Automatic account reconciliation: its origins & functionalities?

We wanted to answer some of the questions about this solution, and this is why we got together with the people behind the scenes to hear the story of the product. In this article, Katri Kosonen and Jouni Kirjola share their insights.

What is Matching?

Matching is a tool for automatic account reconciliation. It helps companies to automate their Accounts Receivable reconciliation process, or in other words, to match incoming payment transactions on bank account statements to the right customers and the right customer invoices.

Why do you need a solution for automatic account reconciliation?

Typically, handling incoming payments is a highly manual process, which is costly and requires a lot of time and effort in AR departments and Shared Service Centers (SSC). We wanted to provide companies with a way to streamline their financial processes further by automatic account reconciliation.

The inefficiency of manual matching causes delays in the reconciliation process, which in turn means there is a lot of cash left idle in organizations. It is simple: a faster allocation makes the money available faster for efficient use. Having a large sum of unallocated cash also makes it difficult to identify which of the open receivables are actually overdue and which have already been settled by the customer but not yet allocated. With more efficient reconciliation, a company can avoid sending unnecessary reminder letters and dunning.

So, all in all, we can bring considerable benefits to organizations with this solution. For Nomentia, it is also a natural step. It will serve well our existing customers, who use our Cash Management and Invoice Sending solutions, but can fit into any environment. We have been handling bank account statements and open receivables information for cash forecasts for hundreds of our customers. We have been dealing with this data for a long time, and now we have the functionality to support our customers’ processes even further. The first step is to automate the matching of the receivables, and soon we will extend it to posting the transactions automatically, too.

What is so special about Nomentia's Matching solution?

The problem with traditional rule-based systems for handling accounts receivables is that a great many manual tasks are still needed to actually match the payments to invoices. This is due to the fact that the data needed to process bank account transactions is in multiple systems and different payment material types place very different demands on the reconciliation process. Our solution for automatic account reconciliation overcomes these challenges.

It is done with advanced data enrichment capabilities, which means we can bring in data from third party sources to increase the proportion of payments that are matched automatically. This is the data in customer database or on payment advices, for instance, that the person handling the matching would check manually. Another perk is the assisted matching feature. Even when a transaction cannot be automatically matched, the system gives the user suggestions and supports the manual steps of exception handling.

Why is this a relevant solution?

The fact that Matching is a genuine answer to a very concrete customer need. It helps solve major bottlenecks and saves time and effort in an organization's current reconciliation processes – in practice, it means that a task that could have taken days to complete can now be done in hours. It is great to see how a small feature in the software can make a big difference for the customer. For example, our Matching also supports non-Latin characters, such as Chinese or Arabic, which means it can be used in a truly global operating environment with all languages.

How is a reconciliation solution created?

We have been developing the Matching solution jointly with several of our customers; global companies operating in the B2B sector as well as B2C companies with high invoice volumes. It has been great to be part of the close and active collaboration between the companies and our product development.

One of the most exciting things has been to notice that there has been no change resistance from the end users in these companies’ AR departments and SSCs – quite the opposite; they have been eagerly involved in developing their processes with automation. It will change the way they work, naturally, but they see it as an opportunity to improve the quality of their work, get rid of the most tedious routine tasks and focus on more value-adding work.