Bank statement reconciliation is an important task for businesses of all sizes.
It involves comparing your own records of financial transactions to your bank statements in order to identify and resolve any discrepancies. This process helps ensure the accuracy of your financial records and helps detect any fraudulent activity.
Unfortunately, reconciling bank statements can be a time-consuming and error-prone process when done manually. It involves reviewing and comparing large amounts of data, which can be tedious or prone to misinterpretation and mistakes.
Yet, it is a necessary and frequent task for businesses, done as regularly as bank statements are received. Depending on the size of the business and the volume of transactions, this could be anywhere between daily, weekly, quarterly or yearly.
This is where OCR (optical character recognition) technology can help. OCR technology enables businesses to automate the process of extracting data from scanned documents, including bank statements. By using OCR to extract the data, businesses can significantly reduce the time and effort required to reconcile their bank statements and minimize the risk of errors.
This article is about how bank statements are traditionally reconciled and how the process can be streamlined to benefit businesses with OCR and Nanonets. Nanonets is a platform that uses machine learning and OCR to extract data from scanned documents, making it easy to reconcile bank statements for your business.
Traditional reconciliation of bank statements
Reconciling bank statements traditionally involves manually reviewing and comparing your bank statements to your own records of financial transactions. This can be a time-consuming and error-prone process, especially for businesses with large volumes of transactions.
The process typically involves the following steps:
- Gathering all relevant documentation. From your bank statements to your business’ own records of financial transactions (such as invoices, receipts, account records, and more) – all relevant material must be gathered for the reconciliation.
- Review and compare. Review and compare the various documentations to identify any discrepancies. This may involve manually reviewing and comparing fields such as transaction dates, amounts, descriptions, or more. The larger the volumes and complexity of transactions, the more prone to error such manual reviewing can be.
- Investigate and resolve discrepancies. If there are discrepancies between the statements and your own records, they will need to be investigated. Resolving them may involve contacting your bank or other parties involved in the transactions to understand the root of the discrepancy and clarify any misunderstandings.
Manual data entry is also a common cause of errors in the bank statement reconciliation process. When data is entered manually, there is a risk of mistakes being made, such as transposing numbers or misinterpreting information. These errors can have serious consequences, such as misstated financial reports or missed fraudulent activity.
Why is bank reconciliation important?
Bank statement reconciliation is important for businesses of all sizes for several reasons.
First, it helps to ensure the accuracy of a company’s financial records. By comparing the transactions listed on a bank statement with the corresponding entries in a company’s records, any discrepancies can be identified and resolved. This helps to ensure that a company’s financial reports and other financial data are accurate and reliable.
Second, it helps to detect and prevent fraud. Reconciliation helps to identify any unauthorized transactions or other suspicious activity that may not be immediately obvious in a company’s records. By detecting fraudulent activity early, a business can take steps to prevent significant financial loss.
Third, bank statement reconciliation helps with cash flow management. By reconciling bank statements on a regular basis, a business can keep a better track of its cash flow and identify any discrepancies that may affect future financial decisions.
Fourth, reconciliation helps with tax compliance, by tracking all the transactions and having a clear record of the expenses and income, companies can have a better sense of their tax obligations.
Lastly, reconciling bank statements is a legal requirement in many countries and failure to do so may result in penalties and fines.
Overall, bank statement reconciliation is an important task that helps to ensure the accuracy and integrity of a company’s financial records, enables fraud detection and prevention, supports better cash flow management, helps with tax compliance and fulfill legal requirements.
How OCR technology and Nanonets can help
OCR technology can automate the process of extracting data from bank statements, reducing the need for manual data entry and minimizing the risk of errors.
Nanonets is a platform that uses machine learning OCR to extract data from scanned documents, excel sheets, and various types of documents. It also offers a range of features that make it well-suited for bank statement reconciliation, including the ability to handle multiple document types and create customizable workflows and logic for data extraction and processing.
For example, a business using Nanonets can scan their bank statements and use the platform’s OCR capabilities to extract the data automatically. They can then use customizable workflows to specify which data points to extract, such as transaction dates, amounts, and descriptions, and also further process them according to custom logic. This eliminates the need for manual data entry and helps ensure the accuracy of the extracted data.
Once the data has been extracted, Nanonets allows businesses to easily review and compare the extracted data to their own records of transactions. Nanonets enables businesses to capture relevant data seamlessly, and also process them further downstream, to a database ERP or another business tool, according to customizable workflows and logic. This helps businesses save time and effort, reduce manual errors, and identify discrepancies to resolve them quickly and efficiently.
Specifically, the process of bank statement reconciliation helps with:
- Increased efficiency: Automating the process of extracting data from bank statements with OCR technology can significantly reduce the time and effort required to reconcile bank statements.
- Improved accuracy: By eliminating the need for manual data entry, businesses can minimize the risk of errors and improve the accuracy of their financial records.
- Increased productivity: By streamlining the process of reconciling bank statements, businesses can free up time and resources to focus on other important tasks.
Get started with Nanonets for your bank statement reconciliation today.
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- Source: https://nanonets.com/blog/how-to-reconcile-bank-statements/
