The Ultimate Guide to Bank Statement Data Extraction in Accounting: A Comprehensive Approach

The ACFE 2020 Report showed that occupational fraud lost $125,000 globally. Financial statement fraud, such as inflating revenue or hiding expenses, comprised 10% of fraud cases. The median loss was $954,000 per case.

This shows how important it is for account teams to review documents like bank statements to keep finances in order.

This article explores the importance of bank statement verification for accounting teams. We will understand why checking bank statements is crucial for maintaining accurate financial records. Additionally, we'll discuss how automation can streamline the process.

What is bank statement verification?

Bank statement verification confirms the accuracy and validity of information provided on a bank statement. It involves reviewing the statement to ensure that transactions match what is claimed by an individual or organization. 

Bank statements are commonly used for verification purposes in various financial and non-financial contexts. These include loan applications, rental agreements, employment verification, and auditing procedures. They serve as crucial evidence of financial history and activity, offering insights into an individual's or entity's financial health and behavior.

Why is bank statement verification needed in the accounting industry?

Accounting teams use bank statements to show how much cash a company has and how well it does. They also use them to ensure transactions match the company's records. This information helps with holistic financial statements that lead to informed decisions.

Here are some use cases of bank statement verification in accounting:

a. Reconciliation

Accounting teams compare transactions with internal records like the general ledger. For example, if the bank shows a $1,000 deposit, accountants confirm it matches the ledger.

b. Error detection

Bank statement verification identifies errors or discrepancies in financial records. For instance, if a transaction in the company records is missing from the bank statement, it indicates an error.

c. Verifying cash balances

Accountants use bank statements to verify the company's cash balances. They compare the ending balances on bank statements against company records.

d. Detecting fraud

Bank statement verification helps with fraud detection. Accountants review bank statements for suspicious transactions that do not match records.

Thus, bank statements are an integral part of accounting. Any discrepancies can result in several business problems. They can cause issues with compliance reporting and tax filings. These can trigger audits and fines. 

The following sections will examine what accountants look for in bank statements and understand how proper verification helps prevent fraud.

What accountants look for in bank statements?

Checking bank statements is crucial to ensuring accurate financial reporting. This section will explore the key aspects accountants look for in bank statements. 

Unmatched transactions

Accountants check bank statements against internal records to ensure accurate documentation.

Duplicate entries

They review financial records to spot and correct duplicate entries. This prevents errors in financial reporting.

Opening and closing balances

Accountants confirm opening and closing balances on bank statements. This helps them verify the accuracy of cash positions.

Deposits and withdrawals

They reconcile bank statement deposits and withdrawals. Doing this maintains accuracy in financial documentation.

Bank fees

Accountants review bank statements to identify any incurred bank fees. It helps with expense allocation.

Interest paid or earned

Bank statements are crucial for verifying interest payments and earnings. These ensure compliance with financial agreements.

Electronic fund transfers

Accountants examine this to confirm the accuracy of electronic transactions.

Preventing accounting fraud with robust verification measures

Accounting fraud means changing a company's financial records. Fraudsters may create false information about how well the company is doing. 

It can involve individuals or groups within a company. The aim is to mislead the investors, regulators, and the public. Examples include hiding debts and expenses, inflating revenue, and falsifying documents.

Accounting fraud harms a company in many ways. It erodes trust with investors and stakeholders. This results in lost investments and legal issues. 

Document misappropriation also hinders decision-making, distorts the company's financial health and performance, and damages its reputation and brand, resulting in a loss of customer trust and loyalty.

On average, 41% of companies misrepresent their financial reports. This can lead to significant costs for investors. The estimated average cost of fraud could be as high as 15.6% of firms' market capitalization. These challenges demand careful analysis and management of documents. Ensuring their accuracy and reliability is paramount, especially when verifying bank statements. 

In the past, bank statement verification was a time-consuming task that took a lot of effort from accounting teams. Doing it manually left room for mistakes and made the company vulnerable to fraud. But now, things have changed. Automation has made a big difference. It has made verification faster, more precise, and more reliable.

How do accounting teams verify bank statements?

Bank statement verification in accounting ensures the accuracy of financial records. It involves reconciling transactions with bank statements. The process can be either manual or automated. Let's explore both:

a. Traditional verification

In this method, accounting teams receive either paper or electronic bank statements. They compare each transaction with invoices and receipts to catch any errors. 

However, this process is time-consuming and prone to mistakes. It requires significant effort and can result in delays and inaccuracies.

b. Automated verification

Automation uses technology to make tasks easier and more accurate. It can get bank statements electronically and quickly extract transaction details. They are intelligent systems like OCR that can sort transactions, match accounts, and find mistakes independently. 

This means less manual work for accountants. They can save time and focus on more strategic tasks.

According to KPMG, automation can save financial firms up to 75% in costs. While some organizations still use manual methods, automation provides a better alternative. It is efficient and accurate and has become the new norm in accounting practices.

Automated processes simplify bank statement verification by speeding up tasks and minimizing errors. For example, a tech company digitized their accounts payable with automation. They have reduced invoice processing time from hours to less than 5 minutes with 99% accuracy.

How to automate bank statement verification for accounting operations?

Advanced technology and machine learning are transforming how accounting teams manage their workflows. Many businesses now use them to automate tedious tasks and focus on more strategic activities. 

Intelligent tools have smart algorithms that extract transaction data from bank statements. They can quickly identify, extract, and verify financial information, even without human intervention.

Bank statement extraction software like Docsumo is one of the many examples. It streamlines accounting workflows and automates data extraction via advanced technologies.

Here’s how accounting teams can streamline bank statement verification with Docsumo:

Step 1: Upload a bank statement from email inboxes, scanners, or other document management systems into Docsumo. It can be in any format, such as image, PDF, or Excel.

Step 2: Automatically categorize, organize, and sort incoming documents into specific folders for quick retrieval and data extraction.

Step 3: Split a large document into a set of smaller ones according to the criteria you select.

Step 4: Access over 30 pre-built AI models to extract data from documents instantly.

Step 5: Additionally, you can train your model with different types of documents to achieve over 95% accuracy.

Step 6: Pull tabular data out of documents and reshape it to your specifications for further processing.

Step 7: Collaborate with your teammates as reviewers to assess incorrect or failed extractions.

Step 8: Avoid repetitive, manual data reviews and enter your documents directly into your downstream systems.

Step 9: Double-check your data through configured checks. Remove duplicates and redundant entries.

Step 10: Know the number of documents uploaded, approved, and held for review with status metrics for data-driven decisions.

Step 11: Connect with your accounting software to create automated workflows and avoid data silos.

Step 12: Share the extracted data with different file formats and databases.

How the accounting industry can automate bank statement extraction?

Bank statement verification is crucial to accounting, ensuring financial transparency and integrity. However, manual methods can be time-consuming and prone to errors. Fortunately, with the rise of intelligent automation, there's a positive shift.

These tools save time and reduce the risk of errors slipping through the cracks. 

Intelligent automation also has the power to streamline workflows and increase efficiency. It can drive cost savings and profitability. By automating repetitive tasks, accounting teams focus on more strategic activities. This not only boosts productivity but also enables businesses to operate better. They can see improved financial performance.

As AI evolves, the possibilities for improving accounting processes are endless. It catalyzes growth and success in today's fast-paced financial landscape. Embrace intelligent automation to drive efficiency, innovation, and compliance across financial operations.

And if you're looking for a specific tool, Docsumo is worth checking out.

It provides an efficient and accurate solution for streamlining bank statement extraction. With over 99% accuracy, automate data extraction from your bank statements in seconds, regardless of format. Benefit from automated validations and data review for unsure extractions. Reduce costs and manual review time significantly with our self-learning AI. Experience the advantages of automated bank statement verification with Docsumo today.

FAQs

a. What is bank statement verification?

Bank statement verification is matching bank transactions with a company's records.

b. What is a financial bank statement?

A financial bank statement is a document issued by a bank to an account holder. It details all transactions within a specified period. 

c. Why do accountants ask for bank statements?

Accountants request bank statements to verify the accuracy of a company's financial records. Bank statements give a detailed summary of transactions. These include deposits, withdrawals, and other activities.

d. Is a bank statement the same as a statement of account?

A bank statement is used as proof of billing when you need documents to prove your identity. A statement of account is exchanged between businesses documenting purchases and payments.

e. How do accounting teams verify bank statements?

Accounting teams verify bank statements by:

• Comparing transactions with internal records such as ledgers and invoices.
• Reconciling deposits, withdrawals, and balances between the bank statement and company records.
• Identifying and investigating any discrepancies or errors.

f. Why is bank statement verification important for businesses?

Bank statement verification is crucial for maintaining financial transparency and integrity. It helps businesses ensure accurate financial reporting, detect errors, and prevent fraud.

g. What are the risks of relying on manual methods for bank statement verification?

Relying on manual methods for bank statement verification is time-consuming and error prone. It increases the risk of overlooking discrepancies or fraudulent activities.

h. How does intelligent automation improve bank statement verification processes?

Intelligent automation streamlines bank statement verification. It automates tasks like data entry, analysis, and reconciliation. 

i. Can intelligent automation handle large volumes of transactions?

Yes, intelligent automation can handle large volumes of transactions. It can process and analyze data at scale, making it suitable for businesses of all sizes.

j. How does intelligent automation contribute to cost savings and profitability?

Intelligent automation helps reduce operational costs and improve productivity. It automates repetitive tasks and streamlines workflows. As a result, businesses save more and manage resources better.