The Next Challenge: Reconciling Complex PPP Small-Business Loans

Jun  26 
Clodagh Swennumson  Director of Product Management, Financial Control Solutions, Financial & Risk Management Solutions, Fiserv  

Automated back-end processes can reduce risk, improve efficiency and increase productivity

The Paycheck Protection Program (PPP) helped many small businesses maintain payrolls during the coronavirus pandemic – a lifesaver for many organizations. But for the financial institutions processing the loans, the application and setup process has been hectic at best. Now comes the back-end process for financial institutions.

While the U.S. Small Business Administration (SBA) is typically structured in its requirements, the PPP has evolved more fluidly, with requirements driven by congressional changes in areas ranging from timing to payroll percentages.

Working with their technology partners has been a boon for financial institutions trying to navigate the complicated PPP process. That assistance helped banks and credit unions streamline the collection of data while enabling small businesses to quickly and easily apply for funding through familiar processing channels.

But the back-end handling of the loans, including reconciliation, may be even more challenging than the setup.

Wintrust Financial Corporation, headquartered in Rosemont, Illinois, helped thousands of small-business customers secure PPP loans and now looks to automation for help with back-end account reconciliation of those loans.

"Amidst all the challenges presented by PPP loans, we have been very happy with our automated solution's ability to scale," said John Pirovano, Wintrust Financial senior vice president. "Despite a sudden spike of 11,000 loans, using automated reconciliation made it seem like any other day."

Even when the number of PPP loans an institution processes is small, the complexity of reconciliation remains. For example, depending on the number of people employed by the loan applicant, the supporting documentation associated with the loans could range from hundreds to thousands of pages.

In addition, loan forgiveness must also be tracked and reconciled. Banks and credit unions are required to review and reconcile the account used for SBA proceeds as well as the PPP loan trial balance to ensure proceeds are properly applied to loan accounts.

Even when the number of PPP loans an institution processes is small, the complexity of reconciliation remains. 

Why Manual Reconciliation Doesn't Work

If a financial institution is using spreadsheets or semi-automated reconciliation processes, accuracy and productivity become an issue, especially when there’s a sudden influx of accounts to input and reconcile. Keying in data, using formulas that can be easily changed and having no segregation of responsibilities make it easy to miss, mistype or deliberately manipulate data in the reconciliation process. The higher the volume, the more those problems intensify – and the longer it takes to resolve exceptions.

Adding to the challenge are newly remote employees who can't share printouts and route approvals as they could in an office setting.

How Automation Streamlines Reconciliation

By automating reconciliation, financial institutions can import data from any source, match transactions and pinpoint exceptions from a single platform – whether in the office or from home. Workflows route the tasks to the appropriate employees, and automated checks ensure compliance with corporate and regulatory controls. Exceptions are identified, and the source of the discrepancy is pinpointed for investigation.

With an automated reconciliation solution:

  • Rules engines match transactions faster and with greater accuracy than humans, as exceptions are automatically found and flagged
  • Automatically loaded data eliminates errors such as miskeyed information
  • Automated workflows ensure review and attestation procedures are completed by the right individuals in the correct time frames
  • User roles allow segmentation of duties, strengthening internal controls
  • Complete audit trails and strict enforcement of compliance measures help companies meet regulatory standards
  • Audit process continues uninterrupted for clients because both internal and external auditors have easy, remote access to needed reports and supporting documentation

For Park National Bank in Newark, Ohio, having an automated reconciliation solution already in place helped staff members manage the changes that resulted from the pandemic.

"As we transitioned to a mandatory remote-working environment, we were able to keep our reconciliation processes running smoothly," said Teresa Hennessy, Park National assistant vice president. "With 98 percent of our reconciliations automated, we were able to achieve notable efficiencies and time savings, and focus our efforts on the logistical challenges of our new normal."

Whether facing an influx of loans, working remotely or meeting whatever the next challenge will be, automated reconciliation helps financial institutions remain ready.