What is Automated Reconciliation?

Jared Fisher12 Oct 20232 mins
What is Automated Reconciliation?

What is Bank Reconciliation?

Bank reconciliation is the process of matching a company’s financial records with bank statements to verify accuracy. It helps pinpoint discrepancies, such as unrecorded transactions or errors, ensuring the business’s financial records are up-to-date and accurate. Regular reconciliations are vital for maintaining financial clarity and preventing oversights.

What is Automated Reconciliation?

Automated reconciliation is a revolutionary tool designed to transform the once tedious task of matching accounts receivable data with bank transactions. Kolleno’s innovative approach to this process ensures that businesses no longer grapple with the manual intricacies of this task. Essentially, automated reconciliation ensures that payments made by customers, from the point of invoicing to the final deposit in your bank account, are tracked seamlessly. Beyond that, it accounts for miscellaneous fees like card processing fees, chargeback fees, and forex fees. Kolleno’s cutting-edge Open Banking API lets you integrate effortlessly, liberating businesses from the chains of traditional bank reconciliation.

Payment Service Provider Reconciliation

The digital age has seen the rise of numerous Payment Service Providers (PSPs) like Stripe, Adyen, GoCardless, and Paypal, complementing conventional EFT bank transfers. This diversity offers consumers unmatched convenience but complicates reconciliation for businesses. While rudimentary automated reconciliation tools exist, they barely scratch the surface, often only indicating invoice payment. Manually accounting for processing fees and relating individual payments to larger end-of-week payouts from the payment wallet becomes a Herculean task.

Kolleno’s solution? A real-time process that not only marks an invoice as paid upon customer payment but also tracks the associated processing fee. This amount is momentarily logged in a “cash and cash equivalents” clearing account, representing the PSP’s liability to you. Once the PSP consolidates and disburses the bulk payment, Kolleno efficiently aligns this with the holding account and correlates it to relevant invoices.

Debtor Bank Transfers

Kolleno harnesses the power of machine learning coupled with proprietary algorithms to construct a model adept at associating invoices with bank payments & receipts. This intelligent model examines diverse data points – from bank transfer specifics like date, amount, and payee details to invoice data such as references, amounts, and associated names. The result? A suggested match percentage score, guiding you on which invoices align with which payments. A mere button-click later, this match is registered in your accounting system, complete with all pertinent accounting journals and ERP objects.

Why is Reconciliation Important?

Manual reconciliation is not only tedious but fraught with risks:

• Potential for incorrect amount entries.

• Duplication of transactions due to the lack of stringent controls.

• Time-draining processes, diverting staff from value-added tasks.

• Delayed monthly closures stemming from manual, user-dependent reconciliation.

• Challenges reconciling diverse data formats from PSPs with ERP or accounting systems.

The Benefits of Automated Reconciliation Software

Kolleno’s solution offers myriad benefits:

• Instantaneous data capture bolstered with comprehensive audit trails.

• Empowers the finance team to concentrate on strategic financial operations.

• Drastically reduced reconciliation errors owing to minimised human intervention.

• Seamless operation irrespective of staff leaves during month-end, with the system autonomously managing reconciliation.

Automated reconciliation, especially the kind delivered by Kolleno, isn’t merely a luxury – it’s a necessity in today’s complex financial landscape.