Most people know businesses pay bills and take in money. Some may be familiar with terms like accounts payable, general ledgers, and accounts receivable. Accountants and finance leaders know more complications are happening behind the scenes. One of those is the reconciliation process.

If you don’t know, reconciliation involves ensuring what’s on your books matches your bank’s statements. You might wonder why companies take the time to do this if you don’t own or operate a business yourself. Fixing errors is one of the top reasons, in addition to catching fraud and staying compliant. Thoughtful reasons aside, the reconciliation process can get tedious and inefficient. Here are ways to make it more streamlined.

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Use a Dedicated Account

This step seems like a no-brainer to larger organizations. A big corporation usually has no reason to mix the personal accounts of its employees with the company’s books. Small mom and pops or solopreneurs might. They’ll do it because it initially looks convenient. Why open two accounts, possibly pay double maintenance fees, and keep track of separate debit cards or checkbooks?

While having one account can seem simpler on the surface, your monthly reconciliations will take longer. You’ll have to separate your personal and business-related transactions. And even if you think you know what belongs where, there’s a chance you won’t remember. An elusive $20 transaction on your bank statement could’ve been for home office supplies. But it might just be the new pair of jeans hanging in your closet.

You want to skip these hassles when comparing bank statements against the books. Keeping a dedicated account ensures all the transactions you analyze are for business-related expenses and income payments. You’ll spend less time sorting through what’s what and double-checking each transaction to ensure it’s labeled correctly.

Get Your Paperwork in Order

You can’t expect efficiency if you don’t have all the information you need. If you’re a one-person operation, your paperwork may consist of a single bank statement and a box of receipts. It might be even more streamlined if you use one digital wallet account for everything. You accept invoice payments through this account and use it to pay for all your expenses.

For larger operations, there’s a tad more paperwork involved. Customers could pay their bills in multiple ways, particularly if your organization deals with a mix of clients. Likewise, your company could prepay some expenses and wait to pay others. Depending on their role, employees might be submitting expense reports sporadically or regularly.   

About one in five expense reports are missing important details or contain mistakes. A single mistake could add 18 minutes in processing time. Imagine if the error isn’t caught until the reconciliation process begins. You want to ensure you’ve ironed out all the details and the paperwork is in order before you start.  

Break It Down

It’s often less overwhelming to complete a complicated task if you tackle it piece by piece. You can approach your reconciliation process the same way. Plus, it can boost efficiency by helping you catch potential problems and mistakes early.

Nothing is more frustrating than getting to the end and suddenly discovering you’ve been working from an incorrect balance. Now you’ve got to scrap what you’ve accomplished, tracing your steps to find the error. Breaking down the process into sections by checking the previous month’s closing balance prevents frustrations from double work.

It also creates efficiencies by eliminating backtracking and re-reviewing every item. If you know you’re starting error-free, you can move forward that way. In addition, slicing up the process into smaller sections helps isolate mistakes. For example, you can focus on account receivables one day and payables the next. You could even get more granular by organizing the reconciliation of your receivables by client or customer type.

Consider Automation

Automation can be your best friend. No, you probably don’t want to fully automate your reconciliation process yet. Technology may be adept, but it’s not foolproof. You still need to maintain some manual portions of your approach.

But that’s not to say you can’t automate the more repetitive and time-consuming portions. Accounting and bookkeeping software can flag employee expenses from company credit cards. Software has the ability to import paperwork, including bank statements, and identify matching transactions. It can catch discrepancies and alert you about potential typos or other mistakes.

As most financial professionals know, transposing numbers is all too common and banks aren’t always error-free. Furthermore, automated tools run reports and analyses the human mind would take months to uncover. You can track patterns in profitability by department/section, function, and client. Automation also helps standardize processes across departments in larger organizations. Standardization increases efficiency by reducing inconsistencies and errors.

Making Reconciliations More Efficient

Shockingly, there are few standards when it comes to account reconciliation processes. Company A may do it differently than Company B. Generally accepted accounting principles (also known as GAAP) provide guidance for debits and credits. However, creating efficiency is up to the business.

Introducing shortcuts usually isn’t the best approach when you’re dealing with a business’s finances. It could create compliance and reporting nightmares. Instead, look for ways to streamline the paper trails, catch errors early, and standardize or automate repetitive steps. By taking these measures, you’ll spend less time reconciling and more on improving your business.