How To Automate Bank Reconciliation for Your Startup or Business? A Practical Guide

Automating Bank Reconciliation for Your Business

Introduction

The practice of reconciling an account balance in an organisation's records to the balance recorded in its bank account is known as bank reconciliation. It's normal to find variances in the balances in your bank account and cash book; nonetheless, the most crucial thing to do is address them, which is where reconciliation comes in.

Reconciling bank accounts is among the most laborious and time-intensive financial responsibilities. What if there was a better way? Automating your bank reconciliation procedure is a better option. Using technology or software, automated bank reconciliation eliminates the need for an employee to manually track and compare an organisation's bank statements and accounting data.ย 

By automating the reconciliation process using cutting-edge technology, your team may save time, money, and effort. Continue reading to learn more about the reconciliation procedure and how you may improve your system efficiency with cutting-edge automated solutions.

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Why Is Bank Reconciliation Important?

Companies use the bank reconciliation procedure as an internal control and supervision tool. This not only assists organisations in identifying fraud but also stops mistakes from happening. Above all, it confirms that the cash on the balance sheet and the accounting procedure are accurate. Warning signs include missing deposits, unexpected withdrawals, transfers, duplicated or amended books, unauthorised checks, etc.

Ignoring bank reconciliation may also result in long-term problems in financial management. The balance sheet, profit and loss statement (income statement), and cash flow statement rely on accurate bookkeeping and bank balances as the fundamental source of financial data. Company owners can be basing their financial forecasts and choices on inaccurate data if they aren't.

With the bank reconciliation, we can accurately do all other bookkeeping tasks, such as handling incoming invoices, accounting for outstanding bills, and classifying expenses.

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How Is Automation Helpful In Bank Reconciliation?

Automation is becoming increasingly popular as a way to optimise your existing systems. According to a 2020 McKinsey & Company analysis, over 50% of organisations are automating at least a single function. It will become increasingly important to consider how you might take advantage of automation as its use and significance rise. Your accounting teams will get a lot out of this.

Automation in account reconciliation replaces the laborious human process of monitoring, analysing, and maintaining an entity's financial statements and accounting records with technology or software. The organisation and its finance teams can profit significantly from implementing automatic reconciliation.

The following are the key benefits of automating some of your most tedious financial tasks:

Reducing Human Error

There is a lot at risk when it comes to money and business finances. Reconciliation on a regular basis lowers the possibility of inaccuracies and human errors. Dealing with large amounts of data inevitably leads even the most skilled financial teams to make mistakes. Finding any disparities during reconciliation is an essential step in the procedure. Your organisation may feel secure knowing anomalies will be precisely, rapidly, and readily recognised if the correct automation solution exists.

Detecting And Preventing Fraud Efficiently

Frequent bank reconciliations avert fraud. Fraud, whether intentional or the result of a reasonable error, is never good for business. Businesses are becoming increasingly concerned about managing fraud, as J.P. Morgan's assessment shows that in 2020, approximately 75% of organisations fell victim to a payment fraud attack. When doing a manual reconciliation, you risk missing any abnormalities or experiencing delays in finding them. Automated reconciliation can quickly identify these issues, reducing your risk of fraud and minimising financial harm to your company.

Optimises Internal Processes

In addition to exposing fraud and financial mistakes, bank reconciliation can highlight trends related to your internal operations. Suppose the bank account reconciliation process consistently encounters the same mistake. In that case, you can be sure that there is an internal process that can be improved to work more effectively and boost startup efficiency.

Save Time And Money

Even though bank reconciliation takes a lot of effort, it might ultimately save you and your startup or small business time and money. You can ensure that the amounts on your cash book and your bank statement are always correct by doing routine reconciliations. By doing this, there is no longer any need to revisit and work through challenging issues at the end of the year.

Improves Cash Management

One of the most important aspects of running a startup is managing cash flow. If you don't manage your cash flow well, you might attempt to spend money on marketing campaigns or new software purchases that your firm can't afford. By doing a monthly automated account reconciliation, you can be sure that you always know exactly how much money your firm has available.ย 

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How Can the Reconciliation Process Be Automated?

With only one simple solution, automation can assist your organisation in completing the procedures involved in traditional reconciliation. Thanks to Inkle Books automated reconciliation, your financial personnel will be fully empowered to perform their duties. Whether your company works with a small number of banks or multiple, using cutting-edge software can help you effectively automate cash management and increase your visibility over the whole process by enabling you to:ย 

  • Automatically and accurately reconcile bank statements.
  • Enhance mapping and matching with configurable rules
  • Bank statements can be imported automatically.
  • Improve oversight of multiple bank accounts and legal entities.
  • Reconciling transactions are created automatically.

If your company has been using manual financial processes for a long time, it may be time to move to a more robust solution. Relieve your finance staff from this burden by delegating the tedious job to capable automated software solutions, allowing your staff to concentrate on the duties that genuinely call for human intervention.

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Conclusion

Bank reconciliation could appear to be a cumbersome, busy task. However, frequent bank reconciliation is essential to managing a stable business.

Through reconciliation, you may find out where your business is spending its money, look for possible fraud hotspots, and determine whether minor bank errors negatively impact revenues. You may easily finish the reconciliation procedure and return to managing your business if you have a team of bookkeepers and technology on your side.

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