Accounts & Receivable Management Challenges of Manual Reconciliation Processes for Electronic Payment Acceptance

Welcome to our blog series dedicated to helping you transition from manual accounting to continuous accounting. Whether you're just starting or already on the journey, we're here to provide a better understanding of the concept and its benefits. Throughout this series, we'll explore common challenges, discuss the numerous benefits, and offer authoritative and informative content on continuous accounting. Drawing insights from reports and real-world experience, we aim to unravel the intricacies of this critical aspect in merchant operations. Stay tuned as we guide you through automating your electronic payments reconciliation and achieving continuous accounting.

Introduction

Efficient management of accounts receivable is essential for maintaining a healthy financial ecosystem within any organization. This is particularly true when it comes to reconciling electronic payments, such as credit card payments from customers or payments made through alternative methods like delivery services, wallets, or online payments. However, manual reconciliation processes can present significant challenges and inefficiencies that impede your book closing processes. Numerous organizations have come to recognize this fact. According to two studies on AR/AP automation (What’s Next in Automation, The Journey to Automation), an overwhelming 93% of participants anticipate automation to deliver more accurate, efficient, and streamlined processes. In contrast, a mere 7% believe that the current manual processes are sufficient. Interestingly, despite this awareness, 84% of participants still rely on manual processes in certain areas.

In this blog post, we will delve into the difficulties encountered when managing payment reconciliation, shed light on the risks associated with manual reconciliation, and demonstrate how automation can make a difference.

In the subsequent parts of this series, we will further explore the advantages of automation and standardization on the path to achieving continuous accounting.

The Arduous Nature of Manual Reconciliation Processes

Let's have a look at the nitty-gritty of the challenges that come with manual reconciliation. It is crucial to understand the inherent pitfalls in continuing with manual methods in today's rapidly digitalizing world. Manual reconciliation, in essence, can be seen as a backward-looking approach that may have potential ramifications for a business. Below, we enumerate some of the most common issues associated with manual reconciliation:

• Tediousness: Manual reconciliation requires an enormous amount of effort to match individual transactions, making the process overly complicated and wearisome.
• Repetitiveness: The process often involves repeating the same task multiple times until all transactions are matched correctly, leading to procedural monotony. Should well-educated accountants really focus their skills on this?
• Inefficiency: Due to its labor-intensive nature, manual reconciliation is vastly inefficient, especially when dealing with large volumes of transactions.
• Human Errors: As the process is heavily reliant on humans, it is particularly susceptible to errors that can lead to financial discrepancies.
• Time-Consuming: The time taken to manually reconcile accounts can be significant, especially in large organizations with substantial transaction volumes, leading to delays in financial reporting.

Can you explain the difference? Risks of Manual Reconciliation

Manual reconciliation processes can present substantial risks to financial management. How long does it typically take to close your books? How frequently do you encounter discrepancies in your payment reconciliation, and can you provide an explanation for these variances? These laborious procedures impede organizational efficiency, resulting in inefficiencies and compliance concerns.

Here are some of the risks related to manual reconciliation processes:

• Discrepancies and compliance
  Inaccuracies in reconciling transactions can lead to financial discrepancies and unreliable financial data. Compared to your sales data, you might have received too much or too little payouts from your payment partners. Can you explain these differences? Do you carry them forward as unexplained discrepancies? Do you just assume they must be fees or charge backs?
• Delays in financial closing
  Manual processes that consume a significant amount of time can impede the timely closure of your books. As the delay lengthens, the analysis of potential issues becomes increasingly challenging. Important details may slip from staff's memory, IT system logs may have been deleted, and payment partners may struggle to address inquiries regarding past transactions, among other complications.
• Rising costs and scalability challenges
  Your organization is constantly evolving. New branches may be established or existing branches may be closed. In this increasingly intricate world of technology, the need to incorporate additional payment methods arises. How can you manage these changes effectively without incurring exorbitant costs? Do you have a comprehensive plan in place to ensure that your team and processes can adapt seamlessly to the ever-changing landscape?
• Missed opportunities
  Ineffective processes and financial data inaccuracies hinder efficient resource allocation and strategic financial planning. Is your team struggling merely to close the books each month? Or can you contribute greater value to your organization? Do you comprehend your payment acceptance, fee structure, and brand mix? Are you aware of the most crucial payment methods in your regions? Do you possess the necessary information to develop strategic processes for payment acceptance and accounting?
• Staff shortage
  Manual processes amplify workload, leading to reduced productivity and possible dissatisfaction among the workforce. You have an exceptional team. However, are your highly educated staff members engaged in meaningful and fulfilling work? Are you encountering challenges in finding qualified individuals to join your team?

Efficient and Transparent. The Need for Automation

Organizations can overcome the challenges and risks associated with manual reconciliation by embracing automation in electronic payments reconciliation. By implementing automation, you can transform your financial closing process, achieve scalability, and be well-prepared for daily closing. Furthermore, modern tools will provide comprehensive insights into payment acceptance and equip you with the necessary information to make informed strategic decisions.

Here are some benefits of automation in electronic payment reconciliation:

• Efficiency
  With automation, you can streamline your reconciliation processes, saving time and effort. Manual tasks are replaced with automated workflows, allowing for faster and more efficient operations.
• Standardization of processes
  Automation ensures consistency and standardization in accounts receivable management. By following predefined rules and workflows, organizations can minimize errors and discrepancies.
• Transparency
  Cutting-edge reconciliation software offers detailed insights into transaction matching, seamlessly linking bank transactions with individual point-of-sale transactions, and even providing valuable analytics on payment acceptance.

State of the Art Reconciliation

The adoption of automated reconciliation software, such as ReconHub, offers a range of benefits for accounts receivable management. With streamlined reconciliation processes, organizations can save significant time and resources. The reduction in errors and delays improves financial decision-making and ensures accurate financial reporting. Automated reconciliation software provides a comprehensive and centralized platform for tracking, reporting, and analyzing electronic payments data, enabling organizations to make informed and strategic financial decisions.

Conclusion

Efficient accounts receivable management is crucial for the financial well-being of any organization. Manual reconciliation processes pose significant challenges, including time-consuming tasks, potential errors, lack of visibility, and tracking difficulties. By embracing automation, organizations can overcome these challenges and benefit from improved accuracy, efficiency, and productivity. ReconHub offers a powerful solution to automate reconciliation processes, enabling organizations to streamline their electronic payments reconciliation and make informed financial decisions.

In the next blog of this series, you will learn more about how automation improves transparency and controls for your processes. Take the next step on the journey to continuous integration by reading here.