As these institutions strive to innovate and offer services in new ways to meet the needs of their customers, they have introduced different payment methods and rails, both online and offline. Nowadays, companies and businesses are embedding various payment rails and methods, such as bank transfers, mobile payments, digital wallets, card payments, and POS payments, into their offerings to provide better service to their customers.
While this shift towards diverse payment methods has revolutionized the financial sector, it has also introduced new challenges and complexities in reconciliation processes. The reconciliation of transactions, comparing internal statements with external statements from banks or payment providers, has become crucial to ensure accuracy and identify any discrepancies or errors. However, with the asynchronous nature of offline transactions, reconciliation often takes longer and can be a time-consuming manual process.
Here are 10 reasons why automating the reconciliation process is essential for financial institutions:
- Accuracy: Automating reconciliation eliminates errors that can occur during manual data entry, ensuring data is entered correctly and saving time and effort wasted on correcting mistakes.
- Efficiency: Automation reduces the time and effort required to reconcile transactions, allowing for faster closing processes and improved accuracy. This automation provides more time for the finance team to focus on other critical objectives.
- Cost savings: Automating reconciliation saves money by reducing the need for additional staff or outsourcing. Manual reconciliation is time-consuming and puts pressure on accountants and finance team members. By automating, financial institutions can save up to 80% of the time spent on reconciliation.
- Faster processing times: Automation speeds up transaction processing, reducing the time needed to complete a transaction. Financial entities that use automation can close transactions much faster than those that rely on manual processes.
- Improved customer service: Automation allows businesses to respond more quickly to customer inquiries and issues, enhancing overall customer service. By reducing the burden of manual reconciliation tasks, staff can focus on providing better care to customers.
- Compliance: Automated reconciliation ensures businesses comply with regulatory requirements by providing an audit trail of all transactions. This helps prevent erroneously reported revenue and inaccurate revenue reporting resulting from manual reconciliation processes.
- Reduced risk of fraud: Automated reconciliation's accuracy and speed help detect and prevent fraudulent activities, reducing the risk of financial losses. Financial institutions can improve transparency within their teams and businesses without burdening the accounting team with manual reconciliations.
- Better decision-making: Automated reconciliation provides businesses with accurate, data-backed information in a timely manner, helping them make informed decisions.
- Improved financial management: Automation enables better financial reporting and analysis, enhancing transparency and streamlining operations involving multiple entities or cross-border transactions.
- Scalability: Automated reconciliation allows businesses to scale their operations easily and efficiently. This is particularly advantageous for financial entities planning to expand across borders and handle multiple currencies, as automated reconciliation solutions can keep up with the growth of these companies.
About Credrails
Credrails, established in 2020, is a financial infrastructure provider aiming to support the growth of digitally-enabled companies in Africa. By aggregating financial data from both online and offline sources and making it available through an API, Credrails empowers businesses with insightful analytics and intelligence to make informed decisions, unlock new revenue streams, and increase market share.