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How to Streamline Bank Account Reconciliation

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Reconciling bank accounts may seem like a mundane and straightforward activity.

But effectively reconciling multiple bank accounts is easier said than done for many cash managers.

And a single slip can result in costly errors and increase the risk that fraudulent transactions will go unnoticed.  According to the Association of Certified Fraud Examiners (ACFE), proactive bank account reconciliation can significantly reduce the impact of fraud and embezzlement.

This article explores strategies for streamlining the reconciliation of multiple bank accounts. 

Bank account reconciliation challenges

Reconciling multiple bank accounts can be a complex task, especially for larger businesses and businesses that don’t have automated technology for performing the task.  Here’s why: 

  • High transaction volumes.  Accurately reviewing and reconciling a large volume of transactions across multiple bank accounts can overwhelm seasoned cash managers.
  • Outstanding checks and deposits.  Tracking and properly recording checks and deposits that have not yet cleared can make it tricky for cash managers to reconcile accounts.
  • Keying errors.  A single typo, transposed number or mis-categorized transaction can lead to discrepancies between bank statements and a company’s records.  Cash managers must then spend a lot of time researching and resolving errors, potentially delaying the financial close.  Banks may also occasionally make errors in processing transactions or creating statements.    
  • Non-standard data.  There’s no telling the format in which banks will present statements or the codes or descriptions they will use to label transactions.  This lack of standards makes it difficult for businesses to ingest statement details, often resulting in manual work.  Making matters worse, bank statements may come with varying frequency (e.g., monthly, quarterly), making it challenging to keep track of which accounts need attention at any given time. 
  • Bank fees.  It’s easy to overlook interest charges and other bank fees when reconciling bank accounts.  But these expenses can throw things out of whack when reconciling accounts.
  • Timing differences.  It’s not uncommon for transactions to appear on bank statements on a different day than they are recorded in a company’s ERP or accounting software package.  Cash managers must account for these discrepancies when they reconcile bank accounts.
  • Multiple currencies.  Fluctuating exchange rates can lead to discrepancies between bank statements and what’s recorded in a company’s ERP or accounting software package.  Cash managers must account for currency conversion rates when reconciling multiple accounts.
  • Bank account changes.  Bank mergers and changes in bank account numbers can disrupt the entire reconciliation process, requiring cash managers to update their records and processes.

There’s too much at stake to let these challenges bog down the bank reconciliation process.

Impacts of poor bank account reconciliation

Poor bank account reconciliation leads to inaccurate financial records, which could result in huge monetary losses and damage to a business’s reputation.  Poor bank account reconciliation also makes it challenging to identify discrepancies in the records and find solutions to balance sheet issues. Inaccurate balance sheets could impact critical business decisions such as taking loans, annual budgeting, and cash forecasting.  Moreover, poor bank account reconciliation can make a business vulnerable to payment fraud and embezzlement and could result in investors, shareholders, and stakeholders losing confidence in senior management and their ability to be good financial stewards.

Strategies for improving bank account reconciliation

Cash managers know that bank account reconciliation is critical to maintaining accurate records and ensuring efficient financial operations.  The question is how to streamline the reconciliation process.

Here are some strategies to make it easier to reconcile multiple bank accounts:

  • Get on a schedule.  Regularly reconciling bank accounts helps catch issues early, making them easier to resolve.  To stay on top of your finances, a good rule of thumb is to reconcile bank accounts monthly.  Some automated solutions reconcile bank statements in real-time.  Carefully review bank statements for any errors, discrepancies, or unauthorized transactions.  And be on the lookout for missing transactions, duplicate entries, and data entry errors.
  • Quit keying.  Work with your banks to provide an electronic feed that can be automatically imported into your ERP or accounting software.  Eliminating the need to re-key transaction data reduces the possibility of errors and frees up staff to focus on higher-order activities.
  • Put data in its place.  Investigate whether your ERP or accounting software allows you to create custom categories for transactions on a bank statement.  Automatically assigning categories to each transaction on a bank statement ensures accurate financial reporting.
  • Automate.  Use the reconciliation reports from your ERP or accounting software to speed up the process.  And investigate artificial intelligence (AI)-powered tools that import bank statements and match transactions with records in a company’s ERP or accounting software.  These systems can also account for outstanding checks and track any deposits that have not been cleared.  Some solutions will even match documents such as invoices and receipts.  
  • Don’t skimp on training.  The turnover that many finance departments have experienced recently is a good reason to provide your staff with a refresher on the bank reconciliation process.  Provide clear guidelines on your processes and procedures.  And review your department’s internal controls to ensure that sensitive financial information is protected.      

These strategies will help cash managers streamline the reconciliation of multiple bank accounts.

Take the pain out of bank account reconciliation

Bank account reconciliation is critical for cash management professionals in enhancing financial accuracy and mitigating the risk of fraud.  Poor bank account reconciliation has far-reaching impacts such as monetary losses, damaged reputation, and increased risk of fraud.  Inaccurate financial records could also impact crucial business decisions like budgeting and forecasting.  Reconciling multiple bank accounts can be challenging, but the right strategies can streamline the process.

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