Automated Payment Reconciliation: Making Companies More Responsible

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.

What Is Payment Reconciliation?

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.

Accounts Payable Best Practices That You Should Definitely Know

The accounts department of every organization has a big responsibility on its shoulders. They not only have to account for the revenue generated by the company but also keep track of the liabilities that are getting added to the company’s record. Every company, whatever industry it may be in, has to pay its bills and timely payments are key to building trust amongst vendors and partners. Therefore, the accounts payable of the company has to be managed very effectively, and the payment should always be on time.

So, in this article, let us take a look at the accounts payable best practices for 2022 so that businesses can take a cue from these strategies and implement them to optimize their own accounts handling.

Accounts Payable Best Practices For 2023

● Optimize Accounts Payable Workflow

Since the first step in the accounts payable workflow is to gather data from all relevant sources, you need to optimize this process first. To do so, you need to create a central repository where all internal records are stored periodically and can be visualized altogether whenever tallying has to be performed. Similarly, a separate central record portal can be created for the records that are submitted by vendors or those taken from the bank, which ultimately has to be compared with your own internal records.

● Deal With Invoices On Priority Basis

Optimization of accounts payable workflow cannot happen till the invoices are prioritized in a strategic manner. One way to prioritize the invoices can be based on due dates. Those invoices that have a very proximal due date should be prioritized, and everything from cross-checking to contacting the vendor and generation of payment should be done on a priority basis for that particular invoice only.

This way, companies can ensure that there are no shortcomings in the accounts payable process and that all invoices are managed sequentially, leaving behind no liabilities or debt on the company’s name.

● Use Advanced Applications and Tools

Primarily, the handling of data makes accounts payable management extremely tedious and cumbersome. Therefore companies should make use of advanced tools, like an Artificial Intelligence-based Optical Character Recognition application as part of the accounts payable best practices.

By using OCR software, companies can seek data from even physical documents submitted by vendors and convert them to a digitally usable form. This converted text can easily be updated on the company’s portal, making data gathering and processing much easier. Further, artificial intelligence ensures that the chances of errors are minimized and that the workflow gets optimized at each step.

● Bringing Vendors On-board

The other important part of the accounts payable process is the vendor himself. You need to take him into confidence and build a smooth process for payment settlement. Arrangements like the settlement of invoices at a fixed period of 30, 60, or 90 days can be a good way to start. Further, enhancing communication with vendors also helps you inform them timely about a late payment or any other glitch in the accounts payable workflow. This way, the company’s reputation does not take a blow, and the management of invoices, debt, liabilities, etc., becomes much easier.

● Do Away With Physical Documentation

Handling, storing, and processing physical documents is a big headache in itself. Cross-checking physical documents makes the accounts payable workflow very difficult to manage and also requires a larger workforce to do the same.

Therefore, companies should only contact their vendors and the bank to seek invoices, account statements, etc., in a digital format. Having data in a digitized form makes it easier for companies to upload it on their own portals and then match the details with their internal records before processing the right payment amount. It is a very important part of the AP best practices.

● Give Attention to Payment Reconciliation

Payment reconciliation is the process where companies match and compare their internal records with the external records submitted by banks, sellers, clients, customers, etc. Since this cross-checking has to be performed before the payments for any vendor can be released, companies should cultivate a culture where payment reconciliation is done periodically.

Many organizations perform payment reconciliation on a daily basis, where at the end of the day, the accounts section has to submit reports about such comparisons. Companies that delay payment reconciliation usually face issues like cash flow obstruction, and their poor bookkeeping records come across as an embarrassment. So, reconciliation of data regularly is part of accounts payable internal controls best practices too.

KlearStack OCR For Digitizing Accounts Payable

By leveraging the advancement of artificial intelligence, KlearStack has come up with the best possible solution for optimizing accounts payable workflow. A software that helps in the extraction of required data within seconds from documents of any format or template whatsoever, the KlearStack OCR helps account managers get hold of the right data without putting in much effort. A software that helps businesses save big on time, money, and effort, the KlearStack OCR has become a hot favorite among the accounts departments of companies across industries.

Contact KlearStack representatives today to book a demo for the AI-based OCR software.

Straight Through Processing for Insurance Industry

Insurance is an industry that has to process an enormous amount of documents on daily basis. Human resources is a core aspect of the insurance industry due to the lack of automation at various levels in an insurance firm. Straight Through Processing (STP) is one such processing automation layer/characteristic that will allow insurance organizations to improve their business processes.

Research by one of the top management consultancies revealed that 68% of the insurers would like to see improvement in customer experience in the insurance industry. In the same survey, 59% of insurers also pledged to spend more on Artificial Intelligence (AI). The research provides a clear indication that the insurance industry is ready to move towards tech-based solutions to enhance its operations.

Straight Through Processing for Insurance Industry

Straight Through Processing enables end-to-end document processing to be automated without any human intervention. This has become thanks to revolutionary innovations in the space of AI and Machine Learning (ML) technology. These technologies enable self-learning of the technology and therefore can assure smooth processing of various types of documents for the insurance firms.

Straight Through Processing in Personal & Commercial Lines

STP is becoming quite common in insurance underwriting and processing claims, especially for life, medical and personal insurance policies. Such insurance policies offer very thin profit margins for insurers and therefore, automation can help eliminate unrequired labour costs and earn more revenue while spending less.

It has been noticed that the adoption of STP for commercial lines has been relatively lower compared to personal lines insurance policies. Marine insurance, cargo insurance, and other commercial line insurance policies are usually sold directly through an agent and broker. Apart from that, commercial line insurance policies are usually complex in nature. There are various different clauses that need to be mixed & matched and customized for the clients of insurance firms.

Although commercial lines is a complex insurance product, there are still worker’s compensation policies and small commercial lines policies that can drive direct sales. These insurance policies can be facilitated through STP.

Straight Through Processing for Claims Processing

On average, nearly 60% of insurers have not implemented STP when it comes to processing claims. About 10% of claims are processed through STP. However, this trend is gradually changing.

Claims for personal and individual lines of insurance policies such as health, life, car, bike etc. are being processed through STP. These coverage policies are relatively low when compared to commercial line policies. Automating and making use of advanced technology will ensure faster process times while keeping the cost low.

Insurers have achieved a significant amount of automation in digital claims payment thanks to STP.  One-third of the insurers are processing payments digitally.

Many insurers are finding ways to reduce the physical paper load for settling claim processes and payments. STP, along with smart data extraction and intelligent document processing, can help in achieving sustainable means to process claims.

Need for Straight Through Processing(STP)

STP is the most effective way of processing documents when:

  • Risks associated with the business or transaction are crystal clear
  • Data is accessible and easily available
  • Revenue or profit margins are thin

These are some of the many factors on which the need for STP can be evaluated by the insurers. This will allow them to add various data validation criteria that will help process claims and policies that match the particular set of criteria in order to achieve STP.

Insurance firms are making their headway towards the digital revolution and STP will bring efficiency and enhance productivity to boost the customer experience of policyholders. Reputation management will be therefore an added intangible benefit that STP can bring to the table.

Future of STP for Insurance Industry

Complete human intervention cannot be removed in the insurance sector. There are various complexities involved in the industry that the technology that we have to date cannot fulfil. Having said that, documents and claim process automation, at least for the personal and individual line of insurance policies is something wherein STP can be useful.

Manual data entry work can lead to many errors. This can lead to a costly affair for the organization. Time taken to process claims and handling paperwork manually is a cumbersome task as well. STP, with the help of self-learning AI technology, can provide a huge advantage to insurance firms in the future to improve accuracy rates and reduce physical paperwork.

The KlearStack Advantage

KlearStack AI will enable your insurance firm to automate the entire documentation process. Using advanced OCR technology and state-of-the-art document automation solutions, KlearStack AI can remove human intervention when it comes to processing documents.

Our experts can guide you to implement and automate your business processes so that you can focus on growing your insurance firm. If you would like to know more about our automated document processing solution, click here.

Exit mobile version