The Risks of Manual Account Reconciliations in the Banking Industry (APAC)

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Financial risk management in the banking industry is ever evolving. The continuous updates and new regulations emerging over short periods make it challenging to stay compliant using manual account reconciliations. Financial institutions need an effective financial reporting risk management strategy to keep up with these changes and stay ahead of regulatory requirements. A report by McKinsey predicts that by 2025, a bank’s approach to financial reporting risk will need to be significantly different from today. To succeed, banking organisations must rebuild their financial close functions and optimise them for short- and long-term initiatives.

Relying on manual reconciliation methods increases risk factors and the likelihood of non-compliance, exposing banks to potential future consequences. Moving from manual to automated reconciliation is essential for overcoming the limitations of the current financial close process and preparing employees for the future.

Risk Factor #1: Errors and Miscalculations in Reconciliation

Banks deal with a constant influx and high volume of transactions, such as debit, credit, online, and mobile payments. Each transaction needs to be accurately reconciled daily. The pressure on back-office accounting operations can lead to incorrect financial data inputs using manual methods like legacy tools and binders. Human error is inevitable under such conditions.

The Risks of Manual Account Reconciliations in the Banking Industry | Risk #1 Errors

How Month-End Close Automation Solves Account Reconciliation Errors

Month-end close automation uses custom matching rules to reconcile accounts automatically. It flags inconsistencies or miscalculations for accountants to resolve, speeding up the matching process and ensuring accuracy. This allows accountants to focus on high-risk accounts and prevent exceptions, reducing errors over time and increasing transaction matching rates. Accurate reporting prevents non-compliance and fraud, allowing the team to focus on strategic activities like refining financial controls and creating data insights.

Risk Factor #2: Decentralised Legacy Tools and Documents

When multiple departments handle their reconciliations, a unified solution makes tracking and verifying transactions easier. Sharing documents through emails can lead to lost versions and errors. Manual methods make financial data tracking nearly impossible, and changes can result in hidden fraudulent transactions.

How Month-End Close Automation Centralises Data

Centralising documents allows accountants and financial leaders to stay updated and ensures accuracy. Changes can be made directly within the month-end close automation software, eliminating the need for last-minute updates to legacy tools. A centralised, easy-to-track solution means all financial leaders can supervise accounting activities.

“We no longer have to use binders to archive our financial data because the solution archives everything electronically. It has also simplified our working routines due to the different permission levels that the solution offers.”- Toyota Financial Services

Risk Factor #3: Lack of Standardised Legacy Tools

A decentralised process and lack of standardisation can lengthen the month-end close process. Personal layouts for balance sheet reconciliations cause bottlenecks and errors. Financial personnel end up decoding different layouts across thousands of documents instead of focusing on strategic initiatives.

Risks of Manual Account Reconciliations in the Banking Industry | Visibility

How Month-End Close Automation Standardises Processes

Cloud-based financial automation provides a standardised layout that is accessible to all accounting personnel, saving time and reducing errors. Accountants can rely on the software to interpret financial data quickly, facilitating a smoother period-end close.

Risk Factor #4: Lack of Organisational Visibility

Tracking progress in the financial close is essential. Managers need real-time updates to navigate reconciliation progress and overall financial close productivity. Manual methods require the ability to track progress, delaying the financial close.

“There’s never enough transparency. But we’re changing that with Trintech’s solutions. They offer us real-time visibility into these activities that we just didn’t have before.” – Western & Southern Financial

How Month-End Close Automation Boosts Visibility

An automated reconciliation solution and task management software provide visibility into the reconciliation process. Managers can access real-time updates, reassign tasks as needed, and ensure a balanced workflow, eliminating bottlenecks and reducing stress.

Risk Factor #5: Strict Compliance Standards

In an industry with evolving regulations, ensuring precise and correct figures is challenging. Automated reconciliation solutions drastically reduce the time spent on the financial close, enabling compliance with strict regulations and accurate reporting.

Risks of Manual Account Reconciliations in the Banking Industry | Strict Compliance

How Month-End Close Automation Ensures Compliance

Month-end close automation enforces workflow standardisation across entities, producing an activity log for external auditors. This audit trail ensures compliance with standards and procedures, benefiting the organisation.

Month-end close automation offers banking organisations numerous benefits, especially in account reconciliation. It enhances accounting workflows, boosts ROI, streamlines financial reporting, and reduces overall risk. As financial risk rises, banking organisations trust Trintech for a more efficient financial close.

Discover how Trintech can help your banking organisation stay ahead in an ever-evolving industry.