7 Key Considerations When Choosing A Reconciliation Solution

Fin-Ops teams must be flexible and adaptable to succeed with the payment evolution happening in today’s business environment.

Automating and optimizing all the manual processes on a scalable data platform is crucial to reducing the strain on your Fin-Ops teams.

Why You Need A Reconciliation Solution

The ongoing rise of digital payments is increasing the complexity of transaction reconciliation, which can be a source of laborious manual effort for finance teams.

There’s a need for reconciliation teams to abandon mundane, repetitive operations and eradicate the risk of trivial human errors. Compared to manual reconciliations, software automation offers noticeable productivity gains.

Modern reconciliation software automates the process of creating high-quality, accurate financial statements. They accommodate a broader range of revenue and payment channels and give businesses a streamlined way of verifying that their balance sheets are appropriate, correct, and compliant.

The reconciliation software import real-time data from banking institutions and compare them against internal records. Inconsistencies are flagged for businesses to review and reconcile. This saves time and improves the accuracy of income statements, balance sheets, and related documents.

7 Key Considerations When Choosing A Reconciliation Software

Hopefully, now you understand how businesses prioritizing their reconciliation software requirements can ensure agility and long-term adequacy.

Now, the choices can seem overwhelming if you’re in the market for a new reconciliation system.

Here are some critical considerations for the selection of a transactional reconciliation solution that has the capacity to future-proof accounting and finance operations.

1. On-Premise Vs. Cloud-Based Systems

The deployment approach is a crucial choice to be made.

You can deploy reconciliation software using on-premise or cloud-based systems.

Businesses, especially in banking, insurance, and other information security-sensitive sectors, often argue that an on-premise system is preferable, data security-wise.

However, hosting the solution on internal servers requires extra costs and resources to monitor the application performance and maintain the infrastructure.

Cloud-based systems require minimal installation, are easy to update, and have no hardware costs since the vendor bears these. Modern cloud-based systems also often offer as good or better security than most on-premise solutions (encryption and multi-factor authentication).

2. Price Model

Vendors typically charge an annual license fee for their software and maintenance, support, and professional services.

When looking at pricing, it’s vital to consider the TCO – Total Cost of Ownership – of the reconciliation software. For instance, how many professional services will be needed? Is it intuitive software requiring very little consultancy work, or will the license cost eventually be dwarfed by the service fees?

Also, how much will the support and maintenance cost? With cloud-based systems, this is typically much lower, but it’s crucial to do the due diligence. Talk to the vendor’s reference clients. Ask them if they ended up spending a chunk on ‘extras.’

Lastly, watch out for pricing traps that restrict the transactions you can reconcile. This can affect your ability to add new reconciliations onto the platform, hindering you from attaining optimum ROI.

3. Ease of Adoption and Learning Curve

How steep is the learning curve for the new reconciliation software, and will the users adopt it?

While some tools demand a different skillset (such as coding experience from accountants) and topple the entire routine of the team, intuitive, business-user-oriented software is more likely to survive the implementation.

Generally, daily users find it reassuring when the reconciliation software operates under a familiar excel-like interface.

4. Customizable Vs. Configurable Solution

A customizable solution may appear attractive as it promises to resolve the pressing challenges of reconciliations in a specific organizational context. However, change management of custom programs (typically developed in-house) has proven expensive and unsustainable for the end client.

Users must reach out to the development team even for the minutest adjustment in the reconciliation account structure.

On the other hand, fully configurable best practice SaaS solutions allow greater flexibility for scope expansion and offer regular feature upgrades appealing to a broader client base. End users can create, modify, and manage their reconciliation processes independently.

5. Industry Agnostic Vs. Industry Specialized Solution

It may make sense to choose reconciliation software that addresses unique industry needs.

For instance, if you’re a nonprofit organization, you may need a way to reconcile grants and donations.

If your industry has specific reconciliation and reporting needs, searching for a solution to accommodate them may seem logical.

However, although financial reconciliation has particular industry specifics, businesses from different verticals share a common data-matching concept.

Being entirely reliant on industry-tailored reconciliation inhibits your flexibility to meet your unique and evolving needs. As a business, you can take new directions, introduce new lines of business, or undergo a merger/acquisition. Your reconciliation solution must accommodate these changes.

6. Robust Solution

A robust reconciliation software can sort growing transaction volumes and account complexity.

Your system needs to be proven dependable, as it will form an essential part of your future architecture.

Consider these three things: the disaster recovery and failover processes in place, the oversight and enforced controls the vendor offers, and the quality of support you can expect.

7. Scalability of The Reconciliation Solution

A reconciliation software should provide scalability and room for growth.

You can expand operations geographically, onboard new processes, or take up process improvements and modifications as a business.

A scalable reconciliation solution that keeps up with the progress of the business it supports should easily tune in to new users, new processes, and increasing transaction and account volumes.

The Takeaway

There are many key considerations when choosing a new reconciliation software. It can be daunting to navigate the differences between different systems. Still, considering the above points, you’ll be better positioned to benefit from the latest reconciliation innovations and technology.

Reconciliation is a crucial component of the period-end close and reporting cycle and a vital indicator of a business’s financial integrity.

When done using the right software, a company and its stakeholders can rely on their reported numbers and management’s ability to manage them.