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5 Benefits of Balance Sheet Reconciliation Automation in 2024

A step in financial close checklist is balance sheet reconciliation, which is matching a transaction’s payables with its invoice.

Manual reconciliations has challenges, such as:

  • Slow processing
  • Lack of accuracy and transparency
  • Overlooking fraudulent activities

An accurate and effective account reconciliation solution can help companies identify and address the bottlenecks in their closes, such as:

  • Overdue payments
  • Gaps in the financial processes
  • Outstanding receivables (that need adjusting for)  

Moreover, balance sheet reconciliation automation can also:

  • Reduce the accountants’ workloads
  • Allow real-time verification
  • Monitor financial close process
  • Reduce human errors
  • Systematize the overall reconciliation process

In this article, we will explain how a balance sheet reconciliation software works, and its top 5 business benefits.

How does a balance sheet reconciliation software work?

A balance sheet reconciliation solution offers built-in libraries of financial tasks. Accountants can leverage them via drag & drop functionality to orchestrate their tasks and bypass IT intervention.

1. Automation

Through the use of automation tools like RPA and workload automation, the balance sheet reconciliation solution uses data from ERPs, data warehouses, and other business applications to autonomously carry out the required tasks.

2. Monitoring

Visible dashboards monitor the progress, tasks, activities, and bottlenecks. These allow for identification and remediation of performance gaps.

3. Storage

By housing all the data on the cloud, the information will be transparent, viewable, and modifiable by all relevant personnel. The latter is particularly important because it mitigates the risk of data loss, as every new input is instantly backed up into the cloud.

What are the benefits of balance sheet reconciliation automation?

1. Reduced workload 

Manual balance sheet reconciliation is time and labor consuming. It is reported that 30% of a company’s finance team’s time is spent on manual reconciliation. RPA and API integrate to automatically exchange data between applications. This reduces accountants’ workload. The saved time can be spent on higher-value tasks.

2. Real-time verification 

Reconciliation = certification. When accountants are reconciling the balance sheet, they are certifying that all transactions in different account ledgers are accounted for, with discrepancies identified and adjusted. That’s how assets and liabilities would go on to be matched at the end of the day. 

But it would be much simpler if transactions were instantly, and in real-time, verified against their receipts and invoices, with a visible audit trail. Automated reconciliation software does that.

So instead of having a pile of data to manually reconcile during the close season, rest assured that the pile would have gone through automated verification and adjustments as it was coming through in real-time. Therefore, during close, the accountants would only need to check and approve them.

3. Transparency & visibility

Automated solutions have visible progress dashboards that allows accountants to monitor the progress status of the reconciliation and certification process. So for instance, if 100$ had to be reconciled, they would see what percentage of that has been so.

Some accounts are more important than others. Therefore, teams might want to prioritize which ones to reconcile first. Or they might want to automate the reconciliation of some, but not the others. The progress of all the rule-based commands would be visible on the dashboard. 

Lastly, real-time monitoring would also enable teams to recognize any bottlenecks (i.e. discrepancies between values, lack of recognized invoice, or anything else) to immediately pinpoint and remedy.

4. Accurate

The potential for errors increases when there is a large amount of data that must be sorted, entered, and calculated manually, across different business units, platforms, and locations. If organizations depend on manual spreadsheets for reconciliation, there is always the possibility that something might have gone awry. Different departments that have to present their numbers to the accounting department might all be following a different format for presenting their transactional data. Or there might be an erroneous formula or a missed reconciliation that could have negative downstream effects, such as imbalanced financial statements, opportunity cost, and public embarrassment.  

The automated solution is able to integrate with a business’ different ERP systems, such as CRM, order management software, and invoice automation software, to allow for the live transfer of financial data. This increases the degree of accuracy of reconciliation because the underlying numbers are as accurate as possible. 

This will enable the executives to be confident that the report they are getting after the close is the most accurate one, reflecting the true position of the company. 

5. Standardized

Leveraging an automated solution results in a standardized and systematized process. Not only will all accounts get reconciled in uniform templates across the board, but the accounting department will have a consistent timeline of the overall close process. Through rule-based workflows (e.g. “if X then Y”), no deadlines will be missed, whether it’s creating a close checklist, reconciling balances, or posting the closing entries. 

For more on financial close

We have written extensively on the automation of financial close in the past:

Finally, if you believe your business may benefit from financial close automation software, we have a list of data-driven list of financial close vendors.

And we can help you find the right automation software for your business:

Find the Right Vendors
Access Cem's 2 decades of B2B tech experience as a tech consultant, enterprise leader, startup entrepreneur & industry analyst. Leverage insights informing top Fortune 500 every month.
Cem Dilmegani
Principal Analyst
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Cem Dilmegani
Principal Analyst

Cem has been the principal analyst at AIMultiple since 2017. AIMultiple informs hundreds of thousands of businesses (as per similarWeb) including 60% of Fortune 500 every month.

Cem's work has been cited by leading global publications including Business Insider, Forbes, Washington Post, global firms like Deloitte, HPE, NGOs like World Economic Forum and supranational organizations like European Commission. You can see more reputable companies and media that referenced AIMultiple.

Throughout his career, Cem served as a tech consultant, tech buyer and tech entrepreneur. He advised businesses on their enterprise software, automation, cloud, AI / ML and other technology related decisions at McKinsey & Company and Altman Solon for more than a decade. He also published a McKinsey report on digitalization.

He led technology strategy and procurement of a telco while reporting to the CEO. He has also led commercial growth of deep tech company Hypatos that reached a 7 digit annual recurring revenue and a 9 digit valuation from 0 within 2 years. Cem's work in Hypatos was covered by leading technology publications like TechCrunch and Business Insider.

Cem regularly speaks at international technology conferences. He graduated from Bogazici University as a computer engineer and holds an MBA from Columbia Business School.

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