Many vendors offer implementation assistance, user communities, and knowledge bases to help you make the most of their solution.

Implementing Automated Reconciliation: A Step-by-Step Guide

Now that you're prepared and have chosen the right reconciliation software, it's time to implement automated reconciliation in your organization. Follow these steps for a successful rollout:

1. Configure the software to match your specific reconciliation requirements
2. Integrate the software with your existing financial systems and data sources
3. Test the automated reconciliation process thoroughly with sample data
4. Run parallel reconciliations (manual and automated) to validate accuracy
5. Train your team on the new automated reconciliation workflow
6. Go live with automated reconciliation and monitor performance closely
7. Continuously review and optimize the process based on feedback and results

By following this implementation guide and adhering to best practices, you can unlock the benefits of automated reconciliation and achieve a faster, more accurate, and efficient financial close process.

Remember, implementing automated reconciliation is a journey, and it may require some effort and investment upfront. However, the long-term benefits, such as increased efficiency, reduced errors, and improved compliance, make it a worthwhile endeavor for any organization looking to streamline its financial processes.

Case Studies and Success Stories

Real-world examples of companies successfully implementing automated reconciliation provide valuable insights into the tangible benefits and return on investment (ROI) of this transformative technology. In this section, we'll explore two compelling case studies that showcase the power of automation in driving financial transformation and operational efficiency.

Case Study: 7-Eleven's Journey to Automated Reconciliation

7-Eleven, the largest convenience store company in the Philippines, faced significant challenges with their manual reconciliation process. Staff spent hours analyzing large datasets containing over 500,000 daily transactions from multiple sources. Generating a single report could take up to two days, and the time-consuming nature of the reconciliation introduced control risks.

To overcome these challenges, 7-Eleven implemented SolveXia to automate their three-way reconciliation across 3,400+ store locations, two payment gateways, the Point of Sale (POS) system, and the bank. The automated reconciliation process now completes in minutes, enabling the team to focus on analysis and investigation of exceptions.

The success story of 7-Eleven's automation journey highlights the remarkable ROI achieved. The reconciliation process was accelerated by up to 100x, reducing it from days to minutes. Additionally, the timely exception reports sent to each store facilitated quick investigations, leading to a decrease in fraud and missing cash at the store level.

Success Story: How Tala Reduced Errors with Automation

Tala, a financial technology company serving emerging markets, sought to streamline their payment reconciliation process and enhance visibility across different markets. Prior to automation, the team manually matched transactions in Excel, taking up to 2 hours for each Payment Rail. Inconsistent procedures across markets hindered the identification of data discrepancies and investigation of variances.

By implementing SolveXia, Tala automated the reconciliation of daily cash movements between their system and nine Payment Rail partners. The automated reconciliation solution validates and prepares input data from various formats, accommodating different mapping rules specific to each Rail.

The success story of Tala's automation initiative is evident in the significant reduction of reconciliation time from 2 hours to just 10-15 minutes per Rail. This efficiency gain allows for prompt investigation of discrepancies and a proactive approach to communicating variances to relevant parties. The standardized reconciliation process across the business has improved visibility and facilitated sharing insights with the broader team, leading to solutions for longstanding problems.

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These case studies demonstrate the transformative power of automated reconciliation in driving financial transformation. By embracing automation, companies like 7-Eleven and Tala have achieved remarkable efficiency gains, enhanced control, and improved collaboration across their organizations. The ROI realized through faster reconciliations, reduced errors, and increased productivity underscores the value of investing in automation solutions like SolveXia.

New Technologies in Financial Automation

The world of financial technology is rapidly evolving, and nowhere is this more evident than in the field of reconciliations. As businesses seek to streamline their financial processes and gain a competitive edge, the integration of artificial intelligence (AI) and machine learning is proving to be a game-changer.

AI in Reconciliations

AI is revolutionizing the way reconciliations are performed, offering unprecedented levels of efficiency and accuracy. By leveraging AI-powered reconciliation software, organizations can automate the matching of transactions across multiple systems, even in the presence of complex data formats or inconsistencies. This not only saves time but also reduces the risk of errors, ensuring a more accurate and reliable financial close process.

One of the key benefits of AI in reconciliations is its ability to learn and adapt over time. As the system processes more data, it can identify patterns and anomalies, continuously refining its matching algorithms. This self-learning capability enables the software to handle increasingly complex reconciliation scenarios, reducing the need for manual intervention.

Machine Learning in Transaction Matching

Machine learning, a subset of AI, is particularly well-suited for transaction matching in reconciliations. By training machine learning models on vast amounts of historical transaction data, the system can learn to identify and match transactions based on various criteria, such as amount, date, description, or reference numbers. This intelligent matching capability significantly enhances the speed and accuracy of the reconciliation process.

Recent advancements in machine learning have also enabled the development of predictive reconciliation models. These models can analyze historical reconciliation data, identify recurring patterns, and predict potential discrepancies before they occur. By proactively addressing these issues, businesses can minimize the risk of delays or errors in their financial close process.

The Bottom Line 

Account reconciliation is a necessary process in organizations. As such, it’s not going anywhere. But, the time it takes to complete manual reconciliations can be allocated optimally by implementing automated reconciliations. Automation tools like SolveXia can help you pull all that data you need, match transactions rapidly and only alert your employees when an exception or variance is present. Most importantly it saves time, improves accuracy and gives clearer insights for better business decisions.