BPO Improves Bank Reconciliation Process

A Fortune 100 company needs help with a problem affecting an international division. A number of accounting staff members left the organization, taking valuable experience and knowledge in the bank reconciliation workflow. This left the company without sufficient resources to complete the monthly bank reconciliation process. This gap in staffing can cause many problems that ripple through an organization – and they were experiencing all of them.

What is a Bank Reconciliation Process?

Bank Reconciliation is an important process for an organization in which the internal or outsourced accounting team compares the organization’s bank statements with the transactions recorded in their general ledger. This process is important as it helps to identify outstanding debits and credits, avoid errors in bookkeeping and identify potential fraudulent activity.

• The division did not have documented procedures or process maps outlining the required steps required for this specific process. 
• Unresolved debts and credits started carrying over to the following months. This increases the risk of misstatements or inaccuracies in financial accounting and reporting records.
• The issues with the process became a costly distraction to other areas of the division. High-paid and overqualified accounting staff were taken away from their primary responsibilities to handle bank reconciliations – tasks that can be more efficiently handled by junior staff.
• Although bank reconciliation is a straightforward concept from an accounting standpoint, this division’s process was complicated and time-consuming. It involved gathering information from dozens of bank statements across several countries, presented in different languages.

Realizing that the situation was starting to get out of control, the client’s management team recognized that the bank reconciliation process would be better off handled by an outside expert than in-house. 

The Fortune 100 Company challenges DATAMARK to improve their bank reconciliation process through analysis and a business process outsourcing arrangement.

DATAMARK’s Business Engineering Team starts with a Business Process Analysis (BPA) of the bank reconciliations. A DATAMARK BPA uses the Lean and Six Sigma process improvement framework of DMAIC (define, measure, analyze, improve and control). The team then defines the process at a high level using a SIPOC (suppliers, inputs, process, outputs, and customers) diagram. The SIPOC diagram tool helps managers better understand the process and serves as a step in creating a new and improved process. 

The DATAMARK team also created process maps for the existing bank reconciliation workflow. This was a critical element in the team’s goal of improving the process. The map helped establish standard and repeatable steps necessary for training new staff to handle bank reconciliations.

By standardizing and documenting the process, it makes it possible to establish clear ownership and accountability for every bank reconciliation. In addition, documentation and mapping would ensure that the process’s institutional knowledge remained within the organization and would not disappear if staff moved on to other opportunities. 

In the future, the maps will help identify any weak touchpoints in the process and identify any opportunities for process automation. The business engineering team developed a plan to transition bank reconciliations to a DATAMARK business process outsourcing (BPO) facility. DATAMARK recommended a near-shore facility in Mexico.   

The nearshore facility is located on the border between the U.S. and Mexico. This location delivers lower processing costs while enabling geographic proximity and time-zone alignment. In this way, the client can regularly communicate with operations managers and travel to the facility, as needed.

The client understood that the back-office functions were becoming an expensive and time-consuming distraction from its core business. Mature business organizations understand that non-core activities are often best outsourced to a specialist provider. In outsourcing their bank reconciliation process, this Fortune 100 company was able to reap the benefits including:

Cost Savings: The client can expect significant cost savings by shifting ownership of the process from high-paid and overqualified employees to staff trained specifically for the bank reconciliation process. By basing staff at a near-shore location, significant hourly wage savings can be achieved when compared to other locations in the United States.

Process Documentation: Documenting and mapping the workflow is the first step in stabilizing the process, creating opportunities to identify areas for improvement. Documentation helps eliminate the inefficiencies, mistakes and other problems that arise from processes that do not have a consistent methodology.

Turn-Around Time (TAT): By establishing a dedicated team for the process, rather than relying on overburdened accounting personnel, bank reconciliations can be processed within the required 10 business day TAT, and the number of unreconciled items carried over into the next month will be significantly reduced. 

Continuous Improvement: With the workflow standardized and stabilized, DATAMARK’s Business Engineering and Operations teams will focus on improving it. This includes exploring ways to standardize reconciliation forms and worksheets, as well as testing commercial software tools to utilize automation. 

DATAMARK delivered a solution to the client to provide cost savings, documentation to preserve institutional knowledge of the bank reconciliation process, and overall improved efficiency and turn-around time. In the end, the Fortune 100 company efficiently outsourced their bank reconciliations process leaving them able to focus on their core business operations and revenue-generating activities.