5 strategies to consider for efficient Reconciliation processes

Tejas Fadia
AVP Business Analyst, Infomatics Services Pvt. Ltd.

Automated reconciliation using Trillium

“If you want to punish someone with the most mundane and monotonous job, put them in reconciliations”, quipped a CFO of a large NBFC with whom we were discussing on a recent reconciliation implementation. Although it is one of the most important accounting activities for his company, his team faced challenges to reach accuracy, since they lacked sound automations needed to process the volumes of transactions they handled. Theirs was a growing business.

Over the years of my interactions with finance and reconciliation teams across varied industries, I have realized that this is one of the areas often kept outside the radar of automation, often neglected as it is a cost center. “We have people, we do it using worksheets”, and the punishment continues!

What if businesses could free good resources & deploy them in other productive areas and leave the mundane to well thought through and implementable automations?

“You can't manage what you don't measure”

Peter Drucker once said “You can't manage what you don't measure”. The Sales team gets the business, the operations team executes the deliveries but the reconciliation team is the one which measures the performance of the entire organizational activity to ensure business operations continuity.

Few of the reasons for any business to do reconciliations have been to get accuracy in

  • Managing Daily/Weekly/Monthly Cash flows
  • Tracking business performance
  • To always stay on top of Payables and Receivables
  • Detection on any financial misappropriation/ Frauds

Imagine, if all of this and much more could be simply automated ? But before we delve into automations, the first question to answer would be how well has an organisation defined it’s reconciliation processes & do we have the right tools ? Since, automations as the word says will perform the monotonous tasks efficiently, quickly and be error-free. The underlying processes, how efficient are they to start with?

5 must have strategies to consider for efficient reconciliation processes

1. Problem (Objective) Definition

“If I had one hour to save the world, I would spend fifty-five minutes defining the problem and only five minutes finding the solution."
– Albert Einstein

Many companies do not have well defined reconciliation objective(s). Hence, the process of reconciliation is random and ad hoc, even though it might seem we have a process. This leads to a lot of personal dependencies being created based on the methodology, of the people involved and their responsibility. Often a hurdle whenever the reconciliation team undergoes change in personnel or a few key people are not available for unforeseen circumstances. Also, whenever management needs ad hoc information/ analysis, the entire team is bogged to collate the data to generate outputs.

Hence the first step is very critical and will define the success of the overall processes.

“If the objectives are well defined, the process can be planned and executed well enough to suit the objectives.”

2. Choosing the ‘RIGHT TOOL’

“The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency”
– Bill Gates

Once objectives are correctly defined, the next step is to identify the tools required to execute the process. In most reconciliation processes, 80 to 90 percent work is based on following standard SOP to complete the reconciliation activity. Decide whether this requires a lot of manual intervention or there is a possibility of process automation.

Right tool can help a business to Increase “Efficiency” , “Visibility” and “Reliability”

Worksheets are the most widely used reconciliation tool along with many different recons solutions available in the market. An organisation should select the right tool based on the combination of objectives and advantages offered by different tools

3. Exception Management

The success of the entire reconciliation process is not about what percentage of cases are reconciled quickly but how robust is the process of managing exceptions arising due to business and other constraints. In my experience, most organizations spend about 70 to 80% of the time on about 15 to 20% of the transactions which are exceptions to the norm. Every exception is an independent business scenario which may require certain decisions.

If the exception scenarios are documented and an appropriate plan of action is defined, the actual amount of time required can reduce by more than 50% while errors can also reduce by a very significant margin.

4. Standardize Dashboards and Reports

This may sound cliche, but I have seen most teams spend hours every week/month simply on collating data to create adhoc reports whenever certain management information is requested. If Dashboards and Reports are standardized and automated, there definitely is a gain by saving at least 20% of the time by most reconciliation teams.

Also, this makes the process of measurement and monitoring the reconciliation process much easier for the management team with a better control.

5. Monitor, Learn and Improve

If you always do what you’ve always done, you’ll always get what you’ve always got.” – Henry Ford

The efficiency and efficacy of any process reduces over a period of time as business and technologies evolve. To ensure that the reconciliation strategy is aligned with the emerging times, there is a constant need for

  • Monitoring business process to understand new emerging scenarios
  • Learning the methodologies used to manage the scenarios and whether they fit in to the currently designed processes seamlessly
  • Improving the process to ensure new scenarios/ business cases are managed in a seamless manner
  • Repeat the above.

We at Infomatics have been partners to medium-to-large enterprises in the NBFC, Banking and Retail business for their automations by implementing cost effective reconciliation solutions. To get some more insights, do read our detailed case studies published on our website Click here