Unlocking Efficiency: Top 10 Use Cases for Bank Statements Extraction and Verification

A company's bank statement provides a snapshot of its financial transactions, including deposits, withdrawals, and balances. Verifying this information is vital for auditing the company’s financial standing and credibility. 

This article delves into the top 10 use cases of bank statement verification and extraction. We also examine manual and automated extraction methods, weighing their pros and cons.

What is bank statement verification? 

Bank statement verification ensures the accuracy of financial information provided in bank statements. It involves meticulous bank statement analysis to assess risk, detect fraud, and make informed decisions. 

The process is useful for auditing purposes and to provide evidence of financial activities to stakeholders such as investors, creditors, and regulatory authorities. Bank statement verification can be done either manually or automated using software. 

10 Use cases of bank statement verification and extraction 

1. Bank statement verification in insurance

The Coalition Against Insurance Fraud report shows that insurance fraud in the United States accounts for $308.6 billion annually. To eliminate fraud, insurance agencies should assure the consumer's financial stability and authenticity. 

Bank statement verification in insurance helps insurers detect any discrepancies or manipulation in income and transaction details within bank statements. This process can help decide the applicant's monthly/yearly premium charges based on their financial capacity. 

2. Bank statement verification in accounting 

Accounting helps businesses take the necessary steps to maintain and grow their finances. This process mainly relies on different account statements such as income statements, cash flow statements, balance sheets, and bank statements. 

Accountants extract and verify bank statements regularly as part of their process to improve the financial health of the business. 

3. Bank statement verification in healthcare

Healthcare institutions receive numerous cheques from patients every day. To prevent fraud and improve cash flow, they need to check the authenticity of the payee before processing the payments. 

Bank statement verification in healthcare helps verify if the payee has sufficient funds to process the payment and refer to the payee's account details anytime.

4. Bank statement verification in independent financial services

Independent financial services are provided by a professional to individuals and businesses. Financial professionals verify the business's financial data, such as bank statements, cash flow statements, tax reports, and balance sheets. 

Financial professionals verify bank statements to validate income sources, track spending patterns, and understand the financial stability of their clients. This statement verification helps them personalize their financial services like investment strategies, tax reduction, and debt management based on accurate information. 

5. Bank statement verification in wealth management 

Bank statement verification is integral to wealth management services, where financial professionals oversee and optimize clients' financial assets. Wealth managers verify bank statements to understand clients' income streams, expenditure patterns, investment portfolios, and financial health. 

This verification process allows them to create personalized financial strategies, including asset allocation, investment planning, tax optimization, and risk management.  

6. Bank statement verification in mortgage lending 

A study by CoreLogic shows that since Q3 2021, the year-on-year increase in mortgage fraud deriving from fake income derivation has risen 27.3%. To mitigate losses, it's crucial to double-check the applicant's income. 

Bank statement verification in mortgage helps verify applicants’ credit score, income, debt-to-income ratio, etc. After verifying the repayment capabilities using bank statements, lenders sanction loans to deserving applicants. 

7. Bank statement verification in business lending

LexisNexis Risk Solutions report shows that small-and-midsize business lending fraud increased from 6.9% in 2021 to 14.5% in 2022. 72% of respondents expect this percentage to increase in the coming years. With increasing loan defaults, it's inevitable for lenders to verify the bank statements of applicants to avoid losses. 

Bank statement verification in business lending helps verify borrowers’ details, annual revenue, debt-to-income ratio, and credit score. They can use the data extracted from bank statements to reject and approve loans. 

8. Bank statement verification in Medicaid 

Medicaid is a public insurance scheme that offers health coverage to low-income people. Older adults, children, parents, and low-income pregnant women can apply for Medicaid programs.  

Medicaid agencies verify bank statements to assess applicants' income levels accurately, ensuring that coverage is provided to those who qualify based on financial need. This verification process is essential for maintaining the integrity and fairness of the Medicaid program.

9. Bank statement verification in bookkeeping 

Bank statement verification ensures accuracy in financial records. Bookkeepers verify bank statements to reconcile transactions, ensuring that all income and expenses are correctly recorded in the company's books. 

This verification process helps maintain the integrity of financial statements and ensures compliance with accounting standards. Additionally, by verifying bank statements, bookkeepers can identify discrepancies, detect errors, and prevent fraudulent activities, contributing to the business's overall financial health and stability.

10. Bank statement verification in financial auditing 

A financial audit involves thoroughly examining the company's financial statements. The financial position of the company should align with the financial statements. 

Auditors verify bank statements to assess transactions, balances, and account reconciliations. This verification process helps auditors confirm financial records' integrity and detect discrepancies.  

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How do business teams verify bank statements?

Business teams verify bank statements using two methods: 

1. Manual extraction 

2. Automated extraction 

Let's discuss each process in detail. 

1. Manual extraction 

Manual extraction requires employees to locate bank statements and physical or digitized documents. Then they manually search for verification data and input it into accounting systems or spreadsheets.

For example, in business lending, lenders receive numerous applications monthly. They manually verify each borrower's income and approve loans based on the extracted data. The manual extraction process is easy when dealing with small volumes of bank statements. However, the process can become difficult as your business scales, impacting efficiency and productivity. 

Pros of manual extraction: 

• Small businesses with limited budgets or operations can benefit from manual extraction.
• Manual extraction allows for meticulous oversight and control over the extraction process.

Cons of manual extraction: 

• High turnaround time, we often take days to extract data from bank statements.
• Delayed decision-making due to the time-consuming nature of manual extraction.
• Increased labor costs as businesses may need to hire and train additional employees to handle large volumes of statements.
• High chances of errors due to human concentration lapses.

2. Automated data extraction

Businesses use automated data extraction to handle large volumes of documents, such as thousands per week. This process employs a tool to efficiently extract and verify data from bank statements. 

The tool can process hundreds of bank statements in minutes with minimal human intervention. Automated extraction streamlines the process significantly, improving efficiency and reducing manual labor.

Let’s look at the two ways you can automate data extraction from bank statements. 

Optical Character Recognition (OCR) 

An automated data extraction tool uses Optical Character Recognition (OCR) technology to scan and read the documents by dividing them into tables and text lines. 

The extracted data is then converted into machine-readable texts. However, the OCR technology has the disadvantage of following a template-based approach. It can scan only a specific format of documents. 

Hence, OCR cannot extract data from different formats even with the same type of documents. Businesses need to create different templates for different formats. Once again, this is a time-consuming process similar to manual extraction. Though OCR-based software helps with automated extraction, there are more flexible solutions. 

Intelligent Document Processing (IDP) 

Tools like Docsumo utilize Intelligent Document Processing (IDP), an advanced technology surpassing OCR's limitations. IDP combines OCR with Artificial Intelligence (AI) and Machine Learning (ML) to effectively extract data from structured and unstructured documents. 

Unlike traditional OCR, IDP can adapt to variations in bank statement formats, such as changes in layout, headers, columns, and tables. This adaptability eliminates the need for businesses to create templates for different statement formats, streamlining the extraction process with minimal human effort.

Any business can gain from the various benefits of automating bank statement extraction. The extracted data can undergo validation, and team members can review it. It also offers analytics tools to gain insights about income and expenses. 

Pros 

• Enables 99+% accuracy 
• Saves time as document processing can happen in seconds 
• Reduces costs in the long run 
• Helps make decisions faster 

Cons

• Initial set-up costs can be high

How to automate bank statement verification to maximize business efficiency? 

Let's look at the step-by-step process of automating bank statement extraction with Docsumo. 

• Upload the bank statements to the Docsumo platform. 
• Mention the information you need to extract. It can be the account number, income, tax amount, etc.
• The data capture algorithm will scan and read the bank statements. Then, it extracts the mentioned data from these statements.
• The algorithm validates the information, looks for errors, and sends them for manual verification.
• Now, export the extracted data in preferred formats. 

As you can see, automation requires only a little human intervention helping your business to focus on strategic tasks. 

Best bank statements verification and extraction use cases 

Bank statement verification is essential across industries like lending, auditing, accounting, and bookkeeping. While manual verification suffices for smaller operations, businesses dealing with a large volume of documents benefit from automation. 

With the right tool, you can achieve over 99% accuracy and complete automation, freeing up time for productive tasks and enabling quick decision-making. 

So, start your free trial with Docsumo now and automate bank statement extraction with 99%+ data accuracy. 

FAQs 

1. What are bank statements used for? 

Bank statements give the entire financial history of a person or business. Use cases include lending money, accounting, financial planning, auditing, and more. 

2. What is a bank extract? 

A bank extract is the extracted transaction data from the bank statements. The information is converted from PDFs or images into structured data. 

3. What is the purpose of bank statement verification? 

The bank statements verification process finds use across industries. These include activities like the loan approval process, auditing a firm's financial state, accounting purposes, etc. 

4. Is it possible to automate the process of bank statement extraction? 

Businesses can completely automate the bank statement extraction process. There’s minimal human intervention required in the process. 

5. Which is better - manual verification or automated verification? 

The manual verification process has many disadvantages. This includes increased time, labor costs, errors, and loss of productivity. So, investing in an automation tool to verify bank statements can help. It has several advantages, including overcoming the challenges of manual processing.