What Is Bank Reconciliation Software

Aside from ensuring the accuracy of financial records, completing regular bank reconciliations can help your business detect fraud and sometimes even prevent it.

For instance, it was a routine bank reconciliation, among others, that unearthed the Parmalat scandal, one of the major financial scandals on par with the likes of Enron.

Yet, despite its immense benefits, especially as a major internal control item, performing bank reconciliations can be tedious, time-consuming, and susceptible to human errors. 

With this in mind, businesses are turning to bank reconciliation software to speed up the process and reduce errors. 

What Is Bank Reconciliation Software?

Bank reconciliation software helps companies automate the matching of their bank transactions with their internal financial records. 

The purpose of bank reconciliation, as the name suggests, is to reconcile the ending bank balance in the books to the closing balance in the bank.

Matching the transactions entails tracing each entry that appears in the company’s books to the bank statement.

This procedure will ultimately reveal transactions that appear in the books but miss the bank. And those that appear in the bank but miss the books.

Here’s the thing. Reconciliation in accounting is a pervasive task. It’s not limited strictly to cash or credit cards. 

For example, businesses often need to reconcile their customer accounts. With this, companies complete what’s known as cash applications, the process of matching a customer payment to the corresponding invoice in their accounts receivable.

Bank reconciliation follows a similar procedure—matching each cash receipt or cash disbursement to the bank statement.

The Benefits of Bank Reconciliation Software

Bank reconciliation software is an internal powerhouse for your company because of one thing: automation. Recall that bank reconciliation software is a program that automates bank reconciliation.

Don’t downplay the importance of automating processes. Whether in customer service or HR, automation is a huge efficiency game-changer. 

With bank reconciliation software, these are the benefits you can reap.

• Bank reconciliation software is a time-saver: This is a simple decision. Doing bank reconciliation manually can be time-consuming, laborious, and downright boring. 🥱
  
  Tracing each posted transaction to the bank statement is no walk in the park. And it’s worse for entities, like retailers, that handle many daily transactions. With bank reconciliation software, however, it’s a snap.
• Fraud reduction: You may not be current with your manual bank reconciliations, especially if you’re processing hundreds of daily transactions.
  
  If that’s the case, you may not spot an amount not promptly posted into your bank account. 

And if you do your bank reconciliation at month-end or quarterly, it may be too late. The horse may have bolted from the barn. But if bank reconciliation software automates the process, you’ll be able to do your bank reconciliations promptly, regardless of the volume of transactions. This can result in the early detection of fraud.

• Staff satisfaction: Performing bank reconciliation manually is tedious and repetitive, and nobody loves doing routine, repetitive work.
  
  However, automating a bank reconciliation process using bank reconciliation software can bring some oomph into an otherwise boring task. The result will be staff satisfaction and efficiency, a double win for your accounting team and the company.
• Improved transparency: Some bank reconciliation software is part of an integrated accounting and financial reporting system. As a result, everyone on the finance team will know the bank reconciliation status at any moment, along with the issues to resolve.

What Features Should You Look for in Bank Reconciliation Software?

The following are the features you should look for in bank reconciliation software. 

You may first need to familiarize yourself with a bank reconciliation template and an accounting reconciliation checklist so you can know what to expect.

• Good user interface: A good user interface does not simply imply aesthetic appeal. Bank reconciliation software should be smooth, crisp, and easy to understand and navigate.
• Ability to produce relevant reports: Any bank reconciliation software will be useless if it can’t produce reports that inform decision-making. The reports should be well-structured and formatted to help identify trends and monitor cash flow. 
• Security: Robust security features are a must to protect sensitive financial information. Be sure there are encryption and multi-factor identification layers in place.
• Scalability and integration: Many companies prefer bank reconciliation software that can integrate into their ERP systems and other apps and add-ons. And some businesses will need to look for bank reconciliation software that can be scaled up when the company grows to include multiple currencies, for example.

💸 You will need to evaluate the financial cost of bank reconciliation software. This includes pricing both the purchase fees and maintenance costs. 

Top Bank Reconciliation Software Options

FloQast

FloQast Reconciliation Management provides a single dashboard to monitor bank reconciliations in real time. Its centralized viewing feature lets you view the preparers, reviewers, and sign-off dates.

Another feature of FloQast is its ability to send automatic notifications when reconciliations are due, items are ready for review, or the platform detects an unexpected out-of-balance condition. 

It integrates easily with most popular accounting software, including SAP, NetSuite, Sage, and QuickBooks. 

Xero

Xero is also a good bank reconciliation software with an easy-to-use interface. Aside from the fact that Xero can perform other accounting-related tasks, it doesn’t restrict the number of users regardless of the plan.

It also supports multiple currencies and is cloud-based, so you can access it from anywhere. But it has limited customization compared to other stand-alone bank reconciliation software. 

Bank Rec

Aside from its ability to automatically reconcile transactions, Bank Rec is easy to use. It also provides reports that explain why certain items didn’t match and which satisfies Sarbanes-Oxley Section 404.

Bank Rec can integrate with many accounting systems and allow you to customize it to set up matching rules and define discrepancy threshold tolerances.

But because Bank Rec is a stand-alone bank reconciliation software, it can be costly because you’ll still need a general ledger accounting system.

BlackLine

BlackLine is a software company that develops cloud-based services designed to automate and control the entire financial close process. This includes bank reconciliation.

Some key features of BlackLine include its centralized dashboards that provide complete visibility into the status of each bank reconciliation. The software also has customizable templates, checklists, and integrated storage for supporting documentation.

Comparison of Best Bank Reconciliation Software

FloQast 

ProsConsEasy to launchLearning curveSimple and user-friendlyExcellent supportProvides audit trail support

Xero

ProsConsUnlimited usersLimited tracking categoriesSide-by-side layoutDoesn’t support multi-company accountingAbility to integrate with other softwareYou can only import a bank statement from a CSV file or a live connection.

Bank Rec

ProsConsNo set-up feesAdditional software neededReports that satisfy Sarbanes-Oxley Section 404Learning curve

BlackLine

ProsConsWeb login to connect anywhere, anytimeCostGreat layout, great UIComplexity

Bank reconciliation is a crucial process for businesses to maintain accurate financial records, detect fraud, and ensure internal control. With the increasing complexity of financial transactions and growing companies, bank reconciliation software has become essential for efficient, timely, and accurate reconciliations. 

When selecting the best bank reconciliation software for your business, it's important to consider factors such as user interface, reporting capabilities, security, scalability, integration with existing systems, and cost. By carefully weighing these factors, you can choose a solution to streamline your reconciliation process and contribute to the overall success of your business's financial management.