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What is cross-entity bank rec?

What is bank reconciliation?

One of the first rules of bookkeeping: reconcile your transactions.

With cloud accounting systems, bank reconciliation is fairly straight-forward thanks to the following features:

  • Bank feeds, which mean that bank transactions are automatically imported to the accounting system without the need for finance teams to manually enter their bank transactions or import them via CSV.
  • Bank rules save users from having to manually create a new transaction each time they get a recurring or similar type of bank statement line in a spend or receive money transaction (where there is no invoice or bill which relates to the transaction).
  • Intelligent matching of spend/receive money transactions to the corresponding bill or invoice

When bank rec becomes a challenge

These are among the many benefits of cloud accounting systems. However, bank rec can prove a challenge for finance teams of businesses with multiple related entities. In multi-entity businesses, sometimes one entity will pay a bill or receive income on behalf of other group entities. In this situation, bank reconciliation suddenly becomes much more complicated, as the benefits mentioned above are only ever applied within the same entity. There is also a risk that a bill could be paid twice, as it will still show as outstanding in the entity to which it pertains. There are a few reasons why a business with multiple related entities might operate this way.

For example, Entity X might pay a bill on behalf of Entity Y if Entity Y doesn’t have its own bank account, or perhaps the bill was posted in Entity X’s currency so it makes sense that they would pay it. Whatever the reason, the result is a very difficult reconciliation process for the business’s finance team. To match payments and income to bills and invoices posted to other group entities, finance teams have to comb through all of the related entities’ accounts to find the information they need to reconcile the transactions. It takes a long time and can be incredibly frustrating. Read on to find out how to easily overcome the challenge of reconciling transactions across your group with cross-entity bank rec.

What is cross-entity bank rec?

With cross-entity bank reconciliation, finance teams can quickly and easily match transactions to bills and invoices that have been posted to other group entities. BRAG (which stands for Bank Reconciliation Across the Group) is an extension which adds on to the bank reconciliation page of your accounting system. This enables users to quickly find the bills and invoices which apply to their intra-group transactions, and immediately reconcile them as they would with their regular payments and invoices.

It may well be that Entity X makes a payment which covers several bills posted to Entity Y, or perhaps the payment even covers bills posted to Entity Z as well. Perhaps Entity X only paid part of the bill posted to Entity Y. Cross-entity bank rec will allow for all of these use-cases, letting users easily match transactions to any and all of the bills or invoices to which they relate.

To find out more about Mayday's cross-entity bank rec solution, BRAG, click here.

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