The build vs buy decision is one that finance, product and engineering teams must frequently make. Every business is different, but it is important to consider all options before embarking on a path that may not be best. When you are working with a talented, ambitious team, it is easy to start believing that anything is possible and that keeping control over an in-house build will yield better results. Having been on this path before, this article outlines some factors your team should consider before building something as complex as automated reconciliations.
Opportunity cost
This is often overlooked, and both teams and senior managers need to think about it. For teams, building automated reconciliations forces prioritisation, leaving other roadmap items behind. Left in its wake could be revenue-generating product development, a new market, a new set of clients, or technical enhancements for scalability. Product, engineering and data teams need to weigh the value of other developments against the value of reconciliation automation. Senior managers should steer the strategy and are responsible for organisational structure: if teams are reserved to focus on reconciliation automation, does that deliver the most value in the short and long term?
Opportunity cost matters for finance teams too. If you keep the existing manual process rather than investing in automation, could your finance team be more effective focusing on more strategic, value- add work?
Complexity
The value of automating reconciliations is clear: fewer manual processes, reduced risk, reduced cost. The other side is cost, and complexity is a big part of that. Complexity is notoriously difficult to estimate, especially when a team has not built something before. Asked to build an automated reconciliation system from scratch, you might break down some components, but the chance of defining everything that needs building is low if you have not done it before. The “unknown unknowns” add a lot of effort, leading to heavy cost and a long timeframe to value. Some teams have spent years building internal systems that do not solve the core problems and leave a lot of bespoke process behind. If specialists have built these systems before, understand the market and have invested in the product, why not take the specialist product off the shelf?
The semi-automation trap
Iterative product development that delivers value in increments is a good thing. But there is a catch when automating reconciliations. Once teams start building, they often realise they can only solve a few steps of the process, usually consuming reports and doing some transformation. Either they consider the project complete, or they find the next steps too complex. As covered in Reconciliation models: pros and cons, they cannot neglect the execution of reconciliations (including transaction matching), break management, and the final close steps. Any automated solution, built or bought, should cover all of these.
Maintenance
Ask any product and engineering team about maintenance and they will tell you it can cost more than the initial build. Invest a six or seven-figure sum to build automated reconciliations and you will keep spending to make sure it delivers value. Want to add a new payment provider? Change your reconciliation process? A new reconciliation? Do not expect that in the initial build. On top of that, payment providers change their reports and delivery mechanisms at short notice, and a growing company must invest in scaling the systems too. When deciding to build in-house, do not just look at a one or two-year horizon: expect a high up-front cost and moderate to high maintenance costs depending on the speed of change in your organisation.
To buy or not to buy?
If you are considering building an internal reconciliation system, you are already clear on the value automation delivers. But are you and your team really clear on the cost, complexity and effort of building and maintaining a specialist product that keeps up with your needs? If you intend to invest in improving your reconciliations, speak to the specialists. The Equali team has experience building both in-house and customer-facing reconciliation products, so we can help you make the decision that makes the most sense for your business. Start a free trial or book a call.