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Digital transformation for banks is crucial to retain customers and achieve loyalty in a highly competitive market bustling with new players and features. Ideally, this would mean that every single step of the customer journey from opening a bank account to day-to-day operations, credit applications, paying bills, etc. can be done online, without a physical presence in a bank’s branch. To ensure customers’ smooth digital journey, traditional banks need to re-assess and redefine their operating models. This process is accelerated by the global pandemic which is transforming customer behavior and habits all over the globe. At the same time, financial services markets are disrupted by fintech companies successfully stepping in niche areas like payments, loans, and personal finance. A Statista survey in Great Britain shows that in 2019, 73% of the respondent were using online banking regularly, most of them on their smartphones. Similarly in 2018, about 61% of Americans used digital banking, which is set to rise to 65.3% by 2022. The so-called neobanks, which operate exclusively online and don’t have physical branches, are targeting these customers, as well as the unbanked population. They gain positions because of the convenience of use, lowers costs and additional features such as spending trackers and added value through third party products (insurances, investments). Apart from the digital disruptors’ challenges, traditional banks are facing some major obstacles on their way to digitalization. Business transformation and optimization projects are struggling with legacy infrastructure, tightened security/compliance regulations and data privacy concerns. The adoption of modern core systems requires huge IT budgets and complex migration projects. Reorganization of branch networks and back-office operations is also challenging as it comes with changes in the workforce and often copes with employees’ resistance to innovations. The transformation and automation of financial processes are usually part of this bigger effort. For the reconciliation area, this means a high-volume transactional environment and process complexity. The deployment of an automated reconciliation solution, however, does not have to mean a heavy implementation and involvement of technology-based resources. ReconArt’s experience from a number of deployments in the banking industry outlines several major challenges. Reconciliation processes are segmented and spread across departments with fragments in Accounting, Finance, Operations, IT, Risk and Compliance. Subsequently the approaches followed vary from manual reconciliation in Excel spreadsheets to usage of some in-house developed tools. For the accounting teams, this means additional pressure on balance sheet reporting and period-end close. Another layer of complexity is added by the high transactional volumes, various systems/data sources and multiple business processes involved. Dealing with data sources in different formats requires the involvement of technical resources to process any changes/add new file formats. In the end this extends the time necessary for the implementation of new reconciliation processes. ReconArt’s deployment in banks offers: • A centralized reconciliation repository for all types of reconciliations in one platform • Enterprise scalable architecture to handle from hundreds or thousands to millions of transactions daily • An integrated Scheduler to automate all tasks • Both cloud and on-premise options for deployment • Highly intuitive 100% web-based user interface that is easy to learn and navigate The transition from manual/semi-manual reconciliations to one single platform that integrates daily reconciliations and month-end close workflows is an important part of the digitalization of banks’ financial systems. Automation capacities allow financial teams to focus on reconciliation results and exception management, rather than the matching process itself. On top of streamlining the reconciliation, such a solution adds control points and auditability. The data processed through the reconciliation system can also be used for analytics based on actual data, thus allowing faster and more precise decisions and strategy adjustments. Today everyone expects the same high level of digital experience in banking as in any other sphere of life. However, this is still a hard benchmark for banks to achieve. Automated reconciliation can contribute a lot to a smoother transformation of financial processes in banks, thus becoming a factor for profound improvements in customer service delivery. ...
What is Supplier Statement Reconciliation? The process of reconciling a supplier statement is quite plain and simple. The Supplier submits a list of transactions and the outstanding balance of unpaid invoices for a given period. The Buyer’s Accounts Payable (AP) department, on the other hand, compares those records to the internal AP ledger to identify any differences. Those might be invoices or credit notes on the Supplier statement that are absent in the AP ledger or vice versa. The comparison between the two data sets is made both at transactional and balance check points. Besides the net invoice value, there might be fees, discounts, and other payable items that need to be duly verified and booked. The supplier statement reconciliation can take place either prior to or following the actual invoice payment authorization. This type of reconciliation guarantees timely identification and investigation of any discrepancies or errors. Challenges F&A teams are struggling with various causes of supplier statement discrepancies. Many companies use outdated “pen and paper“ methods for reconciliation, which prove to be an error-prone and laborious. Increasing transaction volumes from various accounts and multiple suppliers strain the accounting team resources to cover all bases. Processing large numbers of invoices manually has some undesirable side effects such as oversight of supplier credits due, over or underpayments, posting errors, and duplicates. Below are listed some of the most frequent supplier statement challenges the F&A teams are coming to grips with. a) Timing Delays Time differences might occur accidentally or organically due to contractual payment term. In any case, the Buyer organization must track the transaction lifecycle closely in order to avoid potential penalties or losing commercial discounts and preferences, for example. When a company issues a payment to a supplier, that payment is immediately reflected in the internal records. But the supplier might have not received or been notified about the payment before issuing its period-end statement. The discrepancy should be identified by the Buyer during the supplier statement reconciliation. These unresolved items are usually referred to as “payments in transit”. In a similar situation an invoice could be posted in the accounting records of the Supplier but not the Buyer. An invoice issued by the Supplier at the end of the period and instantly included in the supplier statement might fall short of processing time to appear on Buyer’s side in the AP ledger. One single deviation in the books might not sound like a big deal, but when you factor in scale and time specific purchases, that is a different story. b) Paper and PDF Sources Frequently, the supplier statements are produced in paper or PDF format. To identify exceptions, the AP teams lingers with endless manual checks of transaction details in the accounting system. Clearly, the approach is unsustainable if the Buyer operates with a broad network of suppliers. Facing period-end deadlines, some organizations choose to focus on their largest / high-priority supplier accounts, and hopefully catch up with the smaller ones later. c) Duplicating Payments Reliable controls to prevent double payment are rarely at place. Sometimes the invoice payment is initiated but yet to be allocated with the Supplier. The payment status is unclear and if the Buyer fails to track its progress adequately duplicates are created and later (if at all) reversed. Such chaotic handling of the process increases the workload and above all incurs finances losses. d) Balance Sheet Inaccuracies Ensuring supplier balances accuracy is a cornerstone of financial transparency. In order to validate the reported vendor liabilities on the Buyer’s balance sheet statement, internal and external auditors often take a sample of a selected vendor statement. Only a consolidated reconciliation report with full audit trail documentation attached would justify potential material differences. e) Limited Reporting Capabilities The Supplier Statement Report should incorporate outstanding items with clear overview of their aging and resolution rate over time. Many accountants still spend incredible amount of their time generating such reports in spreadsheets, struggling to respond to various queries. Supplier relationship management and saying on top of supplier spend depend on clear and precise reporting input. Transforming the Supplier Statement Reconciliations with ReconArt Implementing a reconciliation automation solution is a sensible risk mitigation measure with attractive ROI, especially for companies with high turnover and heavy transaction backlog. ReconArt argues that our cutting-edge reconciliation solution bridges the gaps mentioned above and empowers AP teams to streamline and manage their process effortlessly. Efficiency, transparency, and audit readiness are the immediate benefits our clients enjoy following the ReconArt implementation. Process Structure There are two high level approaches to pull up the supplier statement reconciliation. Monthly supplier statements reconciliation. Essentially, this is a three-way matching completed in 2 steps at month-end. Step 1: comparing the monthly supplier statement against the internal data source to confirm that the invoices due in the respective period correspond to the purchase orders approved.Step 2: comparing the banks statements against the internal GL data source to verify that the initiated bank transfers correspond to the amounts stated in the outstanding invoices. Conceivably, at this point the payments have already been done and the Buyer’s Accounts Payable team seek to establish any discrepancies in covering procurement liabilities. The matching is performed at both balance and transaction level so a clear focus is maintained on both long-term and immediate action items. Daily Supplier statement reconciliation. In this case: A supplier statement is submitted every day and it is matched against the Buyer’s internal records.The resulting matched items are exported to another system to proceed with the actual invoice payment. Basically, it is an approval workflow, where supplier data is imported / matched / exported automatically and the payments are authorized as a final step. Verification that those payments have hit the Buyer’s bank account correctly is made in a separate step, as a straightforward bank reconciliation process. The Benefits Delivered by Our Reconciliation Software With ReconArt the accounting departments streamline the supplier statement reconciliation process within a unified digital environment waiving manual spreadsheet manipulation. ReconArt is flexible and versatile and adapts to any business process logic, however complex. ReconArt offers robust functionalities for end-to-end automation of the AP recs such as configurable rule-based matching engine, tracking and management of outstanding items plus automated exceptions categorization. This reconciliation tool features advanced ETL capabilities to retrieve, import, cleanse and enrich data from any source and in flat file format. The matching rates delivered as a result are not only higher but superior in terms of speed and precision. ReconArt is a powerful risk mitigation tool as far as finance, accounting, operations and compliance is concerned. It can schedule and manage your preparer / reviewer / approver workflows pertaining to reconciliation with strict separation of duties observed. It keeps a granular audit trail for each transaction across its entire lifecycle. Generating consolidated reports and analytical insights on a number of monitored indicators, including aging of the transactions, now only takes a few clicks. As a cloud-based reconciliation solution ReconArt adds value for organizations looking to achieve full scope automation of their reconciliation process without excessive investments in IT infrastructure associated with application installation on premise. Our platform integrates seamlessly with your core financial systems. It does not demand heavy customization or IT expertise and stands out as a truly business owned tool. ...
A genuine reconciliation tool is not about a pretty face, but all about a mighty heart. The reconciliation space is burgeoning and overcrowded these days. Software solutions promising miracles are just round the corner. But a closer look reveals that few offerings include a robust matching functionality and that after all is the essence of a reliable reconciliation solution. Actually, ReconArt claims to be the leader in terms of ability to sort out automatically enormous transaction volumes in virtually any reconciliation situation. Prepare your data for matching The ReconArt reconciliation tool captures industry experience with clients who know what millions of transactions implies. The key to productivity when it comes to heavy transaction workloads, however, lies within the ETL capabilities for data integration and enrichment. A prerequisite for high matching rates is the quality of data input. Our platform takes care of that, too. It is configured to extract the files from the designated source, transform the data to improve its usability, and load it into the correct reconciliation account. Cleansing the import data is an essential preparation step to support the consistency of the matching process. The matching rate carried out with an automation solution is a good indicator whether your current reconciliation framework is capable of above-adequate performance. ReconArt scores higher than the average and sets the benchmark for efficiency and speed. The major factor for that achievement is the sophisticated, yet easy to use matching engine. Teach ReconArt your business logic ReconArt originates from its matching engine. The whole system has been built around that powerful core. The underlying principle says "if you can describe a matching relationship verbally, you can write a rule to reflect it." A rule is a logical statement which determines whether and how two data sets are a match. We know that finance and accounting operations rely on sound logic and mathematical consistency translated into strict rules. The ReconArt system can be taught which criteria to apply in what sequence to compare two sets of data. The matching criteria are configured to serve the specific client requirements and their unique business process structure. The matching outcomes produced as a result imply no human errors and huge time savings. Virtually all types of reconciliation scenarios typically encountered by the F&A teams can be accommodated within one unified environment. ReconArt is intuitive and user-friendly. The system configuration does not require intervention in the back end or coding experience. The user interface has Excel like layout. Intermediate to advanced Excel skills in defining formulas and some common sense can be put into use here. The library of functions is handy to pick the right expression. The Wizard Rule screen can give a hint for you as well. Reconcile by your rules The high level set up of account reconciliation involves the initial creation of matching accounts with two sides containing the compared data sets. Side A can be the external source, while side B is usually the internal accounting record. Matching rules are created for each account individually covering different matching scenarios to optimize successful matching rates, when combined and executed by the system. User preferences in the construction of the rules determine: The combination of criteria for comparison – those might be unique identifiers or familiar patterns in the data. The sequence of the rules execution during the matching job. The direction of the rule application – A to B, B to A, A to A, or B to B side. The matching relationship, i.e. the items which make up the matching pairs: One to One, One to Many, Many to Many, Grouping. In ReconArt, rules have different levels of automation permission: The rule is applied upon user request, matching pairs are presented to the user but it’s up to him/her to confirm them manually. User initiates the matching operation, the rules attached to that account are executed in the specified order, and transactions are matched automatically leaving only the exceptions for manual handling. At the highest level of automation permission rules run as fully automated, scheduled tasks. Variance tolerances can be set up if required. The variance allowed depends on user preference to call transactions a match within a specified deviation in the amount (measured either in percentage or absolute number). After the matching dust settles ReconArt keeps a detailed audit trail for each transaction – what is matched against what, which rule is applied, every single user or system initiated update. Besides matching, ReconArt equips its users with instruments for fast-track exceptions resolutions - filtering & sorting functions, reporting widgets, and automatic exceptions categorization. Investigation of the outstanding items is where the real work of the reconciler begins. ReconArt is a truly business-owned reconciliation solution tailored for growth and continuous process optimization. It provides freedom and flexibility for the user to refine rules and adjust to dynamic business changes without the need of constant support or professional services....
Introduction. Digital Transformation and Financial Data. When it comes to financial data streams, paper as a medium has irreversibly lost the battle with e-formats decades ago. “Digital” does not mean only paperless, but above all being able to structure and analyze the heaps of scattered data in a technology environment. Businesses and organizations have put tremendous efforts to digitize their financial data and take productivity to a new level. Electronic files can be transferred, stored and processed in a convenient, fast, and secure manner. Admittedly, the largest “stakeholders” in the global digital infrastructure for financial data exchange are the banking institutions. In the most general sense, the cash balance reporting involves two parties – the customer and the depository institution. But as the customer may have contractual relationships with a dozen of depository institutions (originators of the financial statements), a sensible option would be the involvement of intermediaries such as third-party data processing firms to serve as a focal point for information streams prior to consolidating them in a single report emitted towards the customer for his convenience. Apparently, this multiplies the paths of financial data flow. Transaction Banking Survey 2016 shows that only 7% of corporates have chosen to work with only one banking partner. The bigger the client, the more bank relationships it maintains, generally. Also, 60% are serviced by 2 to 10 banks. More than half of the interviewed companies above the $5 billion revenue threshold, use 20+ banking partners at a time. As per bank accounts, 40% of corporate respondents operate with 150+ accounts, while 20% belong to the 1-20 accounts bucket. Operating in an environment of multiple counterpart relationships, including partnerships with banks, poses the formidable challenge to stay on top of the company’s cash position – 41% testify to that fact. Furthermore, respondents identify as problematic “manual processes/spreadsheets in key workflows” (39%) and hampered access to banking data for decision making (38%). It’s worth noting that 17% cite multiple accounts reconciliation as an issue and 29% admit that subsidiary accounts reconciliation is problematic. (See Transaction Banking Survey 2017) Bank associations at national and regional level deploy and govern banking communication infrastructure. They are also responsible for the development and universal adoption of communication standards by member entities. Usually, these standards are aligned with the business requirements of the local financial industry and reflect local market specifics. Therefore international and country-specific formats have emerged, so have certain technical challenges and their associated costs. Depending on the payment type, geography, regulatory requirements, banking systems characteristics and many other factors (fees, delivery time, and reliability among others), businesses inevitably face the necessity to convert the electronic banking statement into a format readable for the company’s ERP system and the average human alike. Accurate reporting and development costs motivate format unification efforts. It is reported that a significant portion of corporate spending on bank services is allotted to information reporting and integration of the corporate financial systems with the banking platforms. There is a myriad of file formats out there. This series intends to make a brief inventory featuring the most common standards supported by the ReconArt reconciliation tool: SWIFT MT, ACH, FIRD,and BAI. Financial data reconciliation specialists' daily routine largely revolve around those; accountants, controllers, and system analysts know them all too well. Let's have them deciphered: ACH ACH stands for Automated Clearing House. The National Automated Clearing House Association (NACHA) is behind the development of ACH financial information infrastructure. The NACHA file format is applicable for corporate-to-consumer (PPDs – Prearranged Payments & Deposits) as well as corporate-to-corporate (CCDs – Cash Concentration & Disbursement, and CTX – Corporate Trade Exchange) class of transactions. Estimated 25 billion transaction worth $43 trillion are handled by the system each year. Those include government transfers such as social security and benefits, insurance premiums, payroll, mortgage payments and utility bills, e-commerce, transactions between corporates and/or individuals. The collaborative mechanism of batch processing, store and forward of payments involve 4 principle participants: Originator, Originating Depository Financial institution (ODFI) ACH Operators - the Federal Reserve or the Clearing House Receiving Depository Financial Institution (RDFI) The standard file structure in NACHA format consists of 6 types of records, each containing up to 94 characters, alpha/numeric, arranged in fixed/maximum length fields, with strictly defined positions. Each field within the record is designated as mandatory, required or optional. File Header – 13 fields identifying both the origin and the destination of the entries (name and routing number / Fed ID), file creation date and time, plus other files prerequisites such as ID, record size and type code, etc. Batch Header – 13 fields identifying the originating party by company name and Fed ID, and the transaction details such as debit and/or credit codes, class of transaction code (consumer or corporate – PPD, CCD, CTX, TEL, and WEB), record type code, effective entry date (of settlement), etc. Entry Detail – the 13 fields relate the entry to the recipient by name / individual ID, bank account number, and payment amount. The record also contains transaction code determining debit/credit operation to a specified type of account (saving, checking, loan, GL, etc.). Entry Detail Addenda – the only optional record here. Primary used for corporate-to-corporate class of transactions. Usually contains additional information referring to the prior Entry Detail record. Batch Control – describes the batch in terms of transactional operations (debit/credit), entry counts, entry hash, total dollar amounts (debits and credits), company identification number, and batch number. File Control – as a final check, the 8 fields of the record summarize dollar, entry and hash totals accumulated in the Company / Batch record, also counting blocks and batches. The file structure is based on batches. A batch binds together Entry Details in groups of 10s. There can be multiple batches in one file. Each batch has a Batch Header (on the top) and a Batch Control (at the bottom). On the other hand, there is only one set of File Header and File Control records which envelopes the file (top and bottom, respectively). To be continued...
“Account reconciliation is the process of comparing two sets of records to ensure their balances are correct at the end of the accounting period”, end of the definition. As clear and simple as it sounds, this definition implies more than meets the eye. Imagine you are a small coffee shop owner, a market newcomer who has a handful of transactions and reconcile your bank statements on your own. This may not be on your top list of favorite tasks, but you still manage to do it twice a month and stay on top of it. Fast forward five years from now. Your business has grown to a well-known chain of coffee shops, famous for its unique coffee blends. You are present in three states and just opened a new deli in Costa Rica. You operate with five different bank accounts in three currencies and have hundreds of transactions every day. You have hired an accountant. Your accountant is stressed and spends too much time over excel spreadsheets trying to adjust balances and investigate discrepancies. Your business has expanded, so you need a solution that can help effectively manage it. Manual reconciliation can be time-consuming, even time draining and there is a high exposure to human errors. A simple input mistake or accidentally deleting an Excel formula can result in substantial costs for your business. Such inaccuracies are often revealed during audits. As a business owner, you don’t want to waste the time of your highly motivated, expert employees on this tedious task. You would rather give them the proper tools, so they can focus on value-added activities, business development and management. This is when automated reconciliation tool come to aid. A key benefit of reconciliation automation software is time savings. Thus accounting teams can focus more on investigating and managing exceptions. Also, period-end close campaigns run more smoothly and with less stress. Remember - you own a growing, multi-location business. Automated reconciliation helps improve visibility and transparency in intercompany transactions, it enhances compliance and reduces financial risk. The modern reconciliation solutions offer versatile, cloud-based platforms that streamline financial processes and increase audit readiness. The ReconArt reconciliation software provides: Automated reconciliation of bank accounts regardless of the bank statements format (BAI, SWIFT, FIRD, ACH, CSV, Excel, XML, etc.) and the currencies used Transaction matching which follows your business processes and logic Options for transformation and enrichment of your data Automation of every step of the reconciliation process, including import and export of data and report creation Integration with different ERP systems A detailed audit trail and internal control checkpoints at place, reducing the audit vulnerability ReconArt is equally suitable for every industry and any company size Implementation of the software requires minimum IT efforts and the software is oriented towards the business user, so that new processes and rules can be defined without external support. The solution is cloud-based and we constantly invest in product development to fulfill client and industry requirements. So catch the plane and head to the Costa Rican beaches to take care of your new endeavor, let us worry about reconciliation. If you want to learn more, check out the ReconArt website!...
Traveling the globe in 80 days might have been a miraculous achievement in the 19th century, but in today‘s hectic world anyone who can spare two or three weeks on the road can do it without breaking the bank. No need to be a brave male adventurer on a dangerous mission. Travelers’ profiles have evolved to include the solo female tourist, the family living in their tiny mobile home with three toddlers on a quest to visit every State Park in the USA or the digital nomad couple Instagram influencers, who have 100+ countries on their travel list. The travel and leisure industry has changed tremendously to become one of the fastest-growing sectors in the world. According to the World Travel & Tourism Council, it supports one in 10 jobs worldwide and generates around 10% of the global GDP. World Bank data shows that for the last 20 years, the number of international departures has doubled to reach US$ 1.5 billion dollars in 2016. The direct economic contribution of travel and tourism to the global economy amounted to approximately US$ 2.57 trillion in 2017 (Statista portal). Behind the figures, the main contributing factors for this steady increase are found in various layers. Intense competition in the airline services allows tourists to benefit from low-cost providers and promotional packages of the traditional airlines, so going to the other side of the world has never been so affordable and easy. In parallel the rise of shared services like Airbnb, Uber and ToursByLocals, not only lightens the travel budget but also facilitates diving into the local culture and way of life. The modern traveler is less inclined to enroll in organized trips with itineraries covering major tourist attractions. Instead, he wants to travel consciously, to be mindful of the local communities' problems and the impacts of his visit and to spend his money in local economies (small producers, boutique hotels, green initiatives). The search for unique and authentic travel, tours organized by locals, culinary tourism, the slow movement and ecological challenges all shape individual spending habits to shift from consumer goods to experiences. From an economic perspective, a stable economy drives both individual trips as well as corporate business demand and boosts hospitality sector performance. The positive outlook for the travel industry subsequently attracts new innovative players, ready to jump in and shake the status quo. Travel startups have raised more than US$ 5 billion in venture capital in 2018 with Klook accounting for US$ 1 billion, Tour Radar for US$ 50 million, etc. At the same time, the travel industry is embracing emerging technologies and the opportunities they offer for improving client satisfaction. Innovative digital marketing tools, big data, machine learning, blockchain, automation or robotics are employed increasingly to create unique travel experiences. Some twenty years ago, booking a trip meant visiting a local agency office, viewing glossy brochures and long talks with the travel agent. Fast forward and we have a different picture. Today a substantial number of travel bookings are made online whether directly on the supplier website or through a booking marketplace. The steeply increasing volume of travel data to be processed brings challenges that shouldn‘t be underestimated. For the travel and hospitality sector, this means managing high volumes of payment transactions from multiple sales channels. If we review an airline service, it operates in a considerably streamlined model. Airlines sale through various channels (direct, online, through travel agencies), have offices in different locations and usually, airline tickets are fully paid in advance. As commissions are applied between the parties, companies need to ensure revenue from the sales process is timely and precisely recorded in their internal systems. Hotel industry payments processing has some inbound operating complexity. Apart from the direct bookings, reservations may occur through online travel agencies, other operators and partners. The customer can pay upfront for the hotel booking if the reservation is made through a travel agency and subsequently the agency is working with the hotel based on the agreed model of commissions. Alternatively, the hotel guest can book the stay through an operator, but pay at the hotel reception upon check-in. Hotels welcome guests from all over the world and ideally should accept a broad range of payment channels (credit/debit cards, bank transfers, mobile apps, digital wallets and the like). They are supposed to handle multi-currency transactions and take into account a variety of payment schemes. Going a step up on the complexity level scale, Travel/Booking portals sell a portfolio of services (airline tickets, hotel accommodations, rent-a-car, attraction and activity tours, insurance policies). They interact with plenty of partners and suppliers and process customer payments, B2B payments and commissions. With this number of relationships, there might be a lengthy chain of intermediaries before a payment walks the way to reach its final recipient. Every transaction has unique identifiers. However, while interacting with service providers and distributors, the possible transactions flow may include payments offset, delays and batch invoice processing. In such cases, the service provider shall be able to verify, in a reliable way, whether the services rendered have been paid indeed. Service providers need a clear overview of transactions in their counterparts' network. The lack of visibility, the risk of human errors, combined payments, not properly documented invoices or non-standard forms of payment may lead to under/overpayments, create bottlenecks in the accounting and most importantly undermine client satisfaction and create reputation issues in a highly competitive market. Thus set, the travel industry payment ecosystem needs a streamlined reconciliation process to ensure the integrity of the payment flows, control spending and prevent losses. Modern, cloud-based reconciliation solution fits perfectly with the requirements of this dynamic and complex environment. ReconArt can handle immense transactional volumes, enrich Client’s data and easily integrate with ERP systems and external data sources. This makes ReconArt’s platform a reliable partner for the companies of different sizes, regions and product offerings in the travel and hospitality sector. Our successful cooperation with clients in the travel and hospitality sector has given us a valuable insight into the industry-specific reconciliation processes and challenges to overcome. Holiday Extras is a UK market leader for travel extras like airport hotels and parking, car hire, insurances and therefore deals with numerous vendors. After implementing ReconArt they are able to automatically match the invoices received from suppliers in large volumes and a number of different formats, so exceptions are identified daily and handled properly. Holidays Extras' team leverages ReconArt’s intuitive matching rules that are easy to set up without the involvement of IT resources. Defined by the business user with a spreadsheet-like logic, they mirror company processes of any complexity covering one to one, one to many or many to many matching scenarios. Another ReconArt client, being a global accommodation marketplace with millions of offerings, processes and validates a vast number of transactions. ReconArt successfully met the requirements of this heavy transactional environment with its capability to automate all critical activities in the reconciliation lifecycle. This includes data import, automated journaling of exception categories after approval, transaction matching, exception categorization, workflow steps, role-based notifications, data exports as well as report generation and delivery. Towards the end of 2019 and in 2020, we can only expect the travel boom to continue with dynamic rates. The modern traveler is more demanding than ever, so the industry should be equally adaptive and innovative. With technology being in the foundation of this metamorphosis, ReconArt is excited to be part of the travel sectors’ modernization by accelerating its finance transformation. If you want to learn more, don’t hesitate to request a demo here. ...
Government entities often are among the largest organizations in terms of assets managed and cash turnover. They oversee public funds and are responsible for their gathering, safekeeping, redistribution, and investment. Apart from the sheer magnitude of financial management efforts required, institutions in custody of public funds must comply with high standards of accountability, transparency, and public interest service. Those standards are strictly stipulated in the legislation of the respective jurisdiction. One such example are the state treasuries in the USA. They are established in line with state constitutions and although the scope of their functions slightly varies from case to case, their design is essentially identical. They are authorized by law to manage state financial resources prudently, maintain liquidity to meet cash flows, and support financially policy objectives. More often than not, the incumbents are elected officials and therefore are personally held accountable by their constituency for the efficiency of their management decisions. State treasury functions encompass a wide range of activities. In general, they involve fiscal management duties – receiving, depositing, and investing general and/or custodial state funds. They are allocated in infrastructure projects and public welfare programs such as retirement of state employees, healthcare, disability, college savings investment, etc. Debt management (bonds issuance) falls within its domain, too. Within the broad scope of assets administrated in the state treasury portfolio could be unclaimed property, revenues from sales of state land, rights to exploit natural resources, funds for guarantee of saving deposits, etc. Apart from asset accounting, the treasury renders banking services to the state agencies. Deposits from local, state and federal source are accepted. Local authorities leverage Treasury’s experience and volumes in managing idle cash investment in fixed-income, equity products, and securities of various maturity periods. The primary objective is to preserve the principal, a secondary – to yield a highest possible return. The managed asset portfolio is worth billions of USD. The cash position is of similar size. On operational level, the state treasury office takes care of receipts and disbursements. It may redeem, countersign and distribute warrants (check issued for services delivered as part of public procurement) and checks as part of its prerogatives. Cash management is an integral part of its daily business as cash, checks and electronic payments are processed. Statutory accounts reconcilement of various frequency is performed. Thousands of account balances and a dozen of commercial bank sources are processed and sorted out. Cash Management divisions are in charge of treasury operations, as well as balancing the General Leger every day and performing monthly bank reconciliation. Treasury accommodates Federal Reserve wires for funding of local agencies. The constitutional principle of checks and balances enforces auditability and independent regulatory scrutiny. Stringent control on efficiency, responsible management and accountability discourage misuse and uphold public trust. The treasury is subject to frequent external audits and is obliged to produce regular reports. It has become evident that a workload of that proportion outweighs conventional manual procedures and spreadsheet based reconciliation frameworks. Automation of balance sheet account reconciliation and period-end close would guarantee proper separation of duties between preparer, reviewer and approver. An end-to-end software solution would ensure proper documentation and granular audit trail. The account reconciliations and transactions tracking would be performed with significant time savings and increased accuracy. Thus the treasury accounting staff can focus on outstanding items and their resolution instead of tedious repetitive tasks. Risk mitigation measures such as scheduling of the reconciliation task and prompting the officials with assigned roles in the balance sheet certification process would offset potential lapses in terms of missing deadlines, separation of duties override, errors and omissions. ReconArt™ is a Total Reconciliation Lifecycle solution that responds to all of the above mentioned challenges with ease: One integrated solution for all reconcilement tasks. User-friendly and quick to adopt. Business users with Excel proficiency love it. Full automation capabilities – data sources feed the system without human intervention, powerful rule-based matching engine, GL posting, workflow scheduler. Integration with various systems – ERPs, in-house accounting software, banking platforms, third-party tools. No technological disruption. Communication with all kinds of data format standards including ACH, FIRD, SWIFT, XML, CSV, etc. Granular audit trail – documentation attachments archive, appended notes, drill-down to transaction level, user rights configuration and system log A rich library of customizable reports and dashboard visualization of current status. Continual investment in a best practice solution. Competitive price. ...
Introducing our guest blogger Andrew Rombach. He is a Content Associate for LendEDU – a website that helps consumers and small business owners with their finances. When he’s not working, you can find Andrew hiking or hanging with his cat Colby. For businesses of any size, keeping on top of finances is a must. Account reconciliation is the process of comparing recorded transactions internally to monthly account records, such as bank or credit card statements to ensure that the records match up with what actually happened. Put simply, you’re on the hunt for discrepancies in accounting. Without regular account reconciliation, it is difficult to know if the business finances are aligning with day-to-day transactions. Failing to uncover discrepancies in a timely fashion can lead to costly issues for a business. Fortunately, business owners aren’t on their own when it comes to accomplishing this essential accounting task. Bookkeeping services, both from local sources to online software, can help manage the process of account reconciliation for you. Why Should You Pay for Account Reconciliation? Outsourcing account reconciliation or using an automated software is beneficial for many companies for several reasons. First, business owners aren’t always adept in accounting or bookkeeping, nor do they have time to focus their effort and attention on financial management. However, being aware of what discrepancies may be lurking behind the scenes is crucial to keep a business afloat. Account reconciliation gives businesses the opportunity to save money by avoiding unnecessary fees relating to overdrafting a business bank account and overcharged credit cards. Additionally, account reconciliation can be a first-line defense against fraud and theft, both from internal and external sources. Last but not least account reconciliation is important for business to prevent financial statement errors. When a discrepancy is found thanks to consistent account reconciliation, businesses can manage corrections quickly before the difference wreaks havoc on the company’s finances. Hiring a professional service to manage account reconciliation is often considered an extra expense not many businesses want or are able to cover. On average, account reconciliation services may add between $300 and $2,000 to the budget each month, depending on the hourly rate charged by the bookkeeper hired or software used. Despite the costs, outsourcing account reconciliation or using a reconciliation software solution by the company can ultimately pay for itself, given the cost-savings available by finding and correcting discrepancies quickly. Here are a few benefits to consider. One fully automated, integrated reconciliation product can cover data transformation and enrichment, transaction matching, reporting and analytics, exceptions management, period-end close workflow. Reconciling multiple different data sources of varying formats can be faster and more efficient. Finally, account reconciliation services offer fully compliant, granular, and detailed audit trails for future reference. How to Pay for It The value of account reconciliation cannot be overstated, but figuring out how to pay for the extra expense of outsourcing the task may seem a bit daunting. Fortunately, businesses have several tools at their disposal to cover the cost. Budgeting It In For profitable businesses, the simplest way to pay for account reconciliation services is adding it into the monthly budget. To to do this, first figure out how much it is going to cost you. Shopping around for the cheapest price (while keeping in mind what you get in return) is always a good idea, but when more complex processes and large volumes are reconciled, advanced solutions are required – and they come at a higher price. Select the option that is best suited for your business size and reconciliation needs, then build the cost into monthly expenses moving forward. Small Business Loans If your business is not yet profitable or is tight on cash flow month to month, consider a small business loan to cover account reconciliation expenses. Small business loans are available from several lenders and in varying amounts and types, but most come with a fixed interest rate and predictable payment that makes it easier to manage over time than other financing options. Often account reconciliation services can be paid for upfront, covering several months at a time with a single payment. A loan can work well for this payment structure. Additionally, small business loans can be used for just about any valid business expense, and the investment in account reconciliation using a loan can reap significant financial rewards. Business Line of Credit If account reconciliation services are going to be an ongoing monthly expense, a business line of credit may also prove beneficial. A line of credit is a flexible financing tool that allows business owners to tap into available credit, up to the maximum credit line, and repay only what they used, plus interest. This strategy may work well for not-yet-profitable businesses that want to invest in account reconciliation, but that does not want to take out a lump-sum loan to do so. It’s important to note that a business line of credit may carry a higher interest rate than a small business loan. Alternative Options Businesses may also consider alternative options, such as personal financing, to help cover the cost of account reconciliation. Personal loans are available in smaller amounts than business loans, but they may be easier to qualify for based on credit history and score. Similarly, personal credit cards do not offer higher credit limits like business lines of credit, but they can be helpful in paying for smaller expenses if another strategy is not available. However, using personal financing only makes sense when you know there is a return on investment for the expense you are covering. Conclusion Account reconciliation is a valuable tool for businesses across all industries, but business owners don’t have to add bookkeeping to their skill set if they don’t want to. Instead, account reconciliation with the help of a local or online service can take provide some savings for the business when done consistently over time. The good news is that companies have several methods for covering the added cost of account reconciliation, through budgeting, loans or credit lines, and personal financing options, or a combination of these strategies....
Reconciliation finds its place in any and every accounting practice, but for some business models it has become a central issue. Transactional industries stand out as the most obvious example, where huge volumes and speed of exchange operations are typical characteristics on top of cash amounts turnover. Retail business and the e-commerce segment in particular exhibit a boom as consumer confidence strengthens. Online retail platforms and the varied options for payment and shipping provide additional incentives for clients, triggering their purchase decisions. Ultimately, e-commerce has fulfilled the futuristic promise of instant access to a myriad of affordable consumer goods and globally inclusive market experience. Sensible merchants foresee customer needs and complement their product offers with a number of enticing collateral services – from seasonal discounts, gift cards, trial periods and free returns, to flexible payment options and stripped shipping costs. The competition is fierce and marketing inventions push vendors to develop intricate distribution networks. This is a challenging undertaking involving more and more business partners. Common challenges From merchants’ standing point, the rising complexity of the retail ecosystem exacts robust internal accounting controls to stay on top of cash flows, even more so as the majority of transactions take place in a digital environment. The delivery of one single online order requires the authorization and/or action of at least four parties besides the customer and the merchant themselves - their banks, the payment processor / credit card issuer, the parcel delivery company. The attributed transactions may be multiplied by two in cases of cancellations, refund requests or glitches down the supply chain. Some of the intermediaries incur fees for their services, which are reflected in the total sum and need to be properly discerned / sorted out. Let’s not forget that cross-border trade also means currency conversions and the underlying forex differences, plus customs duty and tariffs levied in some cases. Judging from our experience with ReconArt clients, even the small to medium-sized e-commerce vendors deal with several thousand transaction daily. For global market leaders, numbers soar in millions, with sharp variations in consumer activity around holiday campaigns, for example. At these volumes, escalating daily inputs of data simply cannot be handled manually in a timely and accurate manner. Monitoring the frequent transaction status updates and clearing them one by one is a hopeless endeavor. Legacy tools employed in the daily reconciliation tasks (MS Excel, overwhelmingly) give little room for scaling up the business. Beyond a certain threshold, regularly exceeded by retailers, transactional matching in spreadsheets is virtually impossible. While comparing amount totals, important details fall through the cracks and the root cause for the mismatch (which could range from time lags to fraud attempts) is not properly investigated. Thus, lagging behind with reconciliation can have a detrimental impact on both client satisfaction and financial health. How we help our clients ReconArt has an extensive experience implementing its reconciliation solution for small and big e-commerce client alike. Some of them propel sales via proprietary or third-party physical locations as well, which is an additional dimension. In general, the most typical case is three-way-reconciliation between payment processors (such as PayPal, AMEX, Barclays, Chase Paymentech, Adyen, Beanstream, Worldpay, and Skrill), banks, and internal ERP systems (Oracle NetSuite, MS Dynamics), which is performed in two steps (processor-to-bank & processor-to-internal system). Data is sourced and uploaded automatically in the ReconArt™ environment via predefined import templates. The configurable scheduling engine allows grouping the reconciliation tasks in stacks. The outstanding items produced as a result of the matching iterations can be efficiently investigated down to transaction level by fewer users. Configurable cross-sections of bulk sums display and arbitrate currency exchange differences and acquirer charges (payment processor generated) at both cash and transaction levels. The built-in exceptions classification functionality also assists the users in determining the most common cause of mismatch – transaction timing, posting errors, void-to-issue operations, etc. In ReconArt, all that occurs in a single database with individual user accounts, simple browser access and granular audit trail, instead of scattered in numerous documents and repositories with doubtful compliance value. The reconciliation reports output (cash book journals, account balance differences, write-offs, outstanding items, etc.) feed the core ERP solution. Following the successful ticking out of matched transactions and approved exceptions, journal entries can be posted in the GL. The financial period close module completes the accounting cycle. Our e-commerce clients achieved automation and streamlining of the reconciliation process without stuff ramp ups. They leverage ReconArt™ without a disruptive effect on their day-to-day business. The users have quickly adapted to the intuitive interface during the training. Dedicated ReconArt specialists worked with them to configure the system during the implementation phase and provide post-implementation support. Once our clients have full command of the system, they proactively onboard new processes on their own. The benefits – enhanced confidence, self-reliance and visibility. It is important to emphasize that in ReconArt the know-how and lessons learned are persistently invested in our solution upgrade efforts so that all our clients can benefit from them. We evolve as our clients evolve and we eagerly learn from each other. Zero compromise on that. ...
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