23 Nov Automating Bank Reconciliations – How and Why?
What is bank reconciliation – and why should you be automating the bank reconciliation process?
Good bookkeeping is all about recording and matching your financial transactions. Over a usual week of trading, you’ll have a range of payments deposited into your bank account. You will also have a host of operational expenses withdrawn from that same account.
To keep on top of this, you must match each line on your bank statement with the transactions recorded in your accounting software. This process of matching the incoming (or outgoing) transaction with the relevant receipt, invoice, or supplier bill is called bank reconciliation.
Why is bank reconciliation so labour intensive?
Bank reconciliation (or bank recs) is not the most thrilling part of the accounting process. But it’s essential if you’re going to have an accurate overview of your current accounting balance and the balance in your business bank account.
Traditionally, to complete the bank recs, you would need to:
- Get a copy of your bank statement for the period
- Check the deposits (cash coming in) and withdrawals (cash going out) on the statement
- Look at the related credits and debits in your accounting software
- Match these transactions to the relevant receipts, invoices, or supplier bills
- Reconcile your balance in the bank with the balance in your accounting software.
It’s a necessary process – and something you have to keep on top of. But it’s also a laborious and time-consuming task that eats into your admin time. So, is there an alternative?
How can automation help to lighten the workload?
Accounting software has evolved in leaps and bounds over the past decade. And many of the innovations that are now available focus on alleviating the time-intensive tasks, like bank recs.
Modern cloud accounting packages offer a range of ways to lighten the financial workload and improve speed, accuracy, and efficiency.
- Live bank feeds – these software integrations pull all the data from your online banking into the accounting software, giving you a live feed of your bank transactions.
- Automated matching – artificial intelligence (AI) and machine learning are used to automatically match the correct invoices and bills with your bank transactions.
- One-click matching – in a platform like Xero, you just need to review the automated matches and then click OK to match the transaction and complete the bank rec process.
- Reduced human error – with an algorithm doing the matching, there are fewer errors in the bank rec process, and the whole process is completed in seconds, rather than hours.
- Real-time bank and accounting balances – with live bank feeds and real-time data in your accounting software, you have the most current overview of your balances.
Talk to us about automating your bank reconciliation process
If your current accounting platform doesn’t allow for automated bank recs, now’s the time to upgrade. Cutting out the manual processes gives you more time to focus on higher-value financial tasks. It also keeps the reconciliation process ticking away silently in the background.
Get in touch to discuss switching to a new accounting platform.