Bank reconciliation is the practice of aligning the bank statement with Accounts Payable and Accounts Receivable transactions, safeguarding businesses against fraudulent charges or transaction errors. The frequency of reconciliation varies based on business size, occurring monthly or daily. Although manual reconciliation is common, the transformative potential of automation is reshaping traditional approaches to this process. Explore the steps in bank reconciliation below.
Access Bank Records and AR/ AP Ledger:
The first step is to access bank records or statements for a given period of time. Your organisation can either get this from online banking or by asking the bank to share it with you. You will also need access to the relevant business ledger at the same time.
Cross-check Deposits and Withdrawals:
At this stage, you’ll need to cross-check deposits and withdrawals shown in your account statement with the relevant ledger. If one of these records doesn’t match with your ledger, chances are high that something is missing. For example, you may not have taken into account a refund, sale, or bank fees.
Update Uncleared Checks and New Expenses:
The third step involves two things: checking uncleared checks and new expenses that weren’t discovered earlier. For example, your bank statement may show that a check has been cleared but it hasn’t in reality. On the other hand, your accounts team may discover new expenses.
Check Income and Expenses:
Each entry on the statement should reflect in the company ledger book, either as income or expense. For example, businesses often tend to overlook expenses when they use different bank accounts to purchase something.
Reviewing Reconciliation:
The final step is to ensure that the end balances are the same. Any difference in the ledger and the statement becomes a reconciling item meaning it needs further investigation. Such instances often occur because of outstanding checks, deposits in transit, etc.
Challenges of Manual Accounts Payable Processing
Effective bank reconciliation is key to identifying potential risks, understanding finance process gaps, addressing discrepancies in your ledger, and finally making a financial close. It can also help you to analyse data patterns, forecast key financial trends, and improve financial planning. When you do it manually, you’ll have to overcome several challenges. Some of them are:
Error-prone:
Manual reconciliation is susceptible to human error, consuming time to rectify mistakes and update multiple systems.
Scope for Guesswork:
Incomplete and fragmented data leads to guess accounting, complicating the reconciliation process.
Little Control Over Discrepancies:
Manual handling lacks standardized procedures, hindering insights necessary for alignment.
Complicated International Transactions:
Processing payments in different currencies with transaction fees becomes a nightmare with manual decoding.
Inefficient Processing:
Manual reconciliation, from data entry to adjustment, is time-consuming and drains energy better used for strategic decisions.
Businesses, irrespective of the industry, can’t either function or maintain compliance without a bank reconciliation process. While this is still handled manually at many organisations, robotic process automation can reduce error, save time, and improve account team efficiency.
Bank Reconciliation on Autopilot: What It Really Looks Like
Automating and optimising bank reconciliation processes can help businesses to avoid duplicate errors, handle date/time discrepancies, minimise human errors, and deal with complicated reconciliation for invoices containing multiple transactions. Here’s what the streamlined process will look like:
Uploading Bank Statements:
With RPA integration, your existing finance system can easily consume bank statements from the respective banking portals or other interfaces that the various banks provide.
Transaction Reconciliation:
Using rules-based configuration and machine learning algorithms, RPA bots can automatically reconcile transactions. At this stage, you may have to look at a small number of partially matched or unmatched transactions.
Journal Adjustments to General Ledger:
Once authorised, the adjustments journal will be automatically uploaded to the general ledger with the help of scheduling tools provided within the ERP. Alternatively, this can also be handled with RPA.
Automating manual bank reconciliation allows organisations to reduce running costs and eliminate errors. This can help your team to focus on investigating and resolving exceptions quickly.
Advantages of Bautomate’s Bank Reconciliation Automation
Create a shared service environment to facilitate centralised accounts payable processing according to standard protocols. This will enable your organisation to get more done in less time, ultimately reducing cost and improving productivity.
Go paperless and enable electronic communication so that end-to-end processes can be managed electronically, starting from PO creation to invoice acceptance to item tracking to payment. This will reduce the burden of manual follow-ups and errors.
Adopt robust governance practices in order to minimise the chances of manual errors and strengthen the measures of how accounts payable processing is managed.
Improve liquidity management by creating management workflows, identifying system bottlenecks, and streamlining process handoffs.
Define management authority levels for strengthening approval processes to be followed for making purchases.
Conclusion: Experience the Transformation
Businesses cannot function or maintain compliance without an efficient bank reconciliation process. Bautomate’s Bank Reconciliation Automation offers a transformative solution, reducing errors, saving time, and enhancing the efficiency of your finance team. Embrace automation to experience centralized processing, paperless operations, robust governance, improved liquidity management, and enhanced approval processes.
Ready to revolutionize your financial processes? Click Contact Us now to request a demo and witness the power of Bautomate’s Bank Reconciliation Automation. Transform your financial efficiency today!