Supercharge Your Supplier Statement Reconciliation Using Automation
Supplier statement reconciliation matches internal financial records to supplier equivalents of the product or service purchase they refer to, ensuring that a business's accounting system is consistent with the supplier data. The process is vital for accurate records, cash flow management, and building trustful relationships with key suppliers. Reconciling supplier statements can be long-winded and error-prone, so automation is the answer to streamline this process.
How To Reconcile Supplier Statements
Raising a purchase order happens when a product or service is purchased. Records are usually stored at the time of purchase in an internal booking system and, occasionally, straight into the accounting system.
A supplier will send multiple supplier invoices, often followed by a summary supplier statement. The supplier documents may contain a massive list of financial records, and the items in the list always need to be matched against the information on the internal system.
Reconciling supplier statements has traditionally been a time-consuming manual task. Accounts payable departments must deal with paper statements, vendor invoices, and credit notes, which need careful matching with internal records.
Reconciling supplier statements is about more than just matching invoices. Accounts payable departments must also watch for outstanding invoices, identify discounts from early payments, and maintain accuracy. They have to watch that no incorrect payments slip through the cracks.
Many accounts payable teams are small, and the process could be exhaustive and fraught with errors and potential oversight, especially when supplier systems produce multiple formats.
Why Is The Supplier Statement Reconciliation Process So Time-consuming?
Complex procedures and processes where human beings are involved can be error-prone. Errors can quickly occur with tasks such as supplier statement reconciliation. The nature of the job is that it is incredibly complex.
Products or services may have many versions and prices over a period of time. One or more systems might have bugs and record data incorrectly, and recording transactions accurately may fail.
Many automation technologies can be employed today to help with this process, and there is no longer any good reason to do it manually.
However, we need to understand some pitfalls before selecting an automated approach.
Considerations Before Selecting An Automated Solution
Robotic Process Automation (RPA) and automation experts help businesses analyse and consider essential factors before selecting an automated solution.
Often, it takes more work for a business to do this independently, and they engage with a consultant.
Understanding Business Requirements
Understanding some fundamental business requirements is crucial before jumping into automation for supplier statement reconciliations. A business should conduct a thorough analysis of existing business processes.
The analysis might include examining the number of statements, invoices and credit notes processed each month, the complexity of reconciliations due to multiple currencies, differing supplier terms, and transaction volumes.
Integration With Existing Systems
A crucial aspect to consider is how well the automation system will integrate with existing accounting systems and other software tools that a company might use.
Automation integration should be seamless and ensure data consistency, reduce the need for manual data entry, and reduce the chances of errors due to system mismatches.
Manual Training
The technologies that use machine learning typically forward any matching exceptions to the end users to fix. Then, a business uses this activity to further train the machine learning model.
That creates a nice cycle of improvement, but we have seen several abandoned projects where the manual work of training the model has replaced all the previous manual work.
Such a reversal in the process may be okay in the early days of rolling out the solution, but a business must ensure that this training period drops off very quickly and a robust solution evolves at the end.
Scalability Of The Solution
An automated solution should be scalable because the number of transactions is also likely to grow as a business grows. The worst-case scenario is that a business outgrows the solution.
Good automation should be able to handle growth in terms of transaction volume, expanding operations, and a growing number of suppliers.
Quality Assurance
Work completed through automation must ensure that cumulative errors are not an issue. It's essential to define quality metrics that are measured and reported upon and have alerts informing you when things are starting to run astray.
Any sound automation system should ship with summary and exception reports and an alerting mechanism and should provide a dashboard where you can quickly drill into possible errors. Without that, you won't have the peace of mind to leave the automated system running in the background.
Data Strategy
When dealing with data, it needs to be cleaned, deduped, and securely stored so that it becomes 'query-able' and a business asset. Running several automated solutions makes it easier for data to become stale and no longer trusted. To avoid this, you need to consider data structures, data flows and any systems where data with the same concept is in danger of drifting from other copies of it.
Cost
Automation can lead to significant cost savings in the long run. However, You should consider immediate costs before implementing any system. These include the software and implementation price, training, ongoing costs for upgrades and support, and others.
User Acceptance
Gathering feedback from employees who will be using the system regularly is essential. Engaging the accounts payable department, accountants, and key stakeholders in discussions about features, challenges, and expectations can offer critical insights.
The success of automated systems largely rests on the acceptance given by the end users.
Automate Supplier Statement Reconciliation: A Modern Solution
Automating systems can revolutionise the way an accounts payable department operates. The software can reconcile supplier statements directly against the business's accounting systems, and employees no longer have to sift through physical reports, statements and other documents.
In leveraging automation, a business can see many benefits, such as:
A Reduction In Human Error
Reduction in human errors is the most immediate benefit. By cross-referencing vast data points, automation can ensure transactions are reported accurately.
Achieve Faster Reconciliations
A manual reconciliation process typically takes hours or days. Automation means completion in a fraction of the time. The accounts payable team can then focus on further resolving supplier queries or optimising the accounts payable process.
Maintains Accurate Records
A correctly implemented automation solution will ensure that all supplier accounts maintain accurate records, from the opening balance to the most recent transactions.
Such consistency is invaluable for providing comprehensive reporting and maintaining a complete audit trail.
Improve Supplier Relationships
Once an efficient automated system is in place, a business can ensure timely payments, respect due dates, and capitalise on early payment discounts offered by suppliers.
Flexibility With Different Supplier Formats
An automated system can handle many different formats, whether paper-based or digital. You can integrate suppliers into the reconciliation process because it is easy to handle multiple formats.
Now, You're Ready To Automate
As a business grows, managing vendor accounts becomes more complex. One of the first tasks for any accounts payable department should be to automate the statement reconciliation process.
Automated systems help businesses make informed decisions because the data is more accurate, and such software often has comprehensive reporting systems built in.
Automation is not about replacing humans in the workplace but rather enhancing it. The accounts payable team can guarantee that each supplier receives the attention they deserve, regardless of transaction size or volume.
Whether you decide to automate your processes in-house, through a specific system or by designing a bespoke solution with an external company, the sure thing is that this process is a crucial one to be automated.
Conclusion
Don't leave automating your supplier statement reconciliation process until it is too late!
Find an expert with years of experience implementing automation throughout the accounting process. Traverse Automation has spent years designing and implementing automation solutions to solve manual tasks that are often complex and error-prone.
Say goodbye to manual errors with your supplier statement reconciliation, and get in touch to find out how we can help you.
