Ask any old-time professional working in the finance sector what part of their job they wish to avoid the most, their instant reply would be payment reconciliation. Payment reconciliation involves rigorous checking of accounting records and bank statements to ensure that every official payment gets accounted for and that all balance sheets match eventually.
The problem remains that while it was being done manually, payment reconciliation became a very time-consuming and cumbersome process. Further, the chances of errors and subsequent disputes are higher with the manual payment reconciliation process. This situation calls for an automated method for payment reconciliation that not only cuts down on the time required for this process but also the chances of human errors. Therefore, in this article, let us take a closer look at automated payment reconciliation, and why are organizations keen on switching to it today.
Every company’s account section, irrespective of the industry, has one simple job to do. They need to ensure all internal records pertaining to finances completely match with the documents provided by the vendors, or the bank. In a nutshell, performing this process is known as payment reconciliation. Payment reconciliation can be defined as the procedure where every set of internal records has to be matched with relevant sources and needs to be kept up to date. Companies need a process like payment reconciliation to keep track of their business expenses and revenues generated.
Many people confuse payment reconciliation with account reconciliation. The minor difference between the two terms is that account reconciliation involves the cross-checking of records of customer accounts. However, in payment reconciliation, the audit involves cross-checking of internal records against invoices, bills, bank statements, etc.
Benefits of Automated Payment Reconciliation
Companies enjoy the following benefits with payment reconciliation:
● Accuracy in Record-keeping
Payment reconciliation is a good way to ensure that all financial records are accurate at your end. This will involve the matching of your internal data with documents submitted by vendors. Any discrepancies can be spotted and corrected spontaneously, giving more credibility to your in-house record-keeping operations.
● Decreased Workload
Automating operations is the best way to reduce the load on the workforce. The automation of the payment reconciliation process not only reduces the time required for data matching but also significantly reduces the chances of errors. However, for this to happen effectively, the software that you use for automated payment reconciliation should be enriched with the capabilities of artificial intelligence.
● Settling Payments
Businesses that thrive on mutual understanding and trust-building sustain longer in the industry. One of the key ways to enhance the responsible image of your organization is by making sure that no payments remain pending and that all deadlines are met. Automated payment reconciliation can be a method that gives you timely reminders to tell you which vendors need to be paid and which invoices should be settled immediately.
● Prevent Excess Expenditure
Companies that do not manage payment data efficiently have to bear overhead costs like penalties, overdraft fees, fees for bounced checks, etc., more often than not. With a good payment reconciliation strategy, you will always be in the lieu of your financial affairs, preventing any pitfalls, and managing to settle invoices in time.
● Practical Data Analysis
Good payment reconciliation strategies offer high-quality data on company cash flows and expenditures. This becomes a great starting point for any data analyst, eventually helping them analyze and propose strategies to optimize spending and revenue generation. This data also helps in knowing the actual financial health of the company and allows you to raise alarms in time if emergency measures need to be taken.
Understanding The Payment Reconciliation Process
The process of payment reconciliation begins with the collection of internal company records. The sources for these records can either be spreadsheets created by individual workers or accounting software. Retrieval of these documents to further process them and compare them with external records is the whole idea behind payment reconciliation.
Naturally, the next step would be to retrieve external records. These would include monthly or yearly invoices submitted by vendors and statements of accounts and loans taken from the bank.
The last step is to actually perform the reconciliation process. The reconciliation process will begin from the point where you last left off. This means that the last transaction till which you had already compared the two types of records should be your starting point. From hereon, each transaction will be reviewed either manually or through automated methods so as to see whether your internal record keeping gives the same outcomes or not.
KlearStack For Payment Reconciliation
As stated before the payment reconciliation process will require you to first retrieve internal as well as external records. In the current scenario, a large chunk of the documents, be it invoices or bank statements are physical documents. Therefore, companies require a methodology to extract data out of these records in a digitally usable form so that the automated methods can further process them.
KlearStack has come up with an advanced Optical Character Recognition tool that is enriched with artificial intelligence capabilities. The OCR tool not only helps in pulling out data from physical documents and converting them into machine-usable forms but also ensures that there are no discrepancies either. Further, since the purpose of extracting this data is analysis, machine learning models can be trained to facilitate this requirement also. To avail of the advanced benefits of our optical character recognition software, contact KlearStack representatives today.