Reconciliation Playbook: Automate Match and Resolve
Reconciliation is where the promise of a payment product meets the world of accounting. This is the thing that keeps the books straight, customers, in the know and people who regulate things. A lot of the time, reconciliation is something that people only think about at the end of the month instead of all the time. When you make reconciliation automatic and easy to understand, and you make it a part of the product, things run smoothly checking everything is okay goes faster, and problems are not as big. This guide will show you how to make the information you get from settlements work with how to automatically match things up, how to deal with problems that come up and how to measure if reconciliation is working well, which is a really important thing to know about the product.
Why does reconciliation deserve product thinking?
Reconciliation is not about dealing with money. It is something that affects parts of a company like the people who make products, the people who do operations, the treasury team and the people who make sure everything is compliant. If reconciliation is not done well, it can cause problems with customers and waste time for the operations team. Make it hard to see if there are problems with money.
If we think of reconciliation as a product, we need to make a plan for how we organize our data, use machines to help match things, show people when there are problems and give them the information they need to fix it and keep track of how well we are doing and how long it takes to fix problems.
When we do reconciliation in this way, it helps us see if our partners are doing well and if our products are working as they should. Reconciliation becomes a way to know if things are going to go before they actually do.
Normalize settlement inputs and keep raw files
Settlement files come in all sorts of formats like MT940, CAMT, CSV and other special layouts that are just used by one company.
The first thing we need to do is make all these files look the same. We do this by taking the information from our partner settlement files and putting it into a settlement file that has things like the transaction reference the amount of money the date the money is actually worth the reference from the other bank and all the extra information, from the original file.
We should keep the file attached so we can look at it again if we need to check something. Making all the files look the same really helps because it means we can deal with any problems that come up in a way no matter which partner or system we are working with. It also means that when we try to match up the information from files we can do it in a way that always works without having to worry about special cases. This makes everything a lot easier to manage.
Deterministic matching first, fuzzy matching second
We need to make a system that matches things up based on important details. The system should first try to match things using the transaction reference, amount and value date. This should work for most of the settlement lines. If this does not work, we should use a way of matching that is not exact but still has clear rules.
We also need to set a limit for how sure we are about these matches. For the matches that’re not exact, we should show a score that says how sure we are about the match. If the score is too high, a person should review it to make sure it is correct. We should always show the reference from our partner and the original information from the transfer. This will help the operations team fix any problems that come up with the matches.
Context-rich exceptions and prioritization
When things do not go as planned with matches, we need to give people who are doing the work some information to help them. This includes the information that was sent, why it was sent that way, the details of the payment and any messages we got from our partners recently.
We should look at the problems that come up and deal with the ones that will cost us money first, and also the ones that have been waiting the longest. If the problems are not very serious, we can use some rules to fix them. If the problems are big or seem suspicious, we should tell the people in charge of making sure we are following the rules and the people who handle the money. We should keep an eye on how long it takes to fix these problems and use that information to make our work better. We should use these things to measure how well we are doing and to make changes to our work. Matches and the problems with them are very important to our work.
Automate common fixes and build safe playbooks
Reconciliation exceptions are pretty normal. Usually happen because of things like duplicate lines or small differences, in numbers. We can use machines to fix these problems like trying again or fixing small mistakes and make sure we keep track of what we do. For problems we need to have a plan that tells us what to do step by step and how to get help from others if we need it. Using machines to do some of the work means we do not have to do it all by hand. We can fix things faster. Having a plan also helps because it means we do not have to think hard, and we can be sure we are doing things the same way every time. Reconciliation exceptions are easier to deal with when we use machines and plans to help us.
Idempotent ingestion and replay ability
When we are dealing with settlement files, it is possible that they may need to be sent or reprocessed. To make sure this process works smoothly, we need to make sure that the system can handle files being sent multiple times without causing any problems. We can do this by using codes called file checksums and settlement references.
This way, if something goes wrong and a file needs to be sent, we can reprocess it without worrying about it causing any issues. We should also have a way to reprocess files after we fix any problems that occurred. This will prevent settlement files from being posted, which can cause a lot of trouble.
It is also an idea to keep a record of all the settlement files and any actions that were taken on them. This record should include the versions of the files and any changes that were made. This will make it easier for people who need to review the files, like auditors, to see what happened at any given time. Settlement files and settlement references are very important in this process.
Measure reconciliation as a product KPI
We should think of reconciliation like something we are making and keep track of how it’s doing. We need to look at things like how often reconciliation works correctly, how long it takes to fix problems, how many problems we can fix automatically and how long it takes to resolve issues. It is an idea to use dashboards to show what is happening with our partners, the routes we use and the rail systems.
We should also connect the reconciliation numbers to the promises we make to our partners and to our own internal goals. If the number of times reconciliation works correctly starts to go down, that is a sign that we need to look into it before it becomes a problem for our customers. We should do this so that reconciliation issues do not affect our customers. Reconciliation is important. We need to keep an eye on it.
Operational tooling and developer experience
We need to make it easy to reconcile things with our tools. This means we need to be able to search, use filters, add notes and do things in bulk. We should also give developers a place to try things out and some sample files to work with. This way, they can test changes to the connector from start to finish. If we are using something like RemitOS to manage everything, we should make sure that information about settlements is shown in the place as the reconciliation user interface. This includes things like how things are routed and what partners are saying. The settlement details should be there, with the other information.
Governance, audit readiness, and retention
We need to keep retention policies for raw settlement files and reconciliation artefacts that meet what the regulations say.
The auditors should be able to see a trail as this includes the transfer request, the decision on how to route it, the settlement line and the ledger posting for the settlement files and reconciliation artefacts. We should automate the reports that auditors need to see. We also need to keep a log that shows if someone tried to change things. This log is for the reconciliation runs and the actions that the operators take on the settlement files and reconciliation artefacts.
Conclusion: Reconciliation is a lever for operational scale
Making settlement inputs more consistent automates the process of matching them and provides information when something goes wrong. The best thing to do is to make all settlement inputs follow the format and then check how well they match. This is a thing to measure. When we think of reconciliation as something we can improve, our operations get better, audits take less time, and customers trust us more. Settlement inputs are really important, so making them consistent is crucial. By doing this, settlement inputs will be easier to work with.
