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Finance functions undergo account reconciliation to ensure accuracy of transactions and statements. Running a finance department equates to having many responsibilities and concerns, especially those that deal with compliance and regulations like reconciliation. With reconciliation automation, it’s possible to expedite the account reconciliation process (and in turn, the financial close process) while also enhancing accuracy, improving compliance and promoting transparency. 

Let’s take a look at what reconciliation software brings to the table. 

What is Account Reconciliation?

Account reconciliation is the process of comparing two sets of records or data to see that they match. In business, this may be performed daily, weekly, monthly, quarterly or annually. Any notice of mismatched data must be investigated and rectified so that the sets of records are considered to be reconciled. 

Because of the amount of transactions and data that passes through oftentimes disparate systems, it’s possible for errors to occur. Said errors will end up affecting an organisation’s financial statements, which could have serious consequences both when it comes to legal outcomes, as well as business decisions. 

What is Reconciliation Automation? 

Reconciliation automation is the application of software to automatically complete the reconciliation process, as opposed to having to do it manually. Reconciliation tools leverage the power of robotic process automation and artificial intelligence (with the help of APIs) to be able to pull data from multiple sources and compare records quickly. Not only does the system perform account reconciliation with utmost speed, but it also removes the risk of human error, making it an accurate process. 

The software will then alert its users when any anomalies occur for the purpose of investigation. Users have the ability to edit and note the cause of the discrepancy. The system stores any external inputs for documentation, which ensures compliance by creating audit trails. 

By incorporating automation, finance teams free up all the time they would’ve otherwise spent manually comparing records. In many instances, this takes place via Excel spreadsheets, which can cause issues with version control, collaboration and makes standardising the process a tricky task. 

Why is Reconciliation Automation Important?

To overcome the challenges of manual account reconciliation, automating the process proves its value and importance the moment you begin using reconciliation software. While the tool cuts the time it takes to perform a reconciliation manually, it also takes care of your employees’ opportunity cost. Instead of their time being spent on a repetitive task that could be more accurately completed with software, they now have the time to allocate their high-level skills in arenas that genuinely require human interaction. 

Additionally, some organisations understand that the time-consuming nature of manual reconciliation isn’t feasible on a frequent basis. As such, they’ll delay and spread out their reconciliation process quarterly or even annually, as opposed to daily, weekly or monthly. This can cause serious issues when data doesn’t match because it’s even harder to find the reasons why. Even worse, with inaccurate data, decisions may have been made that otherwise wouldn’t have been the case if the data was right in the first place. 

With automated reconciliation, organisations can increase their reconciliation frequency. By ensuring accurate data on a continuous basis, the organisation’s leaders can make better business decisions that impact employees, stakeholders and customers. 

Benefits of Reconciliation Automation Tools  

The value added with the addition of reconciliation automation tools is hard to miss. Here, we’ve compiled the major benefits that your organisation will reap when you apply reconciliation automation: 

  • Streamline the reconciliation process: Reconciliation is rarely going to be approached as a choice. Most companies are regulated to reconcile the accounts, and it often entails multiple people to do so. The process is broken down into repetitive steps that an automation tool can simply outline, perform and streamline to reduce bottlenecks and key person dependencies. 
  • Enhance internal controls: When software manages the process, human management teams gain better internal controls. They can ensure that the process is running as it should be and if any issues arise, there’s no delay in resolving them because of system alerts and notifications. 
  • Optimise and standardise the process: Organisations are increasingly spread out because of the digital nature of work and capabilities of technology to aid workflows. As such, finance professionals may perform their work in different locations, but it’s still imperative that they do so according to the organisation’s defined processes. Automation tools standardise the process, and with enhanced internal controls, it’s easy to optimise the steps. 
  • Reduce errors: It’s inevitable - humans make mistakes. This is especially true when there is a lot of data that calls for keen attention to detail. Reconciliation automation reduces errors inherently. 
  • Save time: Automation is able to maximise capacity by comparing and matching records at warp speed. This saves everyone time in having to pull data together, structure it accordingly to review, and then update and share the changes with every respective party. 
  • Reduce fraud: Account reconciliation can provide organisations with a way to spot fraudulent activity. When reconciliation is performed in a timely manner because of automation, it’s possible to pick up on fraud immediately, which can result in less damage to the organisation. 
  • Increase employee satisfaction: If you were to ask the people on your team who perform manual reconciliation if they enjoy the process, the chances are that they’ll call it laborious and tedious. With the aid of technology, your team can free up their time and reduce repetition, thereby creating an environment in which they can concentrate on more fulfilling tasks. 
  • Boost confidence in data: Even with the best finance professionals, manual account reconciliation still will have a margin of error and doubt. When automated, you can rest assured that the data is accurate and therefore, the reconciliation is, too. 
  • Improve transparency:  Everyone with access control to the system can check in on the account reconciliation process. Say goodbye to the countless calls, check-ins and meetings surrounding financial close because you’ll have all the visibility you need, exactly when you need it.

Problems of Manual Reconciliations

While it is possible to perform manual reconciliations well, it’s naturally time-consuming, error-prone and elicits the need for much oversight. 

By manually performing this task in any interval, your team may encounter challenges, like:

  • Lack of accountability because of the various steps and people involved in the process 
  • Missing deadlines and miscommunicating the current progress of the process 
  • Lost time and missed opportunities 
  • An increased need for micromanagement, check-ins and meetings about the process to make sure everyone is on the same page 

How Automating Reconciliations Can Help: Examples 

Cloud-based reconciliation tools, like SolveXia, can be used and applied to any type of reconciliation your organisation may need to fulfill. These could span:

  • Direct payments: Ensuring that direct payments to the accounts department are properly received and documented 
  • Balance sheet substantiations: Keep track of all business bank accounts and transactions across financial statements 
  • External suppliers: Reconcile accounts from third-parties and boost vendor relationships by never missing a payment or having a wrong transaction take place 
  • Foreign currency accounts: Software can easily match foreign currency accounts to reconcile any differences in rates with access to real-time data 

Steps to Improve Reconciliations Today

Knowing how and where to get started in automating the reconciliation process doesn’t have to be overwhelming. Taking it step-by-step makes it easier. 

Consider the following if you’re looking to enhance your team’s reconciliation process:

  • Begin by reviewing and analysing your current financial close process 
  • Use a flowchart or process modelling tool to outline the process 
  • Check for inefficiencies or any double work 
  • Define roles and responsibilities to see if there’s anything that can be deleted from the process 
  • Clearly state goals and prioritise if emphasis is needed at any step along the way 
  • Consider the software tools in the market that can help 

Areas to Focus Account Reconciliation Automation  

Once you decide on the software to deploy within your organisation, it’s important to focus on three areas, namely:

  • Source connection: Connect your software to source systems (i.e. general ledger and ERP) via APIs so the software is properly designed to integrate with your existing tools and data 
  • Automated workflows: In order to minimise the need for any manual tasks, automate your workflows. With tools like SolveXia, you can use the easy drag-and-drop tool to design workflows with a pre-existing library of actions 
  • Notifications and alerts: Define the criteria by which the system is to alert your team members when an anomaly occurs  

Final Thoughts 

Reconciliation automation can supercharge your team’s output by increasing productivity, enhancing accuracy, improving transparency and reducing compliance risk. With the freed up time that would have otherwise been spent performing manual reconciliation, you can open the door to a team of individuals who can provide more value, while gaining superior satisfaction from the work they get to perform. 

If you have any specific questions or want to see how SolveXia can boost your account reconciliation process ten-fold, we’re here to help!

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