It is possible to get a sense of an individual's financial health by looking at their bank account balances and summarizing their cash inflows and outflows. Businesses and NBFCs utilize bank statement analysis software to speed up processing times, improve efficiency, and process documents more quickly. Here, we'll explain why organizations need to analyze bank statements and what to look for when evaluating these software solutions.
What is the purpose of bank statement analysis for businesses?
For the following reasons, businesses require bank statement analysis:
1. Providing insurance coverage
Underwriting is a process used by banks and other financial institutions to evaluate a borrower's creditworthiness. In return for a fee, a company will provide a loan with a low risk to a prospective borrower. An analysis of bank records helps companies determine where bank deposits originate from, what assets an individual has, and how much money they can afford to repay loans on time.
2. Approval of a loan
Financial audits of loan and mortgage applications are required of all applicants. Data from bank statements is extracted and analyzed using intelligent document processing tools. Using statement analysis, banks are able to discover the sources of revenue as well as the total yearly profits, interest payments, and other obligations.
They use this information to evaluate how much money a borrower is entitled to and how much money they may give out. Bank statement analysis may be used to blacklist borrowers who have defaulted on payments or have a bad credit history.
3. Income tax reasons
In order to calculate ITR files and income tax returns, NBFC and Fintech businesses analyze bank statements. Businesses may determine whether or not transactions are real based on an individual's yearly tax burden via the use of income tax calculations.
4. Preventing fraud in the financial sector
Financial fraud may be detected by analyzing bank statements using clever OCR to look for patterns in recurrent transactions. Using statement analysis models, businesses may compare their ledger transactions to their accounts' statements to see if there are any discrepancies. Accounts can be confirmed and authenticated if the information is accurate, but if the numbers don't match, they may be flagged as suspicious.
When analyzing bank statements, what is the process?
Using a statement's financial data, bank statement analysis is able to draw conclusions about account activity based on the current condition of the account. To evaluate a person's ability to repay debts and their creditworthiness, a bank statement analysis model plots cash inflows and outflows, penalty costs, vendor payments, and defaults (if any).
For example, it may extract and organize data from scanned photos or PDF documents. In order to determine how much money banks and other financial institutions can afford to lend to borrowers, a review of one's bank statement provides an overview of obligations, recurring transactions, and monthly dues.
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