Understand The Role of Position and Cash Reconciliation

Position and cash reconciliations are two of the most common and important reconciliation activities. In this article we provide an overview of each and show how the IVP Reconciliation Solution can make both processes more efficient.

What is Position Reconciliation?

Position reconciliation is the process of confirming that an asset manager holds the same number of securities that a custodian, broker, or other counterparty says the asset manager holds. The process entails matching position balances from two or more sources, typically the custodian or broker record and the asset manager’s internal system. Position reconciliation is also known as holding positions or holding the balance.

Why is Position Reconciliation Important?

Some market participants are required by law to perform position reconciliations on a regular basis, but it is increasingly becoming a daily best practice to mitigate trading and operational risk. In an environment of increasing operational complexity, it is critical to understand any gaps between an asset manager’s internal position data and the counterparty’s position data. Overall, the process of position reconciliation ensures the integrity of positions held.

What are the Benefits of Automated Position Reconciliation?

Leveraging artificial intelligence (AI) and machine learning (ML) capabilities, a position reconciliation solution can automatically match equivalent positions and ensure break management on a daily basis, ultimately helping funds maintain efficiency, accuracy, and flexibility. The solution can also help funds:

• Enhance the capacity to identify and fix breaks
• Recognize and understand current portfolio, fund, and strategy-level reconciliation management
• Boost transparency
• Reduce manual input and ensure prompt problem-solving
• Provide daily balance sheet updates
• Perform complete data cleaning and enrichment from internal systems and custodians for follow-up

What is Cash Reconciliation?

Cash reconciliation is the process of comparing internal ledger entries to external bank statements. The main objective of cash reconciliation is to make sure that the recorded balance of the fund and the recorded balance of the bank match up.

 Why is Cash Reconciliation Important?

Cash reconciliation is a critical process that can improve service levels, prevent fraud, and ensure overall cash control. It helps asset managers identify when ledgers and bank statements fail to match, allowing them to closely examine payments that may have been made accidentally or even fraudulently.

Keeping cash accounts accurate and eliminating bookkeeping errors is much easier with cash reconciliation. Performing cash reconciliation daily, weekly, and monthly helps maintain accurate accounts, which is extremely important. Even the slightest error in bookkeeping can result in significant financial losses or lead to asset managers using inaccurate financial data in their business strategy.

What are the Benefits of Automated Cash Reconciliation?

As with position reconciliation, cash reconciliation solutions can combine AI and ML technology to perform cash reconciliation automatically. This kind of solution can also help funds:

• Increase overall efficiency
• Generate real-time, customized, daily/month-end, and other reports
• Match a large number of statements
• Eliminate accounting errors
• Reduce the risk of fraudulent activities
• Use adaptive matching rules
• Improve transparency

How can IVP Reconciliation Solution Solve Reconciliation Challenges?

For automated position reconciliation, the IVP Reconciliation Solution offers intelligent tools for data cleanup and enrichment. Because security trading involves a variety of regions, exchange platforms, and instruments, it can handle any and all data formats in accordance with industry standards (e.g. ISIN, SEDOL, CUSIP, Ticker, and SIN). The solution gives funds the power to establish a thorough audit trail, examine breaks, and fix them while gaining a more dynamic understanding of reconciliations as a whole.

The IVP Reconciliation Solution delivers similar advantages for cash reconciliation, automating key steps in the process with pre-defined matching criteria that eliminates the need for manual workflows. Instead, your experts can devote more time to financial activities that build your competitive advantage. The IVP Reconciliation Solution also provides a transparent view of data so fund managers can see exactly where and how breaks happen. This helps fine-tune workflow and increase efficiency over time.

Learn more about how the IVP Reconciliation Solution can help funds improve the efficiency and accuracy of position reconciliation and cash reconciliation. Or contact IVP at sales@ivp.in to schedule a live or in-person demo.