For a business, it is critical to track transactions for accounting purposes. Bank reconciliation is one such process, which is in essence, the process of matching the ledger entries with the corresponding transactions so as to ensure that there is no mismatch. However, reconciling the ledger entries with the corresponding bank transactions is a tedious process involving manual errors.
In this blog post, we’ll look into automating this reconciliation process using Robotic Process Automation (RPA). Let’s get started!
What is a bank reconciliation process and why is it important to automate it
Bank account reconciliation is one of the most important tasks in accounting because it is when companies review their bank statements to ensure their financial records are accurate. A bank reconciliation process involves comparing the bank statement for a given period to the actual documented transactions in the accounting records. Once a match is found, the transaction is updated into the accounting software
Once you have the bank statement, you compare the statement to the actual transactions in accounting records. If there is a difference, then you need to find out why. Usually, the difference is due to a mistake made when entering a transaction or because the user forgot to enter a transaction. If you find such a discrepancy, then it’s necessary to fix it and mark the accounting records as reconciled.
The process involves five steps:
- Manually input transactions from bank statements to general ledger accounts.
- Comparing the bank statements with the ledger accounts.
- Identifying any differences between bank statements and ledger accounts.
- Resolve the differences.
- Reconcile the statements
The process can be tedious and error-prone. RPA (Robotic Process Automation) can automate and streamline this process. RPA can help:
- Eliminate the errors associated with the manual steps.
- Automate the process and make it more efficient and scalable.
What is RPA and why should you automate Bank Reconciliation Process
Automation processes have become essential in today’s business world. Robotic Process Automation (RPA) aids organizations in streamlining repetitive and complex business processes. With the RPA process, enterprises perform tedious and error-prone tasks, like data entry or processing, on virtual robots.
Today, the majority of the organizations are moving to paperless accounting. RPA (Robotic Process Automation) was introduced to automate manual processes and repetitive tasks. RPA is playing a key role in automating many of the accounting functions like Accounts Payable, Accounts Receivable, and Bank Reconciliation. RPA helps streamline the business processes by identifying errors and inefficiencies in the current processes.
Reconciliation is the process of comparing bank statements against your accounting to make sure the amounts match each other. For small firms where their clients and cash flows are from fewer sources and banks, reconciliation may be fairly straightforward whereas for larger corporations, it can become a tedious, time consuming, monotonous task. It is also prone to human error. This calls for the need for automation, a tried and tested technology to streamline the entire process such as Bautomate.
Bautomate is a powerful and accurate reconciliation platform which automates reconciliation of data from different sources. It is an end-to-end platform, enabling multi-entity reconciliation, intelligent data matching, and automatic billing.
Bautomate ensures adherence to all regulatory and compliance requirements for Bank, Credit Card, and Merchant Reconciliation, and it provides audit trails to show why transactions were reconciled the way they are. It brings efficiencies, reduces errors, correlates data, enhances reporting and provides full audit controls.
How to automate the bank account reconciliation process using RPA?
The RPA tool can login into accounts, capture and process the bank transactions, fetch data from a shared folder if needed, and reconcile the accounts.RPA Tools create bots that execute these tasks, and simulate human actions on our computers.
RPA tools are becoming more and more popular in today’s Banking Industry. Banks can deploy RPA tools to automate various processes such as Loan approval, Investment banking, Reg NMS, AML, and Reconciliation.
RPA tools can also perform operations such as Currency conversion, Credit transfer, and Payment processing. Banks can utilize RPA tools to automate their end to end processes, hence improving the bank efficiency and reducing manual errors.
How to implement Bank Reconciliation Process using RPA?
Bank Reconciliation basically checks the bank account with the bank statement. It provides the information to reconcile the bank transactions with the bank statement. Bautomate handles the entire process of reconciliation in a stepwise process using RPA tools, which minimizes the number of direct errors.
RPA has eliminated a lot of errors from the reconciliation process and has decreased the bank reconciliation time by 80%. Below are some steps to automate bank reconciliation using RPA.
Steps to automate bank reconciliation using RPA.
Reconciliation Automation for Banks
Reconciliation of bank accounts and ERP data is a core requirement in larger organizations. However, there are also many mid sized companies that have a need to reconcile bank accounts with their financial systems.
Bautomate Reconciliation software is used for reconciliation between the general ledger control account (GLC) and your bank account. All relevant banking data is reconciled through one central, reliable tool which streamlines reconciliation processes and eliminates risk.
Automated bank reconciliation provides a multi-site solution that can be deployed across multiple environments and ERP systems. Such integration brings huge efficiencies and massive cost savings as your company can now employ a single payments platform across multiple sites and banks.
Our solution auto-reconciles General Ledger and Bank Statement items. It enables unreconciled items to be rolled-over at period end into future reconciliations. Unreconciled items and amounts are totaled and displayed through the software.
Properly recording, processing and reconciling transactions ensures your accounting system is accurate and up to date. While computerized accounting software typically makes this process fairly easy, there are a number of steps that should still be completed whenever possible. Reconciliation is the process of comparing actual and posted data to ensure both ledgers agree.
The Bank Reconciliation report allows your bank statement to be reconciled to your checking account. Bank Reconciliation should be performed on a daily basis unless other terms have been agreed to with your financial institution.
What opportunities for automation exist in the bank reconciliation process?
- Ability to automate bank reconciliations with no reliance on human input.
- Reduces human error.
- Improved operational efficiency.
- Faster time to value.
- Reduces the time and effort spent on reconciliation
- Accurate reconciliation data
- Helps prepare reports for management
- Ease the pain in Finance departments.
- More time to focus on higher-value activities.
The Reconciliation Process
The figure above shows a pipeline of the reconciliation process. The reconciliation process can be segmented into 4 main sub-modules: document data extraction, matching, reconciliation, and finalization.
Document data extraction: The first step in the reconciliation process is to extract data from the document, as per figure above. As bank statements are usually in various forms, printed ones or as digital PDF’s, performing this data collection manually can be highly tedious and prone to errors. Bautomte automates this process by scanning the documents and extracting all the important data, such as names and account numbers, from the document.
Matching: The next step in the reconciliation process is data matching. Once data has been extracted from documents, they need to be matched with records in other systems – for example, the core banking system. The matching module in this reconciliation process compares data in documents with records in other databases.
Reconciliation: Once the data has been checked and confirmed, it needs to be reconciled. The reconciliation module performs data analysis, extracting matching data and then merging with data from other sources. Reconciliation ensures that all the data captured in the reconciliation process is correct.Any errors will be reported to companies or individuals for fixing followed by reviews and approvals. This stage is very labor-intensive as the errors require follow ups, reminders and feedback to proceed. These are handled by workflow automation (Learn More)
Finalization: The final step in the reconciliation process is to finetune the data that was collected. This step involves checking accuracy, removing incorrect data, and cleaning up data.
As the entire reconciliation process involves multiple phases and tasks, selecting and incorporating optimized workflows is important to ensure the process runs smoothly. The following factors need to be considered
Reconciliation is a process of cross-checking documents to ensure that the record is accurate. For large companies, numerous documents are required for reconciliation. Bautomate DMS ensures all the documents are received, stored in a structured format and is easily retrievable.
Internal and External Reconciliation
When an error occurs, it is important for the company to figure out whether the fault is internal or of the banks’. It may be a result of a breach if the error took place externally, which happens rarely but still possible. Bautomate audits each step of the process thereby ensures traceability and immediate rectification.
When a company is small, with single or limited sources of income, comparing data is fairly easy. When a high volume of transactions take place in a many-to-many relationship with other data, along with the limited time given to workers, it may be possible for workers to write off or simplify omit some of the transactions. The stakes are high as more and more transactions are dealt carelessly whether intentionally or unintentionally. Automated rules and workflows using Bautomate ensure that all the processes are handled effectively.
Most organizations use ERP or Enterprise Resource Planning software to plan and manage all the core processes of an organization. Bautomate allows seamless synchronization to ERP’s and any other accounting softwares such as Quickbooks, Tally, etc.
Key Performance Indicators and Reports
Bautomate provides default and customized KPIs for Cash Flow Visibility and Compliance. Corporations and companies are required to have clear and visible cash flows for audit submissions, business and financial Planning. After a proper reconciliation process, these records can be used for further financial planning.
One must consider the best practices both in terms of efficiency and ethical standards. Checks across various departments must be conducted before fully deploying the system. For efficiency, we have to make sure that all individual parts of the payment reconciliation set up provide accuracies that outperform traditional approaches while bringing the cost down or at least it’s kept at similar levels as that of the traditional approach.
Advantages of using RPA to automate the bank account reconciliation process
In today’s increasingly competitive environment, it’s critical for companies to have the lowest transaction costs possible. Reducing these transaction costs is one of the ways companies can maintain profitability.
RPA can help automate many of the time-consuming, manual bank reconciliation processes of companies. This not only reduces the operational costs of banks, but also reduces the amount of time your employees spend on these reconciliations.
Automation of the bank account reconciliation process using Robotic Process Automation (RPA) helps eliminate manual errors, maximize productivity, reduce cost of operations, increase efficiency, and improve accuracy.
Pros and Cons of RPA
To capitalize on the benefits sans the disadvantages, onboard Bautomate as your RPA partner and reap the rewards automation provides.
RPA eases out the pain of manual reconciliation. Get started with automation effortlessly using Bautomate. Request a free trial now!