Reconciliations are a fundamental accounting practice that title & escrow companies must regularly complete to ensure that “money in” matches “money out.” Exception reports are vital for successful daily and monthly reconciliations, yet many title & escrow businesses face challenges in efficiently executing them.
While it may seem like a small piece of the operational puzzle, a more systematic approach to exception reports can reduce the potential for errors and fraud, increase efficiency, and give processors more time back in their day to focus on client experience.
Exception reports: a fundamental task for title businesses
As title professionals know, documenting exception reports is fundamental in complying with ALTA best practice standards. Exception reports identify any items that do not match the expected data. This report alerts processors to any red flags or suspicious charges within an account, as well as potential accounting errors. Exception reports are key in performing clean reconciliations and protecting businesses against the risk of fraud.
Once a disbursement is posted and the funds are received, an agent often manually clears items one at a time to verify that a bank account item matches an item in a title company’s system of record (such as their title & escrow software). Agents may also complete this process through automatic clearing, depending on their software. For automatic clearing, an agent uploads a CSV or BAI-2 from their bank’s online portal into their title & escrow software to automatically clear items and identify exceptions. In both cases, the agent would review any exceptions to check for errors or missing funds.
Common challenges with exception reports
Exception reports are necessary to ensure that there are no unusual transactions caused by fraud or accounting errors. Although these reports are essential, many title & escrow companies find the reconciliation and exception report process time-consuming and tedious. Below are some of the top challenges title professionals face when creating and clearing exception reports.
Delays on daily and monthly reconciliations
Performing daily reconciliations and creating exception reports can take a significant amount of time. Agents may be too busy to perform daily reconciliations, or it may not be their core competency. If an agent waits to complete daily reconciliations, the end-of-month process can be painstaking and lengthy, involving researching exceptions, cleaning up order accounting, and reconciling bank accounts. The time-consuming nature of creating these reports can lead to delays in reconciliations, prevent title & escrow companies from being audit-ready, and may ultimately lead to a loss of funds.
Inefficiencies from manually creating exception reports
Manual processes create massive inefficiencies, especially when manual tasks are repetitive functions that automation or integrations could eliminate. Many reconciliations and accounting software lack integrations to seamlessly pull data and information from related files. As a result, a title processor must work between separate systems and manually transfer data by rekeying information.
Less time to build client relationships
When agents spend too much time on reconciliations, they may have less time for communicating with clients and completing orders. Many Qualia customers use our Reconciliation Service to allow their agents more time to focus on client experience. If agents are spread too thin with reconciliations, it can take away from fostering relationships with clients and delivering a differentiated closing experience. For example, JK Closing used Qualia Reconciliation Service to shorten its reconciliation timeline from hours to minutes.
Errors with manual reconciliations
In addition to being time-consuming, manual reconciliations are also prone to human error. For example, a processor may inadvertently omit information or enter payments to the wrong account. Overall, manual reconciliations can lead to inaccurate books and additional time spent fixing mistakes—both of which impact the business’ bottom line.
Difficulty navigating the reconciliation process
If agents lack experience in reconciliations or are not familiar with accounting software, reconciliations can be a frustrating experience that leads to accounting errors. On top of that, training employees and correcting errors can take additional time away from managing clients and executing orders.
What to look for in a reconciliations provider
Managing exception reports as part of daily and monthly exceptions can be a labor-intensive, costly, and error-prone process. Streamlining this process can help title & escrow companies scale their business, mitigate fraud, save time on reconciliations.
Tools to stay audit-ready
Look for reconciliation software that helps manage and scale exception reports to help businesses stay audit-ready. In Qualia, exception reports are delivered daily as part of the Significant Audit Findings Executive Report (SAFER) Daily Update. The SAFER Daily Update gives detailed and actionable information to identify audit red flags or suspicious charges quickly. This package of reports includes:
- Cleared Status Report – Debits
- Cleared Status Report – Credits
- Aged Remaining Balance Report
- Aged Negative Balance Report
- Uncleared Disbursements
- Exception Report
Automatic clearing of exceptions
Reconciliation software that allows businesses to automatically clear exceptions can improve accuracy and provide significant time savings. Automation can give title & escrow teams more time to focus on core competencies, like communicating with clients and processing orders. As part of our Reconciliation Service, Qualia users receive a complete suite of reconciliation, banking, and accounting tools along with a dedicated reconciliation specialist. With Qualia’s automatic clearing functionality, a Qualia Reconciliation Specialist facilitates the automatic clearing of daily and monthly exceptions. This offering aims to provide immediate relief for businesses to increase efficiency and allow processors to focus on more crucial tasks.
Features to accelerate business growth
The time involved in managing daily and monthly reconciliations can hinder growth, especially if a business is trying to scale into new states. Creating scalable reconciliation processes can offer relief to teams by helping them save time and effort on manual, time-intensive tasks. Look for reconciliation software with features that add ease and transparency to the process. For example, in Qualia, processors can add notes directly to exceptions that appear on the Exception Report to simplify communication and prevent errors during reconciliations.
For title and escrow companies nationwide, the end of the month can be a busy and stressful time. If you’re interested in learning more about how Qualia Reconciliation Service can help mitigate fraud and keep your company audit-ready, reach out today to see a full demo.