Reconciliation automation: The key to scalable financial operations

One area where automation technology can provide a real competitive advantage is within financial management, particularly in the area of reconciliation automation. 

In this uncertain economic climate, founders and CEOs are under increasing pressure from investors to make high-consequence decisions about the future of their businesses. 

These conditions translate to a new problem facing CFOs: expectations to deliver up-to-date financial information under shorter and shorter turnaround times. 

53% of surveyed finance leaders strongly agree that CFOs must determine how to balance traditional responsibilities with new mandates. 

So, staying in front of these new demands from financial stakeholders should result in better decision-making. If leaders of the business have access to reliably current financial statements, they are better able to retain a firmly proactive stance amid market turbulence. 

Digital transformation in the finance department is the engine powering the acceleration of your team’s efforts. Reconciliation automation helps CFOs increase accuracy, reduce risks, and gain the capacity to keep stakeholders informed at speed. 

What is reconciliation automation?

Reconciliation automation replaces manual, spreadsheet-based processes with software-driven ones. It standardizes the reconciliation process, increases its pace, and frees up resources. 

Much of reconciliation automation is highly repetitive, with simple, rules-based input-output processes. A few software providers are pushing the technology further afield, harnessing AI-based systems to implement intelligent suggestions as it learns from the dataset and user actions over time. 

Advantages of account reconciliation automation

#1: Increased accuracy 

Human error is a major contributor to lengthy reconciliation processes. 

Employing reconciliation automation means no more combing through spreadsheets line by line to find the one mistyped integer that is breaking the formula. It relieves the finance teams of this burden and provides assurance to the CFO that reconciliations are pristine. 

#2: Better governance

What are the risks of decentralized spreadsheet reconciliation methods? In addition to the potential for errors and loss of time, the approach makes it much more difficult to govern access to sensitive information. Salaries, bonuses, and other protected data are embedded in these spreadsheets. 

Centralizing account reconciliation under one platform gives CFOs greater control over who can or cannot access company financial data. 

#3: Enhanced security 

Reconciliation software provides an added layer of security from hackers attempting to access, leak, or exploit company financial data.  

#4: Productivity gains

Automation should not necessarily take the place of your head count. Instead, it will help your staff do their jobs more efficiently.

On average, financial teams spend at least one-third of their time on transaction reconciliations. By substantially reducing the time spent on the reconciliations that software can automate, they can focus on addressing any edge-case scenarios or work on projects that require more brainpower.  

#5: Speed 

Automated tools do their best work under highly repetitive, predictable conditions. 

As a result, reconciliation automation enables teams to close the books faster. 

Concerns related to reconciliation automation

Digital transformation of financial processes requires CFOs to flex their change management skills. Resistance to change is a common blocker when striving to onboard new approaches — even when the data overwhelmingly demonstrates that a change will enhance productivity. 

But the CFOs embracing necessary technological change are better positioned to remain in front of a changing landscape and its new demands. 

Adding a new expenditure to the P&L statement may also present concerns. Run the numbers: estimate the monthly hours saved to calculate your projected ROI 

Enterprise resource planning (ERP) software and reconciliation automation

Onboarding an ERP often includes reconciliation automation features as part of a broader suite of capabilities. 

ERPs allow businesses to onboard financial data and automate tasks related to financial planning and analysis (FP&A), such as: 

• Accounting 
• Procurement 
• Reconciliation
• Financial planning 
• Forecasting 
• Resource management
• Reporting

Features to look for when identifying a provider

Automated reconciliation processes address time-intensive tasks such as transaction matching and aggregating data for reporting purposes. Beyond these fundamental features, ERP and reconciliation automation platforms offer additional conveniences to streamline finance workflows. 

Cloud-based

Perhaps it goes without saying, but your reconciliation automation solution should be a cloud-based platform that leverages best-in-class encryption and security practices. 

Operating from the cloud allows for easy software updates from your provider, which can protect your business from security incidents and provide access to new features. Perhaps most importantly, a cloud-based solution enables a remote workforce to remain productive, no matter where they work, and ensures data updates reach every platform user in real-time. 

Multiple input sources

The best case scenario with reconciliation automation software is when it enables data flows among more than one source. 

For example, your business likely uses different platforms to capture employee expenses, process sales transactions, plan resources, and generate financial reports. Ideally, your reconciliation automation platform can play in each of these sandboxes:

• Importing data from all relevant sources, from software to spreadsheets.
• Centralizing into one single source of truth.
• Outflowing into software that enables FP&A teams to do their work.

Violations flagging 

Automated processes rely on the rules you set. Such options may include flaggable policy violations, such as when a department or user has surpassed a spending threshold. Error flags, such as duplicate transactions, overpayments, and late invoices, can also be embedded in the reconciliation process. 

This feature helps financial controllers exercise greater fiscal discipline, identify bad actors sooner, and focus attention on resolving mistakes. 

Currency conversion

Businesses operating with multiple currencies can add another layer of complexity to their reconciliation operations. Some may opt for software that does currency conversion work for them. 

Leveraging this feature could result in increased fees. You may be able to secure more favorable exchange rates elsewhere, so not all businesses will opt into a platform’s currency conversion offering. 

Role-based rules and delegation 

Financial governance relies on enforceable confidentiality and accountability. Within a spreadsheet-based system, the inner circle of staff with access to financial information must remain relatively small. 

Certain platforms allow customizable, role-based access to sensitive financial data. In effect, this widens the circle of contributors to reconciliation-related efforts, enabling directors and managers to delegate effectively without raising confidentiality concerns. 

Automated, real-time reporting 

Real-time access to accurate financial information is the greatest advantage presented by automation reconciliation software. 

APIs make it possible for reconciled spend data to flow from a single source of truth to your reporting platform in real-time. This way, CFOs can always have the most up-to-date balance sheet, cash flow, income, and P&L statements on hand in case they are needed quickly.

Such preparedness demonstrates consideration for the changing times and the evolving role of the CFO. With increased expectations to demonstrate off-balance sheet value to shareholders — quantifying social good contributions, estimating the contributions of internal talent, and other complex undertakings — digital transformation creates the necessary space to pursue novel initiatives, allowing CFOs to further increase their value.