When people think about cash reconciliation, they think about the month-end reconciliation process that ensures the correct and timely recording of bank statement activity in the general ledger.
But other underlying cash reconciliations are just as necessary to run your business effectively.
For example, in today’s world, cash inflows from online orders and electronic payment options are becoming the norm for customers. Many organizations seek advice on managing the reconciliation of those merchant gateways and resulting fund deposits into the bank account. This can be challenging for organizations that run tens of thousands of credit card transactions a day.
On the flip side, banks and suppliers are now allowing organizations to pay for merchandise and supplies using various electronic payment options such as ACH, wires, and credit cards. So similarly, organizations are looking for more straightforward ways of reconciling those cash outflows.
Today’s cash reconciliation process is no longer a month-end, necessary audit exercise. It has become imperative to reconcile all sources of cash daily to run a business effectively.
Cash reconciliation is a tedious and time-consuming task. Today's most available technology doesn’t address these top pain points, forcing users to rely on manual labor to complete the cash reconciliation process.
The three major pain points of the cash reconciliation process are data, timing, and auditing.
If you don’t have the right data to work with, it will undermine the entire process.
Manual uploading of bank or credit card statements is prone to errors or, worse, fraudulent activities. This is why it is essential to automate uploading your bank data into your ERP system.
Having the data is one thing, but timing differences massively affect reconciliation accuracy. Proper handling of timing differences can make or break your reconciliation process.
A good reconciliation tool should easily provide a complete daily view of your cash position, including outstanding transactions.
Credit card timing delays can also be a significant inconvenience because these transactions are immediately recorded in a general ledger but take a few days to process and get deposited into your account. Credit card reconciliation can match deposited items and identify the list of ‘in-transit’ transactions, critical in balancing the books and predicting your upcoming cash flow.
Automating recurring direct debits or credits that show up on your statement but haven’t hit the general ledger can also free up time.
After aligning the data and timing, you want a proper and accurate audit trail of the actual reconciliation process. It can take time and resources when you cannot pull previous reconciliation details as needed.
Your reconciliation process should give you valuable reports like outstanding items, unusual items, auto-match, and more. These are just a few things that take up a lot of manual time and labor to produce.
The primary purpose of the cash reconciliation process is to ascertain that the company’s general ledger cash accounts are complete and accurate. This process should be as automated as possible so that your accounting staff can focus on more strategic business tasks.
Automation is critical when it comes to cash reconciliation. The automation process should look something like this:
Let’s not forget that we need a detailed audit trail that will facilitate real-time visibility into the daily cash position throughout this process.
Nolan Business Solutions provides you with cash reconciliation tools that are flexible, powerful, and scalable.
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