Cash reconciliation automation

Cash reconciliation can be one of the most tedious aspects of the month-end close, often forcing teams to spend hours matching transactions or resolving discrepancies. 

Cash reconciliation automation streamlines the process, increasing accuracy and freeing time for more valuable tasks.

Let’s explore how these automated reconciliation tools work, how to use them, and how to find one that meets your unique needs.

What is cash reconciliation automation?

Cash reconciliation automation is the use of technology to verify internal cash records against bank statements. It streamlines traditionally time-consuming aspects of the process, like data entry, transaction matching, and discrepancy identification.

This significantly reduces the amount of manual work involved in cash reconciliation, saving time and preventing human error. As a result, it also lowers costs, speeds up month-end closes, and frees your accounting team to work on more valuable tasks.

Manual vs. automated cash reconciliation

Manual cash reconciliation in accounting is a time-intensive process that often requires painstaking effort. 

When account balances don’t match perfectly, you have to compare each bank statement against internal cash records line by line to find the discrepancy, which could be due to anything from a simple typo to a difference in timing.

This can cost your team hours, especially as business transaction volume grows. In fact, QuickBooks found that businesses spend an average of 25 hours per week on manual data entry and reconciliation.

Cash reconciliation software eliminates most of that manual work. It connects directly to your bank feed and accounting systems, allowing it to automatically match transactions and flag any that don’t align.

Thanks to artificial intelligence (AI) and machine learning (ML), advanced reconciliation tools can improve their matching accuracy over time. Some can even learn to automatically record adjustments to your general ledger when necessary.

Switching from manual processes to automated cash reconciliation provides many benefits. In addition to saving time, it helps reduce the risk of errors and allows you to focus on more rewarding work.

How to ensure accurate cash reconciliation

Automation software can significantly streamline the cash reconciliation process, but it doesn’t eliminate the need for human input entirely. Here are the steps you’ll still need to take to make sure things go smoothly.

Link data sources

Start the cash reconciliation process by confirming that all your financial data sources are properly connected to your reconciliation tool. 

In addition to business bank accounts and accounting or ERP software, it might also include merchant accounts or payment processors.

Making sure these connections are correct allows your reconciliation software to import transactions automatically. 

Most use secure Application Programming Interface (API) connections or direct integrations to maintain continuous data flow. This saves you from having to import transaction data manually.

Verify imported balances

Once you’ve connected your data sources, confirm that the imported balances align with your actual bank statements and accounting records for the same date range. Even with automation software, it’s possible for glitches to throw off your numbers.

In addition to matching balances to your official documents, double-check that your starting cash position for the current period ties to the ending cash balance from your previous reconciliation. Ideally, that should be from the previous month-end close.

Investigate discrepancies

With your cash reconciliation system set up, it’ll automatically compare the transactions in your accounting records to those from your bank feeds. 

If they aren’t a perfect match, the system will flag the discrepancies, such as differences in amounts or payments that appear on one side but not the other.

However, while automation can identify these differences, it can’t always determine why they exist. Someone will need to step in and resolve them, often using information the software doesn’t have, like knowledge of pending deposits or outstanding checks.

Besides these timing differences, other common reasons for discrepancies during cash reconciliations include simple data-entry mistakes and missing or duplicated transactions.

Adjust internal records

After identifying the source of each discrepancy, make any necessary adjustments to your accounting records. For example, this might involve removing duplicate transactions or correcting human errors.

Some cash reconciliation tools can suggest or even automate certain adjustments, but it’s still best to review and control these changes manually. This helps ensure everything is recorded correctly and presented the way you prefer.

After making these adjustments, the ending cash balances in your accounting software should match your bank statements.

Document the reconciliation

It’s often worth keeping notes on the adjustments you made to complete each cash reconciliation. This will help you understand what happened with the exceptional transactions when you review your records later.

It may also help you identify and resolve recurring discrepancies in future reconciliations. 

For example, if you discover that a certain vendor’s payments are frequently recorded twice, having notes from prior months saves you from having to do the same detective work again. These records can also be useful during audits.

How to choose the right reconciliation platform

Not all cash reconciliation automation tools are created equal, so it’s important to do your due diligence before committing to one. Follow these steps to help make sure you choose the right solution:

• Prioritize proper integrations: The software should be able to connect with all of your relevant data sources. In addition to your bank feeds and accounting software, that might include payment processors or an ERP system. 
• Consider customer reviews: Reading feedback from previous users can help you get an idea of the typical experience, especially regarding customer service. Take individual reviews with a grain of salt, but watch out for recurring trends.
• Try the software directly: First-hand experience is the most reliable way to gauge whether a reconciliation tool will work for you or not. Fortunately, many tools offer free demonstrations, consultations, or trials.

Cost should be an important consideration when choosing between systems, but don’t let it be your only priority. It’s better to choose a more expensive solution that meets your needs than a cheaper one that’s less efficient or lacks functionality.

Automate your cash reconciliation with Zeni

With Zeni’s AI bookkeeping services, you won’t stress over cash reconciliations ever again. 

The platform pulls data from bank feeds to update accounting records in real-time, and our AI Accounting Agent handles the reconciliations to make sure balances match.

When discrepancies arise that AI features can’t handle, a dedicated team of financial experts will step in to address them. You’ll only ever need to lift a finger when there’s an exception they can’t resolve due to a lack of information.

Zeni also offers a comprehensive suite of additional services to simplify financial processes for growing companies. This includes payroll, startup tax accountant, and fractional CFO support—all integrated and enhanced with the power of AI.

Subscribers also gain access to other powerful financial automation tools for no additional cost, such as our accounts payable and employee reimbursement software.

Schedule a demo today to see firsthand how Zeni can automate your cash reconciliation and streamline your financial management.