Transaction errors and account inconsistencies can lead to unhappy customers, complaints, and reputational damage. Most financial institutions use data reconciliation software to compare customer account balances in their system with those in their main ledger and achieve consistency in all their financial transactions.
What is data reconciliation?
Data reconciliation is the process of verifying and confirming the accuracy and consistency of data from different sources. It involves the comparison of the same set of data from two sources to identify and correct discrepancies. It can be done manually, but professionals use reconciliation software to automate the process, thereby improving efficiency and productivity.
One method of data reconciliation is counting rows and columns of data in a system and comparing it to its original source. Another method is using checksum to detect inconsistencies in small data blocks. Financial institutions should perform this regularly to ensure the data in the system remains accurate.
What is Reconciliation Software in Finance?
Reconciliation software is the program used to streamline and automate the reconciliation of financial records. It makes the process more efficient and employees more productive, and is a critical asset for financial institutions because of its numerous use cases. One of which is to compare their internal financial records with their general ledger to ensure financial statements and transaction figures are correct and consistent across their systems.
Features of Finance Reconciliation Software
While reconciliation software can be used in many business setups, here are some features specific to the reconciliation software used in fintech companies and financial institutions:
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Automatic matching
Reconciliation software is designed to automatically scan and compare large volumes of account and transaction data into two or more datasets to ensure they match. In the process, it finds and flags inconsistencies. This automated inconsistency flagging makes it easy for employees to review and resolve inaccuracies quickly.
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Feature and settings customization
The software is customizable so people can set the criteria that best suits the reconciliation process in their business.
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Data centralization
Reconciliation software makes it easier for financial institutions to access and review financial statements; thereby making the reconciliation process smooth, seamless, and efficient.
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Software integration
Most reconciliation software can integrate with financial and accounting systems so operators can transfer data to them seamlessly.
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Regulatory compliance
Government bodies have regulations that financial institutions are expected to follow. They sometimes audit these institutions to ensure they comply with said regulations. The software helps this effort by keeping records of reconciliation activity for auditors to review when necessary.
Endnote
Financial institutions need reconciliation software to detect inconsistencies and errors in their customers' financial records and transactions. Reconciliation software automatically compares two or more datasets to find inaccuracies and inconsistencies, and they can be customized to suit different business needs. They also increase workplace productivity and make reconciliation more efficient.
