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Data reconciliation is a crucial part of running a company, especially as they grow larger and amass more information. Traditionally, reconciliation is performed manually, but this method comes with many challenges and drawbacks.
Reconciliation automation has grown in popularity in the last few years, with the advent of several robust software options in the market.
However, these software tend to fall short in certain areas, and it is important to be aware of them before purchasing the software to get an optimal experience. This knowledge can also help you decide which of these software to go for, or whether switching would be a good idea.
With that said, let’s dive in.
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At many large firms, including investment banks and financial firms, a tide of growing transaction volumes and regulatory demands is putting increasing pressure on accounting departments and reconciliation software.
There is a need to contain costs and improve operational efficiency, and this can be done by utilizing the right reconciliation tools and processes.
Some companies, for various reasons, have been reluctant to employ reconciliation tools beyond the tried and tested Excel sheet. However, manual reconciliation tends to be challenging, time consuming, and prone to errors. Automated reconciliation is the undisputed answer – but one must be aware of the drawbacks of the current tools as well.
The Problem with Existing Reconciliation Software
Before we get started on the problems we discuss at length, we want to point out a few drawbacks that have equally adverse effects on your business.
The best automation software is often highly expensive. While large corporations can afford them, they remain inaccessible to most businesses. Furthermore, the price remains a thorny issue even with companies that can afford the software.
Most reconciliation automation software is not user-friendly. They can be cumbersome to use and come with a steep learning curve.
A persistent issue with most reconciliation software is inflexibility. The installation process is huge, and yet it is set up to be very cookie-cutter, so each reconciliation is generally the same.
1. It’s Not Fully Automated
Currently, there is no software that can provide you with full reconciliation automation. Inevitably, a significant amount of manual intervention is also needed. (Note that, however, you will still save potentially hundreds of hours with a robust software).
For instance, the software might not automatically sync with the bank account of your business. This means you will have to keep downloading and uploading the account statement. You will also need to put in several passwords throughout the process.
Hence, for those hoping abandon manual reconciliation entirely, there is no ideal product.
2. It is Not Guaranteed to be Error-Free
Humans might be more prone to error than efficient machines, but this does not necessarily mean machines will always give you perfect results.
Extremely powerful software such as CrushErrors might be able to vastly reduce the chance of errors, but there will always be a risk of error. There are several elements in automated reconciliation that can give rise to errors and draw out the time taken to finish the process.
For instance, if there is a standardized pricing model, most reconciliation automation software might have a hard time matching several entries for the same day for various invoices.
Furthermore, as a lot of the automated reconciliation process occurs out of sight, you might miss out on opportunities to identify potential errors, financial hardships, or misuse of funds.
3. Some Primary Roadblocks are Not Addressed
Some of the primary issues in reconciliation are varying file formats, inconsistent or inaccurate data, and patchwork systems.
Even now, many transactions cannot be reconciled automatically because of unstructured data or mis-keyed data. An example of this would be a transaction reference submitted as PDF files or a memorandum.
M&A activity causes a patchwork nature of several data systems. This causes many challenges. Financial industries (including insurance) tend to be highly active when M&A is involved. In the last 30 or so years, financial industries, on average, have accounted for over 30,000 M&A transactions each year. By deal value, they represent the largest sector.
Daunting technology obstacles are created while absorbing an entire organization, whether large or small. Reconciliation and data integration are both made far more complex.
Some software, such as CrushErrors, are better equipped to handle such massive amounts of data than others, so it is crucial that you book a demo for whatever software you are considering to fully understand what it offers.
Note that, often roadblocks are deeply embedded in organizations. Very few insurance companies fully automate reconciliation, while many more still rely on manual processes.
Most reconciliation software available in the market will come with shortfalls that are hard to work around. Having said that, there is no “perfect” reconciliation automation software, and there probably never will be.
But one software that addresses all the issues written about above is CrushErrors. It is NextGen Accounting’s patented software, specifically designed for large companies with huge amounts of data – and with the goal to mitigate the problems discussed in this article.
You can obtain it as a product, if you’d like to retain control over your daily reconciliations. Or, you could get it as a service. NextGen Accounting offers bank reconciliation services, credit card reconciliation services, and consulting services.
NextGen Accounting’s management team has decades of experience and includes former executives of Barclays Bank, Bank of America, and ICBC. Contact us today for reconciliation services or book a free demo if you’d like to get CrushErrors as a product!