Optimizing reconciliation with automation: Expert insights

What’s missing? What’s incorrect? Why are these entries different, and are there bank fees, unprocessed checks, or pending transactions that I haven’t accounted for? Ensuring reconciliation accuracy in reporting is no joke. Whether it falls under the prevue of a bookkeeper, accountant, or financial controller, the primary job of bank reconciliation is to ensure that a company's financial records align with bank statements.  

When drowning in spreadsheets and endless manual entries, it’s difficult to answer the questions that matter, such as: Are all bank transactions accounted for in the books? What’s the current cash balance in the books versus the bank account? Is there a mismatch in any category, and if so, why? 

Without automated software, reconciling a bank account is far too often more about putting out fires than having clear, real-time answers to critical questions. Automated reconciliation software takes these worries off their plate, bringing strategic financial oversight into focus instead of getting buried in transactional details. 

Let’s break down how automation can save your time—and sanity. 

Meet the experts

Pamela Quiroga Badani

As a seasoned Solution Manager at Nomentia with nearly 9 years of experience, Pamela Quiroga Badani brings a deep expertise in financial solutions, particularly in the automation of bank reconciliation processes. Her diverse background allows her to offer a well-rounded perspective on how automation can streamline and enhance the bank reconciliation process.

Daniel Neubauer

With over 3 years as a Senior Solution Manager at Nomentia, Daniel Neubauer is a highly experienced professional in the field of financial process automation. His expertise spans multiple areas, including accounts payable (AP), cash management, payments, collections, and document management processes. Daniel's extensive background in automating and optimizing financial operations makes him an authority on the integration of automated systems in reconciliation. 

Manual bank reconciliation: A fragmented puzzle?

Without purpose-built, automated reconciliation software, an accountant's day can become a stressful, fragmented puzzle. As Pamela puts it: "While matching transactions may sound simple, there are many cases where it’s more complex. The setup can be quick for basic cases, but to achieve close to 100% automation, it may take additional work to handle more complex scenarios like typos or different customer aliases."

Here's what a day of bank reconciliation might look like in such a complex environment: 

1. Navigating multiple ERPs and systems: With a fragmented system landscape—where each entity might have its own ERP system, accounting solution, treasury, cash management, and payment tools—the accountant is constantly switching between platforms. Because these systems seldom integrate seamlessly, reconciliation requires manual extraction and entry of data from one system to another. 
2. Manual data entry and matching across entities: For multi-entity businesses, each unit is likely to have its own set of financial records, which often leads to discrepancies. Without automation, reconciling these records involves manually pulling data from each entity’s system, comparing bank statements to multiple accounting ledgers, and trying to match transactions that don’t always align.  
3. Difficulty in cross-entity reconciliation: The lack of integration between systems makes it especially difficult to reconcile transactions that span across multiple entities. For example, if one entity pays for expenses incurred by another, tracking those intercompany transactions requires digging through various records, increasing the complexity of the reconciliation process. 
4. Silos in treasury and cash management: Treasury systems that aren’t synced with accounting or ERP systems can create massive headaches. Cash flow discrepancies between these systems might go unnoticed, causing confusion about the actual available cash balance. The accountant spends hours cross-checking these systems to ensure alignment—often finding mismatches between the payment systems and the cash records in the ERPs. 
5. Hunting down missing data: The accountant has to manually track down missing transactions, often having to communicate with different departments to clarify what may have been missed or incorrectly recorded.  
6. Increased risk of errors and fraud: With so many systems and manual processes, errors are more likely to creep in. Small mistakes in manual entry can snowball into major discrepancies, and there's a greater chance of missing transactions or double-counting payments. The risk of fraud is also heightened when the data isn't consolidated and tracked in real-time across systems. 
7. Constant time pressure and anxiety over deadlines: As each system requires separate reconciliation, the accountant faces an endless backlog of work. Without automation, completing reconciliations before month-end or reporting deadlines feels like a race against time—especially when systems don’t provide real-time insights into the status of each reconciliation. 

Reconciliation strain without automation: Common daily questions

In this fragmented setup, the questions troubling the bank reconciliation can quickly multiply, and the complexity of systems only adds to the stress: 

• What data is missing, and from which system? Which ERP or platform hasn't been updated with the latest transaction? 
• How do I reconcile intercompany transactions across entities? Can I easily track payments made by one entity on behalf of another, or do I have to manually check each one? 
• Is there a mismatch between my bank records and the data in my various systems? Why is the bank reconciliation off when each system seems to be showing a different balance? 
• How do I ensure all payments and receipts are properly recorded? What if there’s a lag in data syncing between treasury, payments, and accounting software? 
• Why am I spending so much time moving data between systems? Is there a more efficient way to match transactions without jumping between five different platforms? 
• How do I ensure consistency across the various systems? If one system is lagging, how can I identify where the issue lies in the chain of systems? 

As Daniel puts it: "Without an automated reconciliation software, the challenge is not just matching amounts but ensuring the correct identification of transactions, especially when customers provide incomplete or inaccurate remittance information.”

In such a fragmented environment, the accountant needs to quickly answer questions, but their ability to do so is limited without integrated, automated reconciliation software: 

1. Are all entities’ records aligned with the bank statements across multiple systems? 
2. Where are the discrepancies in intercompany transactions, and how do I resolve them quickly? 
3. Are the cash flow figures consistent across treasury, payment systems, and accounting records? 
4. Is there a system-wide breakdown causing mismatches, or is it a localized issue? 
5. How much manual work am I going to have to do today to reconcile all the records across entities and systems? 
6. Am I missing any critical transactions due to data fragmentation? 

"Even with automation, the last 1-3% of reconciliations can take a full day, but automation handles the majority of transactions with ease." 

Without automated reconciliation software, these questions remain harder to answer. The fragmented nature of the system only adds complexity and time delays, making it nearly impossible to reconcile efficiently across the business. Automated software, on the other hand, brings these systems together, reduces errors, and ensures that reconciliations are done with accuracy and speed—across all entities, systems, and departments. 

How does reconciliation automation work? 

Automated bank reconciliation software simplifies and speeds up the process of matching a company's internal financial records with its bank transactions. It works by automatically importing bank data through bank feeds and then matching transactions such as payments and deposits with corresponding internal records (like invoices or ledgers) based on criteria like amounts, dates, and invoice numbers. When discrepancies or exceptions arise, like incorrect amounts or missing references, the software flags them for review. The solution can also integrate with ERP systems, updating financial records automatically and ensuring consistency across all platforms.  

Key areas of reconciliation automation

• Automated matching: Automated matching plays a crucial role in reconciling bank records with internal accounting data. When a customer makes a payment, for example, the system looks at details like the payment amount, the invoice number, and the date and automatically matches this information with the appropriate customer record. This feature is especially useful in large businesses with high transaction volumes, where manually matching each payment would be inefficient and error-prone.
  
  To quote Pamela: “The reconciliation software also adapting to exceptions and discrepancies in matching, ensures that even the most complex cases can be handled smoothly. For instance, if a customer payment does not match the exact invoice amount due to a discount or a typo in the invoice number, the system can still suggest possible matches, flagging discrepancies for further review by the accountant. This significantly reduces the time spent investigating mismatched transactions.” 
• Exception handling: While automated software streamlines the reconciliation process, there will inevitably be exceptions that require attention. These exceptions are flagged by the system, allowing the user to quickly identify and address them. Common exceptions might include payments with incorrect amounts, missing invoice references, or duplicate transactions.
  
  In Pamela's words: “The software’s ability to handle exceptions is what sets it apart from basic reconciliation methods. When discrepancies are detected, the software categorizes them based on pre-set criteria—such as payment type or customer terms—allowing users to resolve the issue quickly and efficiently.”  
• Integrations with ERP and financial systems: A significant advantage of automated reconciliation software is its ability to integrate with existing ERP systems, bank feeds, and general ledgers. Integration with ERP systems ensures that financial data from various departments (sales, accounts payable, etc.) is automatically pulled into the reconciliation process.
  
  As Daniel says: “By connecting directly with bank feeds, the software can also pull in real-time transaction data, ensuring that reconciliations reflect the most up-to-date information available. The seamless integration with these financial systems allows for a streamlined reconciliation process.” 

Benefits of automated reconciliation

Time and cost savings 

Automated reconciliation software can make a big difference in a company’s financial reporting. As Pamela explains: "Automating the reconciliation process saves time and reduces errors, with the system proposing matches and only requiring human verification for specific cases," she says. 

• Automation reduces manual work: Automating time-consuming reconciliation tasks frees up finance teams to focus on higher-value activities. 
• Faster reconciliation process: Significantly reducing the time spent on manual data entry and transaction matching speeds up the entire reconciliation process and cutting operational costs. 

Increased accuracy and reduced error rates 

The accuracy boost is another major benefit, as automation drastically reduces the risk of common human errors. "Manual processes lead to human error, like assigning payments to the wrong invoices," Pamela points out, "while the system automatically checks and proposes matches." This ensures more reliable and accurate reconciliations. 

• Eliminating human errors: Automation minimizes the risk of common errors like incorrect transaction matching, missed payments, or manual data entry mistakes. 
• Consistent matching: Automated systems ensure that matching is done consistently according to predefined rules. 

Real-time financial insights 

“Faster reconciliations provide more current financial data, contributing to real-time financial reporting and insights," Pamela explains. With quicker reconciliations, companies gain up-to-date financial data, allowing for better reporting. “This leads to improved cash flow visibility, making it easier to track finances and provide more accurate forecasts, ultimately offering a clearer picture of a company's financial health.” 

• Up-to-date financial reporting: Faster reconciliations provide more current financial data. 
• Improved cash flow visibility: Quick reconciliation enables better tracking of cash flow, offering more accurate forecasts and a clearer picture of a company's financial health. 

Tackling the challenges of reconciliation automation

"Data quality is everything," Daniel starts. "If your internal data or bank statements aren’t clean, the reconciliation process is a nightmare. You need accurate, organized data from the start to avoid headaches down the line. Think of it like cleaning up your inbox before you can actually get to work." 

Of course, any new system means change, and Daniel knows that "People don’t like change, especially when it involves new tech. The key is making the training approachable. You want to ease them into it, not just throw them into the deep end. It’s about creating confidence, not fear. Automation in bank reconciliation is about increasing efficiency, not eliminating jobs—employees can shift to more valuable work while the software handles the repetitive tasks." Managing that resistance is half the battle, but once employees see the benefits, adoption gets much easier. 

When it comes to cost, Daniel points out the delicate balance between "upfront costs and ROI." "You’re going to pay a premium at first, but the savings and productivity gains? They’ll come soon enough. It’s about seeing the bigger picture—cutting down on manual work, minimizing errors, and freeing up time to focus on more strategic tasks."  

How to build a business case for reconciliation automation? 

Creating a business case for reconciliation software involves demonstrating how the software will deliver value to the organization by solving key pain points and aligning with broader business goals. Let’s look at an example: 

1. Define the problem: It’s best to start by clearly articulating the current challenges with your bank reconciliation process. Identify inefficiencies, pain points, and the impact these have on the business.
   
   For example, Mega Manufacturing has been relying on manual processes for bank reconciliations, which are time-consuming and prone to errors. The finance team spends an average of 30 hours per week manually matching transactions from bank statements with internal records, resulting in frequent errors that require correction and delay in reporting. 
2. Establish objectives: Define what the business hopes to achieve by implementing reconciliation software. Objectives should be measurable and aligned with the company's broader financial goals. Our example company comes up with the following objectives:
   • Reduce the time spent on bank reconciliations from 30 hours per week to 10 hours per week. 
   • Increase reconciliation accuracy, reduce errors, and improve financial reporting. 
3. Quantify the benefits: To build a strong business case, you need to show the ROI of investing in reconciliation software. Quantify both the tangible and intangible benefits the software will bring to the business. Mega Manufacturing comes up with:  
   • Time savings: By reducing reconciliation time by 20 hours a week, the company saves 1,040 hours per year. At an average hourly wage of $40 for finance staff, this results in $41,600 in annual time savings. 
   • Cost Savings: With fewer errors and reduced manual intervention, the company expects to save $10,000 per year on error correction and rework. 
4. Identify the risks: Acknowledge the potential risks of implementing reconciliation software and how they will be managed. For Mega Manufacturing, the situation looks like this:  
   • Implementation cost: The initial cost of the software is $15,000 for setup and integration.
   • Resistance to change: Finance staff may initially resist adopting the new software. 
     • Mitigation: Choosing a user-friendly solution and a provider with responsive support to ease the transition. 
5. Ask the right questions: Asking the right questions is a crucial part of building a business case. It helps identify specific needs, ensures the solution aligns with business goals, and highlights the potential return on investment. For our example corporation, the key questions included: 
   • What integrations does the software support? Reconciliation software needs to seamlessly integrate with your existing financial systems (ERPs, bank feeds, general ledgers, and payment platforms). If the software can’t integrate with these systems, you may end up with siloed data, which defeats the purpose of automation and could require manual adjustments. 
   • How does the software handle different types of transactions (incoming payments, bank charges, customer refunds)? Not all transactions are the same, and the software must be able to handle a variety of scenarios, such as customer payments, vendor payments, bank fees, and interest transactions. The more flexible the software is in handling different types of transactions, the better it will suit the complex nature of business reconciliation processes.
   • How does the software match transactions and handle exceptions? Automated matching is at the heart of reconciliation software. You need to know how the software matches bank transactions with internal records (e.g., invoices or payments). Equally important is how it handles exceptions, such as mismatched amounts, incorrect payments, or partial payments. The software should be able to flag exceptions and provide tools to resolve them quickly. 
   • How customizable is the software to our specific reconciliation rules and processes? Every business has its own set of rules and reconciliation workflows. The software should be customizable to accommodate these specific rules, whether related to payment terms, discounts, or multi-entity reconciliations. Customization ensures that the software can adapt to your needs rather than forcing you to change your processes.  
   • How does the software handle multi-entity or multi-currency reconciliation?  If your business operates across multiple entities or countries, the software should be capable of handling multi-entity or multi-currency reconciliations. It should facilitate consolidated financial reporting and deal with complex currency conversions, ensuring that your global operations are accurately reflected in the reconciliations. 

Better reconciliation with automation: Conclusion

Automated bank reconciliation software is a powerful tool that transforms the reconciliation process by increasing efficiency, accuracy, and scalability. By automating routine tasks such as transaction matching and exception handling, businesses can save time and reduce errors. The integration with financial systems ensures real-time data synchronization, while the flexibility to handle complex scenarios makes it an invaluable asset for organizations of all sizes. Embracing automation not only simplifies reconciliation but also enhances overall financial control, allowing businesses to focus on growth and strategic decision-making.