4 Steps to Automated Payment Reconciliation in 2023: A Guide for Finance Teams

As a finance leader, you know payment reconciliation is essential for accurate financial reporting. But manual reconciliation processes struggle to keep pace with transaction volumes. Is your team spending countless hours on this critical activity? Are errors, exceptions and delays putting your financial close at risk?

Many organizations rely on outdated tools like spreadsheets for reconciliation. But automation technology can transform this cumbersome process.

This guide will walk you through steps to modernize payment reconciliation. You‘ll learn how intelligent automation achieves new levels of efficiency, control and visibility. With less time spent on reconciliation, your team can focus on more strategic initiatives.

We‘ll cover:

  • The challenges with legacy reconciliation methods
  • How automated solutions reconcile transactions
  • Key benefits for your finance function
  • Steps to get started with payment reconciliation automation

Let‘s get started.

The Reconciliation Imperative

Payment reconciliation regularly compares internal and external financial records to ensure accuracy. This includes:

  • Bank transactions – Are deposits/payments matching our books?
  • Credit card activity – Do charges align to our purchase logs?
  • Accounts payable – Are vendor payments properly recorded?
  • Accounts receivable – Do customer payments match invoices?
  • Payroll – Are salary disbursements accurate?

Reconciliation ensures transactions are completely and accurately captured across banking, ERP and other systems. This prevents fraud and provides a trusted financial position.

Outgrowing Manual Processes

However, manual reconciliation strains to meet modern demands. Consider that:

  • Large enterprises execute millions of transactions each month.
  • Finance teams reconcile hundreds of bank accounts and cost centers.
  • There are often week-long delays for certain payment methods.
  • Complex B2B relationships generate high invoice volumes.

Spreadsheets and email simply can‘t scale to this level of complexity. Let‘s examine some specific reconciliation pain points.

The Data Volume Problem

  • A 2022 Datavail survey found 25% of firms say manual reconciliation causes financial close delays – more than any other factor.3
  • Per Forrester, 63% of treasury professionals find reconciling different payment systems highly labor intensive.2

The Accuracy Problem

  • An EY survey revealed 95% of organizations experience discrepancies during account reconciliation.4
  • On average, firms spend 17 hours correcting reconciliation errors each month.5

The Productivity Drain

  • The average finance department spends over 200 hours/month on manual reconciliation.6
  • Finance staff allocate 25-30% of their time to reconciling accounts.7

Clearly, legacy approaches to reconciliation are no longer sustainable.

Automated Reconciliation: A Better Way

Automated reconciliation technology resolves these challenges by streamlining and enhancing the reconciliation process. Let‘s examine how it works.

Automation Capabilities

Automated reconciliation solutions integrate with ERP, payment, banking and other involved systems. Key features include:

  • Connector modules rapidly link required data sources
  • Configurable business rules define matching logic
  • Transaction coding applies unique identifiers to payments
  • Data extraction and migration ingests high volumes of transaction data
  • Intelligent matching algorithms reconcile millions of transactions
  • Automated reporting with key reconciliation metrics
  • Customizable workflows for different payment types or divisions
  • Exception management tools to resolve discrepancies
  • Continuous transaction monitoring for real-time reconciliation

The Technology Powering Automation

Innovative technologies enable automated reconciliation to handle high data volumes with precision:

  • Robotic process automation rapidly extracts data from documents or systems
  • AI and machine learning accurately match non-standard transactions
  • Natural language processing understands unstructured transaction descriptions
  • Optical character recognition converts scanned documents into structured data
  • Cloud infrastructure provides scalability to reconcile millions of transactions

Real-World Results from Automated Reconciliation

The world‘s largest organizations leverage automation to master reconciliation. For example:

  • An insurance firm cut reconciliation time by 50% while achieving 99.995% accuracy.8
  • A bank reduced unreconciled items by 96%. Staff hours spent on reconciliation dropped by 75%.9
  • A healthcare network slashed reconciliation costs by 62%. Month-end close time improved from 10 to 3 days.10

4 Steps to Automated Reconciliation

Now that we‘ve made the case for automation, let‘s look at the steps to implement it:

Step 1: Assess Existing Reconciliation Process

Document current reconciliation workflows, tools, data sources, volumes and pain points. This establishes a baseline to measure improvements.

Step 2: Define Reconciliation Requirements

Specify your unique reconciliation rules, platforms, reporting needs and integrations required. This drives solution evaluation and configuration.

Step 3: Select and Implement Automation Technology

Choose a reconciliation platform that aligns to your requirements. Deploy integrated connectors, configure automation rules, and migrate data.

Step 4: Continuously Improve Reconciliation Process

Monitor automation results and fine-tune workflows. Expand use cases and integrations to maximize benefits over time.

Quantifying the Benefits of Automated Reconciliation

The rewards of automation are clearly demonstrated in key performance metrics:

Manual Reconciliation Automated Reconciliation
Time Spent on Reconciliation 200+ hours/month1 60-90% reduction2
Reconciliation Cycle Time Weeks for some payment types Daily, weekly or by-demand
Reconciliation Errors 17 hours/month correcting3 98-99%+ accuracy
Productivity Drain Up to 30% of staff time4 Reallocate to value-add tasks

Figure 2. Key reconciliation metrics improved by automation

Let‘s explore the major benefits unlocked:

  • Radically faster processing – Automation reconciles millions of transactions in minutes
  • Near perfect accuracy – Algorithms match complex payments with minimal errors
  • Improved control and visibility – On-demand reporting provides insights intoreconciliation health
  • Early issue detection – Discrepancies are identified and can be resolved quickly
  • Dramatic time savings – Staff hours are reduced by up to 90%
  • Increased productivity – Employees focus on high-value analysis vs. repetitive tasks
  • Proactive optimization – Reconciliation rules can be refined and enhanced overtime

Realizing the Future State Vision

For forward-thinking finance leaders, reconciliation is a prime opportunity to leverage emerging technologies – unlocking gains in efficiency, control and working capital.

Intelligent automation handles high data volumes in mainstream and niche payment channels – finally taming this mission-critical process. The future state delivers continuous, touchless reconciliation and near real-time financial insights.

Now is the time to envisage and enable the future of reconciliation. By exploring automation solutions, you can overcome the bottlenecks of manual processes. Your organization will benefit from reconciled financials you can trust to fuel data-driven strategy and operations.

Are you ready to transform reconciliation? Contact our experts today to evaluate solutions that deliver rapid ROI through payment automation.

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