Advances in bank account reconciliation, along with expansion of the types of information banks can provide their customers, have made it much easier for companies to match their cash accounts to bank records, according to a new guide from AFP. By automating the reconciliation process, treasury can identify discrepancies quickly, free up time to focus on more strategic issues, and better manage liquidity. And, by reconciling accounts daily, the monthly “hard” reconciliation becomes a much easier and less time-consuming process. .
The second installment in the 2014 AFP Treasury in Practice series, released Tuesday, focuses on bank account reconciliation. Underwritten by KeyBank, the guide provides best practices and examples of how companies reconcile their bank accounts on a daily basis to ensure accuracy, quickly identify exceptions and prevent fraud.
Bank account reconciliation best practices:
- Rationalize account structure. The treasury group for one insurance company takes 10-15 accounts monthly and reviews them at the granular level. “We look at all activity, charges, contact information, and fee agreements,” said the treasury team lead. “Hopefully we will find accounts we can close. The goal is to reduce bank fees and to simplify reconciliation.”
- Identify fraud. In the past, companies assumed fraud prevention was the bank’s responsibility. Rosanne Rosenberger, senior product manager of enterprise commercial payments at KeyBank, noted that everyone who’s involved in the payment cycle has responsibility for fraud prevention. “If you get hit, it costs both time and money,” she said.
- Automate. “As automation gets better, companies are becoming less reliant on their banks,” Rosenberger said. “Banks will have to produce the data companies need, whether it’s checks, ACH or wires, but clients will load the data and do their own reconciliation within their system.”
- Identify discrepancies quickly. “The daily routine is very important,” the cash manager at one Canadian company said. “The sooner discrepancies are discovered and researched, the quicker they tend to be resolved.”
- Make it part of your routine. According to Tom Durkin, managing director at Bank of America, every organization should make the reconciliation process part of its regular reporting and review process. “Talk to you bank about upgrading and leveraging the capabilities of your existing TMS and/or ERP,” he said.
Download Bank Account Reconciliation Best Practices here.