Bank statement analysis refers to the process of examining and interpreting the information contained in a bank statement to gain important insights. Read the blog to learn how to analyse bank statements and features of a bank statement analysis software to simplify the process.

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What is Bank Statement Analysis?

Bank statement analysis involves summarizing cash inflows and outflows from statements and providing an overview of financial health of individuals. Businesses and NBFCs consider the financial history of borrowers during credit assessments and bank statement analysis software is being used by various industries for faster processing times, efficiency, and document processing purposes. In this post, we’ll discuss why corporations require bank statement analysis and what to look for when choosing these software solutions.

Why do businesses need bank statement analysis? 

Businesses need bank statement analysis for the following reasons-

1. Underwriting

Banks and financial institutions do background checks on borrowers and assess their creditworthiness through underwriting. Underwriting is a process where a business gives out loans at an acceptable risk, in exchange for a premium. Bank statement software used for analyzing statements helps businesses figure out where bank deposits come from, what assets an individual holds, income verification, and if a person has the capacity to repay loans on time. 

2. Loan approvals 

Borrowers who apply for loans and mortgages need to let their documents undergo financial audits. Intelligent document processing solutions are used to extract data from bank statements and do cash flow analysis of them. Banks are able to identify sources of income, total annual earnings, interests paid, and other liabilities through statement analysis. This helps them determine the amounts of loan borrowers are eligible for and disburse them accordingly. For borrowers who default on payments or have a poor credit history, bank statement analysis helps blacklist them and avoid making mistakes by giving out loans.

3. Income Tax purposes 

NBFCs and Fintech startups perform bank statement analysis for computing ITR filings and income tax returns. Income tax calculation helps businesses estimate how much taxes individuals pay every year, thus letting them know if the transactions occurring are genuine.

4. Preventing financial fraud 

Bank statement processing using intelligent OCR can find patterns in recurring transactions and identify cases of financial fraud. Statement analysis models cross-check transactions shown on the business ledger versus what’s reflecting in account statements. Mismatching amounts help detect fraudulent activities in accounts and if the details are correct, the accounts get verified and validated.

How does bank statement analysis work?

Bank statement analysis works by pulling financial data from a statement and deriving insights from it based on the states of account activities. A bank statement analysis model aims to map cash inflows & outflows of accounts, penalty charges, vendor payments, and defaults (if any) for assessing the repayment capacity and creditworthiness of individuals. 

It parses data from scanned images or PDF documents, structures it, and summarizes account activities of borrowers. Bank statement analysis gives an overview of one’s liabilities, recurring transactions, and monthly dues as well, which helps banks and financial institutions decide how much money they can afford lending to borrowers. 

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What should you look for in bank statement analysis software? 

Bank statement analysis is not a one-size-fits-all solution since every bank is different and there are a variety of document formats for statements. If you are planning on investing in good bank statement analysis software, here are key features you need to look out for:

1. Ability to adapt

Every bank has its own unique format when it comes to printing statements. Good bank statement analysis software should be able to read unstructured data, organize it, and produce the information in more presentable formats. The ability to adapt to different document layouts and styles is a key characteristic of cutting-edge bank statement analysis software.

2. Accurate

Bank statement analysis involves PDF to excel conversions where tabular data is read from scanned documents and entered into spreadsheets for cash flow analysis. Data extraction from PDF and parsing values are challenging problems faced by most OCR solutions. If you are investing in a bank statement analysis solution, make sure it yields a high-level of data accuracy when inputting information and is also capable of checking for fraudulent entries.

3. Data validation

Financials in statements have to be compared with income tax figures, GST filings, and other documents to assess the financial health of borrowers. Good software programs are able to validate entered data, compare with different sources, and ensure that entries are legitimate.

4. Review

Data extracted from bank statements after analysis should be reviewed by users. The software should flag anomalies and send alerts or notifications to users if it detects missing values or discrepancies during data extraction, requesting them for a manual review. 


How does bank statement analysis software benefit financial institutions?

Automated bank statement analysis helps financial institutions in making faster decisions about credit profiles and offer high-end financial services to those whose applications get approved. Bank statement analysis software is capable of processing huge volumes of transaction data which boosts overall organizational efficiency.

Can I cut down costs using bank statement analysis?

Yes, it is possible to reduce costs in the long run if you invest in bank statement analysis or even an automated credit application processing system. This is because these programs are not prone to human error, very accurate, and eliminate data redundancy. 

How Docsumo helps in bank statement analysis?

Docsumo uses smart machine learning algorithms to extract data from bank statements, detect fraud in real-time, and eliminate cases of forgeries. Docsumo can detect frauds such as cropped documents, photo on photo, B&W image, and formatting/layout differences of bank statements.

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Pankaj Tripathi
Written by
Pankaj Tripathi

Helping enterprises capture data for analytics and decisioning

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