Author: Tejas Fadia, Head (Pre Sales and Implementation), Infomatics Services
Automating processes, analyzing data, and optimizing efficiency are some of the favorite corporate buzzwords. However, they’re not always as straightforward as they seem to be. Reconciliation is one of these processes.
Businesses reconcile their collections and payments on a regular basis using MS excel, but they often forget to account for other reconciliations such as loan reconciliations. Companies often fail to automate the loan reconciliation process, yet it is extremely important for companies with multiple short-term, long-term, and working capital loans.
Business owners must pay attention to the details as it can be a time-consuming, repetitive, and tedious task. In fact, automating loan reconciliations can provide several benefits to both your business and your employees.
Free from errors
Automated reconciliation eliminates human errors. It’s time-consuming to check different spreadsheets or accounts records, which makes finding irregularities prone to human error; your eyes may miss a figure or you may incorrectly read a figure.
The team may have to spend time and effort trying to resolve discrepancies in time for the month end closure of accounting books if the discrepancy is not discovered in time. With manual reconciliation, it is all too likely that you will have to stay beyond the normal closing time to check for accuracy. Automation, however, provides an algorithmic precision that can detect errors quickly and easily.
Data accuracy
When any business function is automated, two of the main reasons are increase in speed of the activity and increase in accuracy. Accounts that are reconciled automatically provide assurance of consistency and accuracy. Money mistakenly deposited into the wrong account can be corrected immediately, but it also means you can base your business-critical financial decisions on accurate data.
Getting things done faster
Automatic reconciliation speeds up your processes. All the Loan Inflows and outflows are quickly reconciled to your bank account in order to match up your records. By contrast, manually comparing spreadsheets with balance sheets, cashflows, capital and income statements is time consuming.
By comparing different statistics in different industries, Automated reconciliation processes can automate anywhere in between 40 percent to 90 percent of the data. It can even reach 95 percent+ in data intensive industries. This ensures the team is able to complete reconciliation on daily basis and thus make the financial picture clearly available to everyone in the company.
Enhancing transparency
As a result of using automated systems during reconciliation, everyone can see exactly where we are in the month-end close process and demonstrate the progress made collectively. Automation necessitates collation of data as a central repository which can help generate consolidated reports for management. Thus, having separate meetings and calls each time to discover what is happening or what has been done is unnecessary.
Having a true picture of what is happening and when is especially important for operations that have multiple entities or are global. It is possible for everyone in the Finance department to see all the transactions that have been processed.
Detection and reduction of fraud
An automated reconciliation can keep you safe from fraud because it is accurate and quick and records an audit of every action taken by users in the system. The time it takes to detect and investigate fraudulent activity is likely to be reduced, meaning that if fraud occurs, it will be less damaging to the organization.
Conclusion
Even though loan reconciliations seem mundane on a day-to-day basis, they are among the most common and time-consuming processes for many businesses.
To succeed, this process requires a great deal of focus, time and resources. You and your employees will both benefit from streamlining this process by automating it. Additionally, it will help you maintain compliance, and compliant processes lead to high-performance processes that deliver outsized results for your business and team.
