Bank reconciliation is a crucial part of company financial management. It helps to ensure control and healthy finances.
In other words, we can say that this is something a company cannot function without. This is why no business cannot go without financial institutions.
It is also difficult to a level that often demotivates and leaves you drowned in details that doubt the real intent of the whole process.
It has become a daily routine for thousands of companies and a harsh reality for several financial institutions and organizations.
Account reconciliation is a timely and frequently frustrating operation, yet flaws and inefficiencies often cause errors and inaccuracies.
Therefore, here we found 4 more common problems related to account reconciliation:
1. Slow data input processes
Many companies do not have fast and simple processes. They have a slow and tedious process.
For example, it can include works like a banking system, downloading a statement and uploading it into an ERP system before transactions can be differentiated.
However, because banks will use various file formats, a user will first need to align and standardize files before uploading.
It can be a time taking process with large firms with many transactions that can quickly drain the team’s resources, and they would have less time for other work.
2. Error-prone inputs
Another common mistake takes place in this process and manual inputs become a place for errors.
Mistakes can happen at any stage when data is being manually moved and re-entered between systems, and the more steps in the process, the more likely this becomes.
Errors can occur while downloading, uploading, file standardization and record matching.
And it can give you wrong information that costs you later.
3. Potential for fraud
There is a possibility for fraud, therefore it needs reconciliation.
These procedures don’t have enough control, therefore dishonest staff members might utilize them to conceal the existence of wrongdoing within the organization.
For example, when statements are being downloaded and transferred to ERP systems, a staff member doing these tasks manually may alter the statement to hide evidence of fraud.
4. Efficient Auditing and archiving
The records themselves are stored securely and made available for audits if necessary, when reconciliation processes are finished, although this can come with its own challenges.
Reconciliation outcomes that are still kept in paper formats take more space, are more costly, are much more difficult to look through, and have limited traceability.
Solution
If you want to avoid these issues, you need to have effective reconciliation software.
These solutions can free up financial professionals from many manual tasks and use automation to reduce the chance of mistakes and interference while also providing comprehensive, searchable digital records of all actions.
There are several options available, and while there may be costs associated with employee training.
In the long term, these technologies can improve the accuracy of your cash flow forecasts and guarantee that your business is ready for any future requirements for reconciliation that may arise as a result of the expansion.
Conclusion
Common problems usually occur during bank reconciliation due to the nature of complexity but it can be avoided by using effective reconciliation software.
Not only this, but these solutions also help to take much manual work of employees and use automation to minimize the risk of mistakes and interference.
