problem solving examples in banking

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7 Steps to Solve the Right Problems in Banking More Efficiently

The reality is bankers are fantastic problem solvers. It’s in their blood. The problem is that, as an industry, we leave much to be desired about DIAGNOSING the right problem. Present a challenge to a banker, and they will quickly switch to solution mode without first analyzing what the issues are. They don’t fully understand the “intent” of the customer and usually fail to understand the universe of solutions. This article presents the seven-step framework that we have found helpful in coaching banking teams in solving the right problem in the right way.

Highlighting Problem Diagnosis

The challenge of problem diagnosis is best summed up by the classic Harvard Business School case study “Slow Elevator Problem.” An 11-story hotel gets frequent complaints about its slow elevator. When asked, most managers quickly identify the solution as replacing the elevator, installing a stronger motor, adding another elevator, or upgrading the algorithms to preposition the elevator where people are predicted to be. Each solution is over $100,000 with a three-month minimum time to implement.

Each of the above solutions frames the problem as such: Elevator is slow, therefore find a way to increase the speed of the elevator.

After brainstorming, the hotel owners came up with a different solution – Install mirrors next to the elevator on each floor. People will lose track of time as they look at themselves. This solution costs $3,500 and took two days to install. The owners decide to try this first, and to their amazement, complaints were dramatically reduced.

This solution reframed the problem as the elevator is slow, waiting for an elevator is annoying, therefore let’s make the wait feel shorter.

While the mirror solution solved the problem, the brainstorming didn’t need to stop there. After looking at the complaint data, most of the complaints came around 11 am. Here, the problem is yet reframed again: too many people need the elevator at the same time around checkout. The solution: stagger the checkout to reduce peak load times. The cost of this solution was $800 to design a new system that could be implemented in 24 hours.

By reframing the problem, you arrive at a more efficient solution set.

Exploring Solution Sets To Banking – The Chime Case Study

All the above solutions are correct; they may be correct for a different problem. Further, some solutions are more efficient than others. The exercise of reframing is to validate facts, challenge underlying assumptions and explore alternative solutions to the initially stated problem. Sometimes, after investigation, no real problem exists as it is a perception problem or problems are multicausal and need to be addressed in a multitude of ways.

The core point here is that you don’t fully understand a problem until you spend time understanding what the issues are. The wisdom is supported by the famous Einstein quote when he is reported as saying – “If I only had one hour to solve a problem, I would spend 55 minutes defining the problem and then take five minutes to solve it.”

Reframing the problem was just successfully executed by Chime to make banks look foolish. The recurring complaint that we all get is that our overdraft fees are too much. Upon trying to solve this, many banks reduced their overdraft fees from $45 to $30. However, at the start of the year, Chime asked – Why are customers over-drafting their account? While there were multiple reasons, one major one, supported by the data, is that most overdrafts came right before the pay period, and the customers needed a bridge to their paycheck.

This was a solution at several innovative banks as they introduced the “emergency line of credit” to reduce overdrafts. This worked to some extent. However, Chime took it a step further and concluded, if we know the customer is going to get paid, why not give them their paycheck ahead of time? The problem wasn’t that the customer didn’t have enough money; the issue was that the customer’s pay periods and expense periods didn’t line up. Chime recently introduced their “Get paid early” attribute that makes direct deposits available two days early. That attribute not only helped solve part of the problem but is responsible for a considerable number of new customers, thereby dropping customer acquisition costs.

The 7 Step Framework for Reframing Banking Problems

Educate the team : Step one is to educate the team on problem reframing. If you don’t, the knee-jerk reactidon is that you are wasting time solving the wrong problem, and then you don’t get the participation you need. It is natural for us to want to solve problems, but this framework is to fight that urge and spend the first portion of the time understanding the problem.

Strive for diversity, including third parties :  The need for diversity recently came to light in 2020 in Karlskoga, Sweden, when the town council wanted to reduce the number of injuries related to snowfalls. The town council, composed of men, voted to move snow clearing earlier and increase the number of snowplows on secondary streets. Their experience led to the framing of the problem as injuries from overnight snowfall occurred as citizens walked to work on roads. The injury rate persisted.

It took a woman, the wife of a council member, to point out that the data showed that 69% of the injuries were women not during commute times but right after people walked into town and spouses took kids to school. Instead of adding more expensive snowplows to clear roads earlier, the more efficient solution was to prioritize the clearing of sidewalks into town before plowing the secondary streets. This cheaper solution proved successful at reducing injuries.

In order to limit biases and gain a new perspective, it helps to brainstorm problems with a more diverse group. In banking, we see this issue almost every day when managers, those often farthest from the customer, attempt to solve problems for the customer. Any problem-solving group should be diverse as to position, race, gender, and orientation. Further, third parties such as vendors, regulators, customers, and other outsiders should be included as they can bring an additional perspective.

Go Broad, Then Deep : When brainstorming possible solutions, there is a natural inclination to delve into details of either a proposed definition of the problem or solutions. It is incumbent upon the facilitator to keep asking the question – “What else is missing?”

Brainstorm about improving your bank’s stock price, and you will get a bunch of ideas about generating more fee income, getting more customers, and making more loans. After about the fifth “What else is missing” question, you will get to items about better investor relations, more press releases, and creating more bank stock liquidity.

Commit in Writing: In order to avoid group-think and influence, start a problem-solving session with a pre-meeting task of sending an email with a paragraph, not a bullet point of defining the problem. This allows people to speak more freely, prevents opinions from being influenced, and eliminates getting “target lock” on one definition. Further, require all employees to write in the first person to aid in accountability.

A bank recently learned this lesson when they started to brainstorm how to be more innovative. Managers sat around saying, “Our employees are not motivated to innovate,” and “our people don’t have the right skills.” If the meeting facilitator stopped collecting the data, the wrong conclusions would have been reached, leading to the wrong solutions. Upon surveying the employees, you received comments such as “I am not empowered to effect change,” “I don’t have a mechanism for providing new ideas,” and “Every time I make a new suggestion, nothing happens.”

The first-person perspective carries more weight. This problem becomes even more acute when bankers try to speak for the customer. If the customer view is important to the problem (and it should be), then be sure to get customer input. This also speaks to a gathering a diversity of views.

Getting input in writing allows more of an unfiltered view and allows the critical nuance of the problem to be captured.

Expand Participant’s Views: Another pre-meeting exercise is to ask people to come to the problem definition meeting with an opinion on the following topics:

• Is this an incentive problem?
• Is this an expectations problem?
• What role does training play in the problem?
• Is this a problem in our process?
• How can technology help?
• How can education help?
• What data is needed to better understand the problem?

A bank rolled out a new digital account opening platform only to find customers were still complaining about the time it took to open an account. The bank calculated that it would take less than five minutes to open a new account, but customers complained that it was taking more than 20. After looking into the issue, the problem was that the bank didn’t tell the customers what documents would be required until they already started the process. By moving the education piece to before the customer started the process, processing times, and complaints were dramatically reduced.

By asking the above standard questions before the meeting, participants will be prompted to think along other avenues.

Include the positive, not just the negative: During the problem analysis phase, it is always instructive to break down the instance where the problem didn’t occur. Analyzing what works can help uncover factors that might be missing in the negative case, where the problem occurred.

A bank recently wanted to know why they felt they were never going anywhere with their strategic plan. After defining the problem and looking at those initiatives that worked right, one common factor was that there was a full-time project manager assigned to the successful task. Initiatives often languished at the bank when line operators, those with a full workload already from “day jobs,” took on additional projects. By looking at the successes, the bank was able to solve the problem.

Clarify each participant’s objectives when solving the problem: While all parties in the room may want the problem solved, each party may want the problem solved for different reasons. In some cases, the reason doesn’t matter, but in some cases, it does. While many bankers want online lending, the banker that wants to reduce cost will reach a different solution set than the banker that wants to improve the customer experience. Before challenging anyone’s objectives, first, seek to understand. Question the various factions about their perception of the problem and what should be the objectives of what a solution looks like.

Putting This Into Action

The next time your bank attempts to solve a problem, step back and work on defining the problem first. As Peter Drucker used to say, “There is nothing more dangerous than the right answer to the wrong question.”

Validate the underlying assumptions, gather data, and then practice reframing the problem. Reframing problems take a heavy dose of creativity which is the same muscle many banks need to build to increase their rate of innovation. Practice defining and reframing problems, and you will find that innovative solutions start to come a whole lot easier.

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• Reconciliation

How to Solve Real-Life Problems of Bank Reconciliations (With Examples)

Automate mortgage processing, underwriting, reconciliation & more with nanonets..

Bank reconciliation is the process of matching the company’s cash ledger with the bank statements. The objective is to scrutinize each transaction and identify any errors or potential fraud. The two ledgers generally don’t match due to factors such as bank fees, interest, outstanding checks, and deposits in transit. These discrepancies must be accounted for in a bank reconciliation statement to represent the current financial position accurately. In this blog, we will present some real-life examples of bank reconciliation statements and help solve the major problems faced during bank reconciliation.

Gain insights into the practical applications of account reconciliation in solving real-life banking challenges by checking out What is Account Reconciliation? .

Learn how the best reconciliation software addresses real-life bank reconciliation challenges at Best Reconciliation Software .

What Is a Bank Reconciliation Statement ?

A bank reconciliation statement is a financial document that compares the company's cashbook with the bank statements to ensure accuracy and consistency in financial records. This process helps the company monitor and update its funds, addressing any discrepancies that may arise. If inconsistencies are identified, they must be rectified or appropriately explained. The bank reconciliation process thoroughly investigates the causes of discrepancies between the two accounts. Several reasons contribute to such discrepancies:

• Bank Charges - Bank accounts can incur overdraft charges, account maintenance charges, or other penalties that might not have been marked in the company cashbook. Alternatively, any interest incurred on the bank balance has to be accounted for in the cashbook.
• Outstanding Checks - Checks issued to vendors might not be submitted but accounted for in the ledger. Bank processing delays could also result in checks not being reflected in the statement till the end of the recording period.
• Payment Delays: Payments made through ACH or Wire can take up to several days before hitting the bank. This can result in the transaction missing from the statement.
• Accounting/Banking Error : The bank or the company accountant could have made a mistake in accounting a transaction. Common examples - are missed payments, double payments, or refunds.

Common examples of bank reconciliation statements

Now let’s look at examples of real-life bank reconciliation statements and the type of issues you can face:

Bank Charges

XYZ Corp's bank balance on December 31, 2023, is $10,000, whereas the cashbook balance is $10,300. The variance is attributed to specific bank charges. Let's examine the transactions:

• A $200 penalty was incurred due to a bounced check, recorded in the bank statement but not in the cashbook.
• $300 was levied as the annual bank maintenance charge, recorded in the bank statement but not in the cashbook.
• A $100 dividend was disbursed from the stock portfolio, recorded in the bank statement but not in the cashbook.
• A $100 quarterly interest payment by the bank, recorded in the bank statement but not in the cashbook.

Outstanding Checks - Bank balance > Cashbook balance

XYZ Corp has a bank balance of $10,000 as of December 31, 2023, while the cashbook balance is $9,000. The lower cashbook balance is attributed to outstanding checks. Let's examine the transactions:

• Two checks totaling $1,400 were issued but are yet to be processed. This transaction is recorded in the cashbook but not in the bank balance.
• An inbound payment of $400 from a client has been initiated but has not yet cleared the bank. This transaction is recorded in the cashbook but not in the bank balance.
• A $100 quarterly interest payment by the bank is documented in the bank statement but is not included in the cashbook.

Payment delays - Cashbook balance > Bank balance

XYZ Corp has a bank balance of $20,000 as of December 31, 2023. However, the cashbook balance is $18,000, reflecting a higher balance due to banking delays where certain transactions were not recorded by the cutoff date. These transactions were recorded on January 3, 2024. Let's explore the details:

• Two checks totaling $4,000 were issued but have not been processed yet. These are marked in the cash book but not reflected in the bank balance.
• An inbound payment of $2,000 through ACH was processed four days after it was initiated. Although it was marked on December 31 in the cashbook, it appears in the bank statement on January 4.

Accounting Errors

XYZ Corp has a bank balance of $20,000 as of December 31, 2023. However, the cashbook balance is $15,000. Upon investigation, errors in recording payments by the accountant have been identified. Let's examine the transactions:

• A $2,000 check was issued but was never recorded in the cashbook.
• A vendor payment of $500 was mistakenly recorded twice on separate dates despite being processed only once.
• An inbound payment of $500 was erroneously entered as $5,000.
• A transaction of $1,000 could not be processed and was subsequently refunded.

Banking errors

XYZ Corp has a bank balance of $10,000 as of 31st Dec 2023. However, the cashbook balance is $12,000. The bank balance is lower due to a few banking-related errors:

• The client's payment of $1000 isn’t reflected as the client made a mistake with the account number.
• The Bank transaction failed, and the refund of $1000 hasn’t been processed.
• The Bank statement shows an error where an inbound $1000 transaction is accounted for as $3000.
• The bank lost or misplaced your check for $2000.

Banking errors can be disputed with the bank and resolved. Bank reconciliation is vital in discovering such errors timely within dispute windows!

Bank Reconciliation Alternative Format

In the above method, we accounted for various transactions that created discrepancies between the cashbook and bank balance. Alternatively, companies “adjust” the ledgers to prepare a bank statement. In this method:

Step 1: Adjust bank balance

Bank statements must be adjusted by adding pending deposits (deposit-in-transit) and deducting pending outgoing checks (outstanding checks). The logic here is:

Bank Balance + Deposits-in-transit - Outstanding Checks = Adjusted Bank Balance

Step 2: Adjust cashbooks

The cashbook balance needs adjustment for bank service fees, accrued interest, and rejected checks (NSF Checks). The logic here is:

Cashbook Balance + Interest - Bank Fees - Rejected Checks = Adjusted Cashbook

How to Streamline Bank Reconciliation?

Bank reconciliation is a tedious process with several manual steps. A more efficient approach is to adopt bank r econciliation software , which reduces manual errors and enhances organization and time savings through automation.

Bank reconciliation tools primarily employ two reconciliation methods: Document Review and Analytics Review. In Document Review, OCR-powered software extracts pertinent data from documents and presents it in the required format. Automation tools like Nanonets take it a step further, enabling users to define rules for detecting anomalies, duplicates, and mismatches. If the software can identify discrepancies, it significantly simplifies the reconciliation process by over 90%.

Automate your mortgage processing, underwriting, fraud detection, bank reconciliations or accounting processes with a ready-to-use custom workflow.

Nanonets simplifies and streamlines the account reconciliation process with its AI-powered workflow automation solution. This tool automates various steps, minimizing manual effort and boosting efficiency by a factor of 10.

If Nanonets aligns with your business requirements, feel free to ask for a customized quote tailored to your specific needs.

Related content

What is a Bank Reconciliation Statement & How to do it?

Bank reconciliation Vs. Book reconciliation

Why need for account reconciliation services

Guide to Vendor Account Reconciliation Process

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Money Basics  - Financial Problem Solving Strategies

Money basics  -, financial problem solving strategies, money basics financial problem solving strategies.

Money Basics: Financial Problem Solving Strategies

Lesson 2: financial problem solving strategies.

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Financial problem-solving strategies

Have you ever experienced a financial problem? Do you feel like finances are holding you back from reaching your goals? This lesson will give a brief overview of the general problem-solving process and how to apply it to the most common financial problems.

The problem-solving process

First, let's take a look at a general problem-solving process that you can apply to any situation, not just a financial one.

• Identify the problem . The first step in solving a problem is to identify it. What exactly do you need to overcome?
• Make a plan. What are the steps you need to take in order to overcome the problem?
• Implement the plan . This step actually puts the plan you created in place. While it sounds fairly straightforward, this is usually the most difficult step.
• Evaluate the plan . Although this is listed last, this step might actually occur simultaneously with implementing the plan. Things happen and circumstances change, so you may need to re-evaluate your plan as it is happening.

Identifying the problem

The first step in the problem-solving process is to get to the root of the problem and understand what you need to overcome. Here is a list of the most common financial problems people may face:

• Lack of income/job loss
• Unexpected expenses
• Too much debt
• Need for financial independence
• Overspending or lack of budget
• Lack of savings

When thinking about these common problems, each one falls into one of three areas: You need more money, you need to reduce your debt, or you need to change how you spend.

Making a plan

After identifying the problem you need to overcome, it's time to make a plan. Not sure where to start? No worries! We have you covered with some tips and places to begin.

Problem 1: You need more money . Whether you've lost your job, met an unexpected expense, or are working on becoming more financially independent, a form of income is necessary.

If you are a looking for additional work or maybe just a better-paying job, take some time to update your resume and cover letter. Make sure they are neat, up to date with your most current information, and free of spelling and grammar errors.

Be wary of any advertisements or jobs that offer fast, easy money. A lot of quick-cash methods come with unintended consequences. More often than not, if something sounds too good to be true, it probably is.

Problem 2: You need to reduce your debt . With high interest rates or the need to live paycheck to paycheck, high debt can be debilitating. Sometimes it feels like climbing a neverending mountain with an invisible peak. However, by prioritizing and negotiating your debt, you can make it more manageable.

Try listing all of your debt and the interest rates associated with each. Focus on paying off the ones with the highest interest rates first. If you're having trouble making payments, call the loan company and see if it can offer any solutions for you. The company may be able to lower your interest rate or offer a temporary forbearance to help you get back on your feet. If you need more help tackling your debt, you may want to contact a professional debt counselor like Consolidated Credit.

Problem 3: You need to change how you spend . Going from financial problems to a healthy financial status often requires organization and a shift in thinking. Avoiding overspending, building your savings, and gaining financial independence can often be accomplished with good spending habits.

The first thing you may want to try is creating a budget. There are many templates and resources available to help you create one. Sticking to one can be challenging, but simply having a budget laid out can help you see where you need to start spending less.

In addition to your budget, create a savings plan. Start out small. Even stowing away an extra dollar or two here and there can make a big difference. Also, try placing your savings in a place you cannot easily access. For example, create a savings account at a bank you don't usually use. The more difficult it is to access your money, the less likely you are to spend it.

Implementing the plan

Although the explanation of this part is the simplest, this is often the most difficult part to actually execute. It requires self-discipline and perseverance. The most important part of this step is to know that if your plan doesn't work or if you have a difficult time sticking to it, all is not lost. If it happens, move on to the next step, evaluate your plan, then repeat the process.

Overcoming financial obstacles can require changing your lifestyle, and this does not happen overnight. However, just having a plan itself can help to give you confidence and reassurance that you can eventually overcome whatever is in your way.

Evaluating your plan

As you implement your plan, you'll need to continually evaluate it. Maybe something happens and your original plan needs to change. Perhaps you've learned more along the way and realize that your original plan was incomplete. Or maybe your first plan went as planned and was a success. No matter the circumstances, it is always a good idea to look back and re-evaluate. Try answering these questions:

• Was your problem solved? Did a new problem arise?
• What went right?
• What went wrong?
• What circumstances changed?
• Was there anything you didn't account for?
• What was easy about implementing your plan?
• What was difficult about implementing your plan?

Financial obstacles can often seem debilitating and impossible to overcome. They often create a significant source of financial anxiety . We hope this lesson will help give you the confidence to take on your problem one step at a time so you can conquer your anxiety and move forward.

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Overcoming Challenges in Bank Reconciliation: Examples from Real-Life Scenarios

• Want to Fast Track Your Cash Flow?
• Want to Improve Cash Forecasting?
• Want to Digitally Transform Your Finance Function?

Bank reconciliation is a critical step for ensuring the accuracy of your company’s financial records. However, it can be a time-consuming and difficult task that necessitates close attention to detail. Even with the most painstaking efforts, anomalies and errors can emerge, causing business owners and accounting professionals alike grief and aggravation. In this article, we will look at the most prevalent real-world issues that happen during bank reconciliations and offer practical answers to them. We will discuss experienced insights and tactics to help you expedite your bank reconciliation process and enhance your financial management, from finding errors to utilizing technology.

Common Bank Reconciliation Statement Examples

Bank reconciliation statements play an important role in assuring the correctness of a company’s financial records. They allow a company’s financial data to be compared to the balances in its bank accounts. Here are some popular bank reconciliation statement examples:

Reconciling a Checking Account

One of the most common bank reconciliation statements is for a checking account. It involves comparing the balance in the company’s financial records to the balance on the bank statement. The reconciliation statement should account for all transactions, including deposits, withdrawals, fees, and interest payments.

Reconciling a Credit Card Account

Another common example of a bank reconciliation statement is for a credit card account. It involves comparing the balance in the company’s financial records to the balance on the credit card statement. The reconciliation statement should account for all transactions, including purchases, returns, fees, and interest payments.

Reconciling a Savings Account

A bank reconciliation statement for a savings account involves comparing the balance in the company’s financial records to the balance on the bank statement. The reconciliation statement should account for all transactions, including deposits, withdrawals, and interest payments.

Reconciling a Loan Account

A bank reconciliation statement for a loan account involves comparing the balance in the company’s financial records to the balance on the loan statement. The reconciliation statement should account for all transactions, including payments, fees, and interest charges.

Reconciling Multiple Accounts

In rare circumstances, a business may need to reconcile many accounts at the same time. They may, for example, need to reconcile a checking account, a savings account, and a credit card account. The reconciliation statement should account for all transactions across all accounts, ensuring that the financial records balances match the bank statements balances.

Accounts receivable play a crucial role in ensuring the accuracy of a company’s financial records. Bank reconciliation statements are vital tools for verifying the integrity of various accounts, including checking accounts, credit card accounts, savings accounts, loan accounts, and many others. Regular reconciliation of these accounts allows businesses to ensure the accuracy of their financial condition, enabling informed decision-making. By diligently reconciling accounts receivable, companies can maintain reliable financial records, gain a clear understanding of their financial standing, and drive successful business outcomes.

Challenges Faced While Preparing Bank Reconciliation Statements

Statements of bank reconciliation are essential for confirming the accuracy of a company’s financial records. They offer a means of contrasting the balances of a company’s bank accounts and financial documents. However, creating bank reconciliation statements can be difficult, and there are a number of potential issues that need to be resolved. The following are some of the most typical difficulties encountered when creating bank reconciliation statements:

Delayed Bank Statements

The reconciliation procedure can be delayed by delayed bank statements because they are required for comparing the company’s financial records to the bank records. Delays in financial reporting and trouble predicting cash flows can result from this.

Unrecorded Transactions

Unrecorded transactions, such as bank fees, electronic transfers, or interest payments, can be challenging to identify and can result in errors in the reconciliation process.

Errors in Bank Statements

Errors in bank statements can cause discrepancies between the bank statement balance and the company’s financial records. This can occur due to incorrect posting, misapplied payments, or other errors made by the bank.

Missing Transactions

Transactions that have been recorded in the company’s financial records but are missing from the bank statement, such as outstanding checks or deposits in transit, can create discrepancies in the reconciliation process.

Complex Bank Accounts

The process of reconciling complicated bank accounts, such as those with several subaccounts or transactions, can be time- and labor-intensive.

Inaccurate Financial Records

Inaccurate financial records, such as incorrect or incomplete entries, can create discrepancies in the bank reconciliation process, resulting in incorrect financial reporting.

Lack of Expertise

A lack of expertise in preparing bank reconciliation statements can result in errors and make the process more challenging, requiring additional time and resources to rectify.

In order to overcome these obstacles, great attention to detail and a thorough reconciliation procedure that takes into account each of these potential problems are required. By applying best practices, such as routinely checking bank accounts and financial records, automating the reconciliation process, and spending money on staff training and development , businesses can overcome these difficulties.

A crucial step in ensuring the accuracy of a company’s financial records is bank reconciliation. However, it can be difficult because there are a number of potential problems that must be resolved. Companies can overcome these obstacles and guarantee the accuracy of their financial reporting by utilizing best practices and technology.

Leverage AI to Reduce Errors in Bank Reconciliation

Efficiently Managing Collections, Reconciliation, and Dunning : Simplifying and Enhancing Financial Accuracy

Bank reconciliation plays a pivotal role in maintaining the integrity of a company’s financial records. Yet, it can be a time-consuming and meticulous process, demanding utmost attention to detail. Errors in bank reconciliation can have significant implications on a company’s operations and financial performance, leading to inaccurate financial reporting. Thankfully, advancements in artificial intelligence (AI) technology offer a solution, minimizing errors and streamlining the bank reconciliation process. By leveraging AI-powered tools, businesses can simplify and enhance collections, reconciliation, and dunning procedures, ensuring greater financial accuracy and optimizing overall efficiency.

• The capacity of AI technology to automatically recognise and indicate any problems during bank reconciliation is one of its most important advantages. AI algorithms can find anomalies, such as duplicate entries or wrong numbers, that may point to mistakes in the bank reconciliation process by analyzing massive amounts of data. This can help accounting professionals focus their attention on resolving potential issues, rather than manually searching for errors.
• Another way that AI can help reduce errors in bank reconciliation is by automating the process of matching transactions. By comparing data from multiple sources, including bank statements and accounting software, AI algorithms can automatically match transactions, reducing the risk of human error. This can save time and increase accuracy in the bank reconciliation process.
• The process of bank reconciliation can be made more swift and effective with the aid of AI technology. AI can free up the time of accounting experts to concentrate on more strategic and analytical work by automating repetitive processes like data entry and transaction matching. This can lower expenses, boost productivity, and help the accounting department operate more effectively overall.
• By harnessing the power of cash management software powered by artificial intelligence (AI), businesses can unlock invaluable insights into their financial processes, while simultaneously reducing errors and enhancing operational efficiency. AI algorithms analyze financial data to identify opportunities for optimizing cash flow, reducing costs, and enhancing overall financial performance by detecting patterns and trends. This cutting-edge technology revolutionizes the way businesses approach financial management, leading to informed decision-making and sustainable growth.
• Leveraging AI technology can help reduce errors in bank reconciliation and streamline the process. By automating routine tasks, identifying potential errors, and providing valuable insights, AI can help accounting professionals focus their attention on more strategic and analytical work, ultimately improving the overall financial health of the company.

For any company to make sure that their financial records accurately reflect their real cash position, bank reconciliation is an essential step. However, creating a bank reconciliation statement can be difficult and time-consuming, and there are a number of potential difficulties to take into account.

Businesses should put best practices into practice to solve these issues, including routinely checking bank accounts and financial records, automating the reconciliation process, and spending money on staff training and development. Utilizing AI and other technologies can also aid in minimizing errors and streamlining the reconciliation process.

Businesses may make sure that their financial records accurately reflect their cash position by addressing these issues and putting best practices into place. This will allow them to make wise business decisions and better manage their finances. An effective bank reconciliation procedure is ultimately necessary for any company that wants to retain its financial stability and experience long-term success.

Madhusmita Panda

Chief Marketing Officer at KredX

Madhusmita is the multi-hyphenate growth specialist at KredX. She worked with industry giants like Wipro and ICICI before turning entrepreneur and then brought that decade of expertise to KredX. She joined the fintech powerhouse in its early years and quickly became a growth driver creating marketing innovation in the fintech ecosystem with a unique approach integrating product and partnerships.

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• How to Solve Real-Life Problems of ...

How to Solve Real-Life Problems of Bank Reconciliations (With Examples)

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Key Takeaways

• Understand the significance of the bank reconciliation process in identifying inconsistencies in day-to-day transactions
• Take a look at a few real-life examples of bank reconciliation statements and the challenges faced by organizations during the reconciliation process, including delays in processing cash and other manual errors
• Learn how you can efficiently leverage artificial intelligence in bank reconciliation to reduce errors and make the process faster and more accurate

Introduction

In the bank reconciliation process, the transactions recorded in the company’s electronic bank statements (EBS) or electronic cash book are compared with its e-passbook or digital passbook cash book are compared with the bank’s passbook to identify any inconsistencies in the day-to-day transactions. In this simple process of tallying the cash book and bank statement, there could be multiple errors. These errors or bank reconciliation problems might differ based on the size of the organization.

In this blog, we will introduce you to some real-life bank reconciliation examples as well as the major roadblocks faced by organizations while reconciling their bank statements .

What Is a Bank Reconciliation Statement?

A bank reconciliation statement is a financial statement that compares a company’s bank account balance with its own accounting records. Its purpose is to identify and reconcile any differences between the two balances. This statement helps ensure accuracy and consistency in financial records.

4 common illustrations of bank reconciliation statements

Before deep diving into the practical examples of bank reconciliation statements, let’s go through a few terminologies which are used in a recurring way while explaining the examples:

1. Cash Book Balance More Than Bank

ABC Corp, has a balance of $2000 as per passbook as on 31st march 2021. However, the balance as per cash book as on 31st march 2021 is  $2210.

Let’s Understand the Transaction Details

• A check of $500 was deposited, but it is not yet processed by the bank.
• Bank charges of $60 were recorded in the passbook, but not in the cash book.
• Checks worth $300 were issued, but not presented.
• Bank interest of $50 was recorded in the passbook, but not in the cash book.

Bank Reconciliation Statement(BRS) Format

2. Cash Book Balance More Than Bank

JPN & Co, has a balance of $20,000 as per passbook as on 31st march 2021.

Let’s Understand the  Transaction Details

• Three checks of $1000, $1500, $1750 were deposited in the bank on 30th December 2021 but were recorded in the bank statement on January 2022.
• A check of $1000 was issued on 31st december 2021, was not processed.
• A dividend of $500 on stocks was credited to the bank account, but not recorded in the cash book.
•  A direct deposit of $600 was made in a bank account by a customer, which was not recorded in the cash book.
• Bank charges of $60 were entered only in the bank passbook.
• Balance as per cash book on 31st december 2021 was $22,210.

Bank Reconciliation Statement (BRS) Format

3. Bank Balance More Than Cash Book

Markson’s & co. has a difference in balance as per cash book and bank statement as on 31st March 2021.

• Balance as per bank statement as on 31st March 2021 is $5000. Balance as per the cash book is $1,650.
• Checks of $2000 and $1000 issued as on 30th March 2021, but not yet cleared.
• Insurance paid by the bank is $200. It is not yet recorded in the cash book.
• An outgoing check of $1000 was recorded twice in the cash book. It is accurately recorded in the bank passbook.
• Payment of a $500 check is recorded twice in the passbook.
• Dividends received $600 recorded only in the bank statement and not in the cash book.
• A check of $500 was deposited on 29th March 2021, but it is not collected.
• Bank charges of $50 were debited, it is only recorded in the bank passbook.

4. Cash Book Balance More Than Bank

Rutherford Inc. has  a difference in the balance as on 31st March 2021 between the bank statement and cash book.

Let’s Understand the Transaction Details:

Cash Book (March 2021) for Rutherford Inc:

Bank statement (March 2021) for Rutherford Inc:

The balance transactions would appear in the bank reconciliation statement:

Challenges Faced While Preparing Bank Reconciliation Statements

Businesses can gain a variety of advantages from effective reconciliation processes. Without good reconciliation, it is difficult determining which expected payments haven’t been made. In addition to detecting fraud, cash book and bank reconciliation statements allow you to quickly identify any potential disruptions in your cash flow.

Effective bank reconciliation process offers various advantages to businesses. It allows businesses to identify any expected payments that haven’t been made, and detect fraud. Bank reconciliation can also help businesses quickly identify any disruptions in their cash flow.

However, even today, the bank reconciliation process is highly manual in nature. The accountants are responsible for manually comparing the digital passbook and e-cash book to prepare bank reconciliation statements. Additionally, sometimes due to the delay in cash being processed in the bank, there is a difference between the passbook and the cash book. This might lead to multiple errors or inconsistencies in the bank reconciliation statement. Let us explore the various problems in bank reconciliation process and real-life examples of errors in bank reconciliation:

In case of electronic fund transfers such as wire transfers, ACH, and credit card payments, the cash is not immediately reflected in the bank, which leads to a difference in the passbook as compaACH, wire transferred to the cash book.

This is a predominant issue which leads to multiple errors in bank reconciliation statements. If there is a delay in checks getting deposited or being processed, the balance on the passbook would not match the cash book balance.

As discussed earlier, bank reconciliation is a highly manual process. The accountants might enter incorrect transaction details or not add the bank fees or interest details mistakenly. These human errors might lead to problems in the bank reconciliation process and eventually the statement.

Reduce Errors With Bank Reconciliation Solutions

Powered by AI/ML, bank reconciliation software make anomaly detection, variance analysis, and financial close task management easier for analysts. HighRadius’ Account Reconciliation Software accelerates the reconciliation process to achieve up to 90% of auto-certification of accounts every month.

It also enables the review of 100% balance sheet reconciliations before ledger close. Driven by artificial intelligence, the software transforms reconciliations from a reactive to proactive process by detecting anomalies, making it faster and accurate.

1. What is a cash reconciliation solution?

A cash reconciliation solution is a tool that helps businesses match their financial records with bank statements, ensuring accuracy and preventing errors. It saves time and reduces financial discrepancies. By automating the reconciliation process, it streamlines financial management.

2. What is an example of a bank reconciliation statement?

A bank reconciliation statement compares a company’s records of its financial transactions with those of its bank statement. For example, if a company’s records show it has $5,000 in its account, but bank statement shows $4,800, the reconciliation statement helps identify and resolve discrepancies.

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GPO: A Step Towards The Future

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We have seen financial services costs decline by $2.5M while the volume, quality, and productivity increase.

Colleen Zdrojewski

Trusted By 800+ Global Businesses

Banking operations for a customer-centric world

Supports leading financial institutions on strategy, sales and distribution, risk management, and operations effectiveness. Brings deep expertise in branch sales productivity, collections, and next-generation operating models for banks

Helps transform banks and non-banks across a broad range of topics to sustainably drive revenue growth and to enhance efficiency.

June 20, 2019 Today, deep within the headquarters and regional offices of banks, people do jobs that no customer ever sees but without which a bank could not function. Thousands of people handle the closing and fulfillment of loans, the processing of payments, and the resolution of customer disputes. They figure out when exceptions can be made for customer approvals and help the bank comply with money laundering rules, to name but a few.

In ten years, back-office operations will look starkly different. For starters, far fewer people will be needed. McKinsey estimates that 75 to 80 percent of transactional operations (e.g., general accounting operations, payments processing) and up to 40 percent of more strategic activities (e.g., financial controlling and reporting, financial planning and analysis, treasury) can be automated. Operations staff will have a very different set of tasks and thus will need different skills. Instead of processing transactions or compiling data, they will use technology to advise clients on the best financial options and products, do creative problem solving, and develop new products and services to enhance the customer experience. Banks, in other words, will look and feel a whole lot more like tech companies.

Features of transformed banking operations

Financial institutions need to do big picture, board-level thinking about how to prepare for the revolutionary impact digital technology will have on banking operations. With operations consuming 15 to 20 percent of a bank’s annual budget (Exhibit), transforming these functions will lead to significant improvements in profitability and return more capital to shareholders. It can also boost revenues by enabling banks to provide better products and services to customers .

Today, many bank processes are anchored to how banks have always done business—and often serve the needs of the bank more than the customer. Banks need to reverse this dynamic and make customer experience the starting point for process design. To do so, they need to understand what customers want, and how and when they want it. Instead of a major cost center, operations of the future will be a driver of innovation and customer experience.

Based on our work with major financial institutions around the world and from McKinsey Global Institute research on automation and the future of work, we see six defining characteristics of future banking operations.

Distinctive, personalized products and services

Today, banks offer standardized products hardcoded with specific benefits, parameters, and rules–30-year mortgages, travel rewards credit cards, savings accounts with minimum balances. A variety of operational roles are charged with supporting these products and managing the rules governing them. In future, these activities will be automated, and employee roles will shift toward product development. Instead of evaluating credit risks and deciding on mortgage approvals, operations staff will work with automated systems to enable a bank to offer its customers flexible and customized mortgages.

Imagine, for instance, a bank launching a new credit card in which the card member gets to define the rewards points they can obtain–perhaps 30 percent of rewards going to an airline, 30 percent as cash back, and 40 percent at a specific retailer. Or maybe a bank decides to offer loans that allow customers to specify their repayment plan and due dates. Today, these scenarios would be a nightmare for banks to orchestrate—each card or loan would almost require its own operations team. But soon, operations will use their knowledge of bank processes and systems to first develop customized products and then leverage technology to manage and deliver them.

Extensive use of automation and new technologies that empower the customer

Automation and artificial intelligence, already an important part of consumer banking, will penetrate operations far more deeply in the coming years, delivering benefits not only for a bank’s cost structure, but for its customers. Digitizing the loan-closing and fulfillment experience, for instance, will speed the process and give customers the flexibility and freedom to view and sign documents online or with their mobile app. Typically, US consumers have to wait at least a month to get approval for a mortgage—digitizing this process and automating approvals and processing would shrink wait time from days to minutes.

Same for call centers. Instead of waiting on hold or being pinballed between different representatives, customers could get instant, efficient automated customer service powered by advanced AI.

AI and advanced analytics could also improve dispute resolution. Customers can contact their bank any time through internet, mobile, or email channels and receive quick, real-time decisions. On the back end, systems would perform almost instant data evaluation about the dispute, surveying the customer’s history with the bank and leveraging historical dispute patterns to resolve the issue.

Seamless processes and consistent quality

Today, many operations employees perform dozens or even hundreds of similar tasks every day–reviewing customer disputes on credit or debit cards, processing or approving loans, making sure payments are processed properly, and so on. It’s not surprising errors happen. At some US banks, we have seen up to five to ten percent of all debit card disputes processed with errors.

Automating these and other processes will reduce human bias in decision-making and lower errors to almost zero. This will give operations employees time to help customers with complex, large, or sensitive issues that can’t be addressed through automation. And these employees will have the decision-making authority and skills quickly resolve customer issues.

Analytics-driven proactive management

The use of predictive analytics can dramatically improve the management of operations in several ways. First, it enables operations leaders to be more precise and accurate in their predictions. Instead of using simple arithmetic based on a limited number of variables to predict demand, demand predictions for specific products and services can be made based on granular profiles of customer segments and customer behavior using dozens or hundreds of variables. Banks can build detailed profiles from a multitude of data sets–including online interactions, geographic information from cell-phone usage, and aggregated payments behavior–and then apply analytics to predict the needs and desires of their customers—down to the level of a single individual in some cases.

Comprehensive data sets will also enable managers to set more KPIs. For example, instead of tracking just average handle times and customer satisfaction at a call center, banks could drill down to see how much time millennials or residents of a particular state spend on the phone with reps. If they spend longer than average, banks can determine why and, if needed, change how they communicate with these customers or adjust products or services to better serve them.

Finally, applying analytics to large amounts of customer data can transform issue resolution, bringing it to a deeply granular level and making it proactive not reactive. Instead of a bank addressing an error or customer problem only when it reaches a certain scale or frequency, software can find errors that happen to even just one customer, such as a fee that’s been miscalculated or a double payment to a credit card. The customer can then be alerted about the mistake and informed that it has already been corrected; this kind of preemptive outreach can dramatically boost customer satisfaction. Banks could also proactively reach out to customers whom predictive modeling indicates are likely to call with questions or issues. For instance, if a bank notices that its older customers have a tendency to call within the first week of opening an account or getting a new credit card, an AI customer service rep could reach out to check in.

Eliminating siloes for a simpler organization

Banks have always functioned with an organizational trinity: front offices (branches), middle offices (call centers), and back offices (operations). In the next ten years, this trinity will evolve dramatically. As we’ve already noted, back offices will slim down. Call centers will all but disappear due to AI bots and automation, and branches will be scaled down in number and transformed in function. As more customer transactions move to digital channels, front-line branch employees will operate as skilled personal advisors, helping customers get answers to complex questions that can’t be addressed digitally, giving advice about bank products and features, and generally serving as a one-stop-shop for customers in need across journeys. This is a new paradigm in which customers will receive personalized advice, relying on a simpler organization.

Talent as a differentiator: Going beyond the call of duty

Today’s operations employees are unlikely to recognize their future counterparts. Roles that previously toiled in obscurity and without interaction with customers will now be intensely focused on customer needs, doing critical outreach. They will also have tech, data, and user-experience backgrounds, and will include digital designers, customer service and experience experts, engineers, and data scientists. These highly paid individuals will focus on innovation and on developing technological approaches to improving in customer experience. They will also have deep knowledge of a bank’s systems and possess the empathy and communication skills needed to manage exceptions and offer “white glove” service to customers with complex problems.

Starting the transformation

To thrive in a world where once-siloed roles like loan closing and fulfillment, compliance, and risk management become an integral part of product development, product management, and customer experience, banks will need to make major organizational changes. They will need to rethink how the people who make the bank run are going to function. This calls for three major efforts:

Develop a plan to migrate to a journey-based organization : Today, functions such as call centers, payments processing, and risk underwriting are organized by product or segment. As banks increasingly focus on personalized interactions, a journey-based operating model will be required. With a journey-based model, banks will ensure operations resources own the customer inquiry or problem until it is solved. A journey-based model will integrate resources with different capabilities and knowledge and will cut across the currently established siloes. To do this, banks will need to re-think how they staff, measure, and track performance, and ultimately deliver to customers.

Design and implement a new talent model: Operations employees in 2030 will need to know how to code, develop products, and understand data, but they will also need the personal warmth and insight to manage exceptions and deal with complex customer problems. To attract this kind of talent, banks will need to expand their geographic footprints and identify talent pools with the required skills and attributes. They will need a new hiring approach to assess and hire talent for operations with different skills from those required today. Finally, banks will need training approaches to develop not only technical skills, but also empathy and the ability to impress customers in every single interaction.

Build a roadmap to accelerate digitization: Banks need to act now to develop an aggressive tactical roadmap that outlines the plan for digitization and automation. Banks that lack a clear long-term automation plan—one that will result in a fully digital operation a decade from now—will struggle to meet customer expectations.

The future will look very different for banks and their customers in 2030. Banks have a unique opportunity to lay the groundwork now to provide personalized, distinctive, and advice-focused value to customers.

Is Design Thinking the new DNA of the Banking Sector? Design Thinking has been successfully used to create new value and solve complex problems in Banking by corporations such as Bank of America, BBVA, Citibank and Capital One.

Design thinking has become increasingly popular in the banking industry as banks look to improve their customer experience and stay competitive in a rapidly changing market. Design thinking is a human-centered approach to problem-solving that emphasizes empathy, collaboration, and experimentation. It involves understanding customer needs, generating ideas, prototyping solutions, and testing them in the real world.

There have been both successes and failures in the application of design thinking in banking. Some banks have successfully used design thinking to develop innovative products and services that meet the changing needs of their customers. For example, BBVA Bank in Spain used design thinking to develop its mobile banking app, which has been highly successful in attracting and retaining customers. The app is user-friendly, intuitive, and personalized, providing customers with a seamless banking experience.

Other banks have struggled to implement design thinking successfully. Some have failed to fully embrace the customer-centric approach of design thinking and have instead focused on internal processes and systems. As a result, they have developed products and services that do not meet the needs of their customers. Other banks have found it challenging to overcome organizational barriers and cultural resistance to change, which has hindered the implementation of design thinking initiatives.

Design thinking has the potential to transform the banking industry by improving the customer experience and developing innovative solutions to complex problems. While some banks have successfully implemented design thinking, others have struggled to achieve success. However, the increasing adoption of design thinking in banking suggests that it is a valuable approach that will continue to drive innovation and customer satisfaction in the industry.

Read case studies about the use of Design Thinking in Banking by these and other corporations. Read about their involvement with design thinking and the kinds of problems that have been tackled through the case studies and other articles about the use of design thinking in banking:

Design Thinking helps businesses to create user-centric products and services by discovering insights into user needs, applying these insights to their business model and generating innovative ideas.

In this five-part series, Sarah Dickins gives advice on how Design Thinking techniques can help you to orientate your product development around user need.

Read more...

In 2017, employees, managers, and partners of Société Générale Global Solution Centre agreed that invoices based on time tracking and project allocation were a chronic and painful challenge.

At SG-GSC, customers were billed for the time each assigned employee worked. The process of collecting the time worked by those employees (HCC) was a complicated and difficult ordeal. It consumed 21 days per month for senior employees. These employees had to navigate different systems, many types of contracts, high staff mobility, and a variety of processes between business lines.

This is an example of accelerating a transformation through co-design. Eighty-two professionals gathered, representing OTP’s whole organization. Together, they were able to achieve months of work in just three days.

OTP Bank Romania (OTP) was at a key turning point in late 2018. The organization was undergoing changes in its leadership team. This new team helped them develop an ambitious goal:

OTP Bank will double its market share in 5 years.

The banking industry has become increasingly concerned over the challenge that emerging fintech startups pose to banks’ traditional ways of doing business and the threat that they present to revenue streams. In response, many banks have created internal innovation labs to counter these risks. “Design thinking” has become an important tool in the effort and is being used to explore how banks can boost their growth by applying the approach in a rapidly changing environment and an era of de-banking.

The hottest Trend in Banking is the use of Design Thinking to transform banking services.

If the one product you’re known for is ubiquitous, how can you stop your customers from leaving for other banks?

For Capital One, the answer was a small laboratory within the larger bank. The group leading this innovative push calls themselves  Capital One Labs , and their secret weapon is free coffee.

Ever since it became clear that smart design led to the success of many products, companies have been employing it in other areas, from customer experiences, to strategy, to business ecosystems. But as design is used in increasingly complex contexts, a new hurdle has emerged: gaining acceptance (for the new solutions).

Co-creation and empathy are fundamental principles of design thinking that enable teams to collaborate and solve user problems at pace. Cross-functional collaboration and deep understanding of end-users help to break down barriers between organization silos, resulting in an aligned vision and more holistic, user-centered solutions. However, the geographically-dispersed nature of investment banks can make co-creation and empathy-building challenging.

Whether it is fintech, new regulations, or increasing customer demands, banks need to rethink the way they address wicked challenges related to designing and launching value-adding products and services that meet current and future customer needs. Design thinking has emerged as a highly effective and customer-centric method for solving these types of business problems.

It is based on observing customers in their natural environment, prototyping ideas, and validating them with real customers in an iterative way, working towards the best possible solution.

Service design includes all the intangible aspects of how an organization seeks to build a relationship over time with its customers. And one goal of prototyping these service design experiences is to bring tangibility to these intangible experiences. Prototyping is such a powerful tool because you're organizing your service around the needs of the end consumer. Prototyping is important for determining what lands correctly and what’s missing. It’s a way to depict how the experience might play out over time and to gather feedback around that.

Digitization of Services, especially in the banking sector is creating enormous risk for traditional banks who have not placed the customer at the center of their customer service activities. In general customers of physical banks are not very happy with their banks, whereas those at digital banks are much happier. Herein lies the risk for traditional physical banks. This report offers some good analytical information.

How banks can boost their growth through design thinking in a de-banking era.

There is broad concern in the banking industry that an important share of revenues and the traditional ways of doing business are at risk due to the emergence of fintech startups that are challenging the established players. In the current economic environment, banks are looking to adapt and evolve their business models to meet these challenges and opportunities. Design Thinking is proving to be a useful tool that can help banks in their endeavors.

How do you encourage new customers to open bank accounts? In 2004, Bank of America used the Design Thinking methodology to look at the problem from a human centered perspective when they assigned design agency IDEO to boost their enrollment numbers: a problem that at the time, lacked any user perspective on why it was so hard for customers to save.

How design thinking’s user-centric approach is helping Hong Kong embrace a cashless future.

The world is rapidly moving towards a cash-lite society with the continuing global spread of the coronavirus disease, Covid-19, helping to accelerate the demand for digital payment services.

Many people have been not only adopting social distancing measures during the pandemic, but also trying to avoid contact with people through the use of bank notes and coins by choosing digital payment methods or shopping online. Except in Hong Kong...

6.4 Solve Simple Interest Applications

Learning objectives.

• Use the simple interest formula
• Solve simple interest applications

Be Prepared 6.4

Before you get started, take this readiness quiz.

• Solve 0.6 y = 45 . 0.6 y = 45 . If you missed this problem, review Example 5.43 .
• Solve n 1.45 = 4.6 . n 1.45 = 4.6 . If you missed this problem, review Example 5.44 .

Use the Simple Interest Formula

Do you know that banks pay you to let them keep your money? The money you put in the bank is called the principal , P , P , and the bank pays you interest , I . I . The interest is computed as a certain percent of the principal; called the rate of interest , r . r . The rate of interest is usually expressed as a percent per year, and is calculated by using the decimal equivalent of the percent. The variable for time, t , t , represents the number of years the money is left in the account.

Simple Interest

If an amount of money, P , P , the principal, is invested for a period of t t years at an annual interest rate r , r , the amount of interest, I , I , earned is

Interest earned according to this formula is called simple interest .

The formula we use to calculate simple interest is I = P r t . I = P r t . To use the simple interest formula we substitute in the values for variables that are given, and then solve for the unknown variable. It may be helpful to organize the information by listing all four variables and filling in the given information.

Example 6.33

Find the simple interest earned after 3 3 years on $500 $500 at an interest rate of 6%. 6%.

Organize the given information in a list.

I = ? P = $500 r = 6% t = 3 years I = ? P = $500 r = 6% t = 3 years

We will use the simple interest formula to find the interest.

Try It 6.65

Find the simple interest earned after 4 4 years on $800 $800 at an interest rate of 5%. 5%.

Try It 6.66

Find the simple interest earned after 2 2 years on $700 $700 at an interest rate of 4%. 4%.

In the next example, we will use the simple interest formula to find the principal.

Example 6.34

Find the principal invested if $178 $178 interest was earned in 2 2 years at an interest rate of 4%. 4%.

I = $178 P = ? r = 4% t = 2 years I = $178 P = ? r = 4% t = 2 years

We will use the simple interest formula to find the principal.

Try It 6.67

Find the principal invested if $495 $495 interest was earned in 3 3 years at an interest rate of 6%. 6%.

Try It 6.68

Find the principal invested if $1,246 $1,246 interest was earned in 5 5 years at an interest rate of 7% . 7% .

Now we will solve for the rate of interest.

Example 6.35

Find the rate if a principal of $8,200 $8,200 earned $3,772 $3,772 interest in 4 4 years.

Organize the given information.

I = $3,772 P = $8,200 r = ? t = 4 years I = $3,772 P = $8,200 r = ? t = 4 years

We will use the simple interest formula to find the rate.

Try It 6.69

Find the rate if a principal of $5,000 $5,000 earned $1,350 $1,350 interest in 6 6 years.

Try It 6.70

Find the rate if a principal of $9,000 $9,000 earned $1,755 $1,755 interest in 3 3 years.

Solve Simple Interest Applications

Applications with simple interest usually involve either investing money or borrowing money. To solve these applications, we continue to use the same strategy for applications that we have used earlier in this chapter. The only difference is that in place of translating to get an equation, we can use the simple interest formula.

We will start by solving a simple interest application to find the interest.

Example 6.36

Nathaly deposited $12,500 $12,500 in her bank account where it will earn 4% 4% interest. How much interest will Nathaly earn in 5 5 years?

We are asked to find the Interest, I . I .

I = ? P = $12,500 r = 4% t = 5 years I = ? P = $12,500 r = 4% t = 5 years

Try It 6.71

Areli invested a principal of $950 $950 in her bank account with interest rate 3%. 3%. How much interest did she earn in 5 5 years?

Try It 6.72

Susana invested a principal of $36,000 $36,000 in her bank account with interest rate 6.5% . 6.5% . How much interest did she earn in 3 3 years?

There may be times when you know the amount of interest earned on a given principal over a certain length of time, but you don't know the rate. For instance, this might happen when family members lend or borrow money among themselves instead of dealing with a bank. In the next example, we'll show how to solve for the rate.

Example 6.37

Loren lent his brother $3,000 $3,000 to help him buy a car. In 4 years 4 years his brother paid him back the $3,000 $3,000 plus $660 $660 in interest. What was the rate of interest?

We are asked to find the rate of interest, r . r .

I = 660 P = $3,000 r = ? t = 4 years I = 660 P = $3,000 r = ? t = 4 years

Try It 6.73

Jim lent his sister $5,000 $5,000 to help her buy a house. In 3 3 years, she paid him the $5,000 , $5,000 , plus $900 $900 interest. What was the rate of interest?

Try It 6.74

Hang borrowed $7,500 $7,500 from her parents to pay her tuition. In 5 5 years, she paid them $1,500 $1,500 interest in addition to the $7,500 $7,500 she borrowed. What was the rate of interest?

There may be times when you take a loan for a large purchase and the amount of the principal is not clear. This might happen, for instance, in making a car purchase when the dealer adds the cost of a warranty to the price of the car. In the next example, we will solve a simple interest application for the principal.

Example 6.38

Eduardo noticed that his new car loan papers stated that with an interest rate of 7.5% , 7.5% , he would pay $6,596.25 $6,596.25 in interest over 5 5 years. How much did he borrow to pay for his car?

We are asked to find the principal, P . P .

I = 6,596.25 P = ? r = 7.5% t = 5 years I = 6,596.25 P = ? r = 7.5% t = 5 years

Try It 6.75

Sean's new car loan statement said he would pay $4,866.25 $4,866.25 in interest from an interest rate of 8.5% 8.5% over 5 5 years. How much did he borrow to buy his new car?

Try It 6.76

In 5 5 years, Gloria's bank account earned $2,400 $2,400 interest at 5%. 5%. How much had she deposited in the account?

In the simple interest formula, the rate of interest is given as an annual rate, the rate for one year. So the units of time must be in years. If the time is given in months, we convert it to years.

Example 6.39

Caroline got $900 $900 as graduation gifts and invested it in a 10-month 10-month certificate of deposit that earned 2.1% 2.1% interest. How much interest did this investment earn?

We are asked to find the interest, I . I .

I = ? P = $900 r = 2.1% t = 10 months I = ? P = $900 r = 2.1% t = 10 months

Try It 6.77

Adriana invested $4,500 $4,500 for 8 8 months in an account that paid 1.9% 1.9% interest. How much interest did she earn?

Try It 6.78

Milton invested $2,460 $2,460 for 20 20 months in an account that paid 3.5% 3.5% interest How much interest did he earn?

Section 6.4 Exercises

Practice makes perfect.

In the following exercises, use the simple interest formula to fill in the missing information.

In the following exercises, solve the problem using the simple interest formula.

Find the simple interest earned after 5 5 years on $600 $600 at an interest rate of 3%. 3%.

Find the simple interest earned after 4 4 years on $900 $900 at an interest rate of 6%. 6%.

Find the simple interest earned after 2 2 years on $8,950 $8,950 at an interest rate of 3.24% . 3.24% .

Find the simple interest earned after 3 3 years on $6,510 $6,510 at an interest rate of 2.85% . 2.85% .

Find the simple interest earned after 8 8 years on $15,500 $15,500 at an interest rate of 11.425% . 11.425% .

Find the simple interest earned after 6 6 years on $23,900 $23,900 at an interest rate of 12.175% . 12.175% .

Find the principal invested if $656 $656 interest was earned in 5 5 years at an interest rate of 4% . 4% .

Find the principal invested if $177 $177 interest was earned in 2 2 years at an interest rate of 3% . 3% .

Find the principal invested if $70.95 $70.95 interest was earned in 3 3 years at an interest rate of 2.75%. 2.75%.

Find the principal invested if $636.84 $636.84 interest was earned in 6 6 years at an interest rate of 4.35%. 4.35%.

Find the principal invested if $15,222.57 $15,222.57 interest was earned in 6 6 years at an interest rate of 10.28% . 10.28% .

Find the principal invested if $10,953.70 $10,953.70 interest was earned in 5 5 years at an interest rate of 11.04%. 11.04%.

Find the rate if a principal of $5,400 $5,400 earned $432 $432 interest in 2 2 years.

Find the rate if a principal of $2,600 $2,600 earned $468 $468 interest in 6 6 years.

Find the rate if a principal of $11,000 $11,000 earned $1,815 $1,815 interest in 3 3 years.

Find the rate if a principal of $8,500 $8,500 earned $3,230 $3,230 interest in 4 4 years.

Casey deposited $1,450 $1,450 in a bank account with interest rate 4%. 4%. How much interest was earned in 2 2 years?

Terrence deposited $5,720 $5,720 in a bank account with interest rate 6%. 6%. How much interest was earned in 4 4 years?

Robin deposited $31,000 $31,000 in a bank account with interest rate 5.2% . 5.2% . How much interest was earned in 3 3 years?

Carleen deposited $16,400 $16,400 in a bank account with interest rate 3.9% . 3.9% . How much interest was earned in 8 8 years?

Hilaria borrowed $8,000 $8,000 from her grandfather to pay for college. Five years later, she paid him back the $8,000 , $8,000 , plus $1,200 $1,200 interest. What was the rate of interest?

Kenneth lent his niece $1,200 $1,200 to buy a computer. Two years later, she paid him back the $1,200 , $1,200 , plus $96 $96 interest. What was the rate of interest?

Lebron lent his daughter $20,000 $20,000 to help her buy a condominium. When she sold the condominium four years later, she paid him the $20,000 , $20,000 , plus $3,000 $3,000 interest. What was the rate of interest?

Pablo borrowed $50,000 $50,000 to start a business. Three years later, he repaid the $50,000 , $50,000 , plus $9,375 $9,375 interest. What was the rate of interest?

In 10 10 years, a bank account that paid 5.25% 5.25% earned $18,375 $18,375 interest. What was the principal of the account?

In 25 25 years, a bond that paid 4.75% 4.75% earned $2,375 $2,375 interest. What was the principal of the bond?

Joshua's computer loan statement said he would pay $1,244.34 $1,244.34 in interest for a 3 3 year loan at 12.4% . 12.4% . How much did Joshua borrow to buy the computer?

Margaret's car loan statement said she would pay $7,683.20 $7,683.20 in interest for a 5 5 year loan at 9.8%. 9.8%. How much did Margaret borrow to buy the car?

Caitlin invested $8,200 $8,200 in an 18-month 18-month certificate of deposit paying 2.7% 2.7% interest. How much interest did she earn form this investment?

Diego invested $6,100 $6,100 in a 9-month 9-month certificate of deposit paying 1.8% 1.8% interest. How much interest did he earn form this investment?

Airin borrowed $3,900 $3,900 from her parents for the down payment on a car and promised to pay them back in 15 15 months at a 4% 4% rate of interest. How much interest did she owe her parents?

Yuta borrowed $840 $840 from his brother to pay for his textbooks and promised to pay him back in 5 5 months at a 6% 6% rate of interest. How much interest did Yuta owe his brother?

Everyday Math

Interest on savings Find the interest rate your local bank pays on savings accounts.

• ⓐ What is the interest rate?
• ⓑ Calculate the amount of interest you would earn on a principal of $8,000 $8,000 for 5 5 years.

Interest on a loan Find the interest rate your local bank charges for a car loan.

• ⓑ Calculate the amount of interest you would pay on a loan of $8,000 $8,000 for 5 5 years.

Writing Exercises

Why do banks pay interest on money deposited in savings accounts?

Why do banks charge interest for lending money?

ⓐ After completing the exercises, use this checklist to evaluate your mastery of the objectives of this section.

ⓑ On a scale of 1–10, how would you rate your mastery of this section in light of your responses on the checklist? How can you improve this?

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Interview Questions

Comprehensive Interview Guide: 60+ Professions Explored in Detail

26 Good Examples of Problem Solving (Interview Answers)

By Biron Clark

Published: November 15, 2023

Employers like to hire people who can solve problems and work well under pressure. A job rarely goes 100% according to plan, so hiring managers will be more likely to hire you if you seem like you can handle unexpected challenges while staying calm and logical in your approach.

But how do they measure this?

They’re going to ask you interview questions about these problem solving skills, and they might also look for examples of problem solving on your resume and cover letter. So coming up, I’m going to share a list of examples of problem solving, whether you’re an experienced job seeker or recent graduate.

Then I’ll share sample interview answers to, “Give an example of a time you used logic to solve a problem?”

Problem-Solving Defined

It is the ability to identify the problem, prioritize based on gravity and urgency, analyze the root cause, gather relevant information, develop and evaluate viable solutions, decide on the most effective and logical solution, and plan and execute implementation. 

Problem-solving also involves critical thinking, communication, listening, creativity, research, data gathering, risk assessment, continuous learning, decision-making, and other soft and technical skills.

Solving problems not only prevent losses or damages but also boosts self-confidence and reputation when you successfully execute it. The spotlight shines on you when people see you handle issues with ease and savvy despite the challenges. Your ability and potential to be a future leader that can take on more significant roles and tackle bigger setbacks shine through. Problem-solving is a skill you can master by learning from others and acquiring wisdom from their and your own experiences. 

It takes a village to come up with solutions, but a good problem solver can steer the team towards the best choice and implement it to achieve the desired result.

Watch: 26 Good Examples of Problem Solving

Examples of problem solving scenarios in the workplace.

• Correcting a mistake at work, whether it was made by you or someone else
• Overcoming a delay at work through problem solving and communication
• Resolving an issue with a difficult or upset customer
• Overcoming issues related to a limited budget, and still delivering good work through the use of creative problem solving
• Overcoming a scheduling/staffing shortage in the department to still deliver excellent work
• Troubleshooting and resolving technical issues
• Handling and resolving a conflict with a coworker
• Solving any problems related to money, customer billing, accounting and bookkeeping, etc.
• Taking initiative when another team member overlooked or missed something important
• Taking initiative to meet with your superior to discuss a problem before it became potentially worse
• Solving a safety issue at work or reporting the issue to those who could solve it
• Using problem solving abilities to reduce/eliminate a company expense
• Finding a way to make the company more profitable through new service or product offerings, new pricing ideas, promotion and sale ideas, etc.
• Changing how a process, team, or task is organized to make it more efficient
• Using creative thinking to come up with a solution that the company hasn’t used before
• Performing research to collect data and information to find a new solution to a problem
• Boosting a company or team’s performance by improving some aspect of communication among employees
• Finding a new piece of data that can guide a company’s decisions or strategy better in a certain area

Problem Solving Examples for Recent Grads/Entry Level Job Seekers

• Coordinating work between team members in a class project
• Reassigning a missing team member’s work to other group members in a class project
• Adjusting your workflow on a project to accommodate a tight deadline
• Speaking to your professor to get help when you were struggling or unsure about a project
• Asking classmates, peers, or professors for help in an area of struggle
• Talking to your academic advisor to brainstorm solutions to a problem you were facing
• Researching solutions to an academic problem online, via Google or other methods
• Using problem solving and creative thinking to obtain an internship or other work opportunity during school after struggling at first

You can share all of the examples above when you’re asked questions about problem solving in your interview. As you can see, even if you have no professional work experience, it’s possible to think back to problems and unexpected challenges that you faced in your studies and discuss how you solved them.

Interview Answers to “Give an Example of an Occasion When You Used Logic to Solve a Problem”

Now, let’s look at some sample interview answers to, “Give me an example of a time you used logic to solve a problem,” since you’re likely to hear this interview question in all sorts of industries.

Example Answer 1:

At my current job, I recently solved a problem where a client was upset about our software pricing. They had misunderstood the sales representative who explained pricing originally, and when their package renewed for its second month, they called to complain about the invoice. I apologized for the confusion and then spoke to our billing team to see what type of solution we could come up with. We decided that the best course of action was to offer a long-term pricing package that would provide a discount. This not only solved the problem but got the customer to agree to a longer-term contract, which means we’ll keep their business for at least one year now, and they’re happy with the pricing. I feel I got the best possible outcome and the way I chose to solve the problem was effective.

Example Answer 2:

In my last job, I had to do quite a bit of problem solving related to our shift scheduling. We had four people quit within a week and the department was severely understaffed. I coordinated a ramp-up of our hiring efforts, I got approval from the department head to offer bonuses for overtime work, and then I found eight employees who were willing to do overtime this month. I think the key problem solving skills here were taking initiative, communicating clearly, and reacting quickly to solve this problem before it became an even bigger issue.

Example Answer 3:

In my current marketing role, my manager asked me to come up with a solution to our declining social media engagement. I assessed our current strategy and recent results, analyzed what some of our top competitors were doing, and then came up with an exact blueprint we could follow this year to emulate our best competitors but also stand out and develop a unique voice as a brand. I feel this is a good example of using logic to solve a problem because it was based on analysis and observation of competitors, rather than guessing or quickly reacting to the situation without reliable data. I always use logic and data to solve problems when possible. The project turned out to be a success and we increased our social media engagement by an average of 82% by the end of the year.

Answering Questions About Problem Solving with the STAR Method

When you answer interview questions about problem solving scenarios, or if you decide to demonstrate your problem solving skills in a cover letter (which is a good idea any time the job description mention problem solving as a necessary skill), I recommend using the STAR method to tell your story.

STAR stands for:

It’s a simple way of walking the listener or reader through the story in a way that will make sense to them. So before jumping in and talking about the problem that needed solving, make sure to describe the general situation. What job/company were you working at? When was this? Then, you can describe the task at hand and the problem that needed solving. After this, describe the course of action you chose and why. Ideally, show that you evaluated all the information you could given the time you had, and made a decision based on logic and fact.

Finally, describe a positive result you got.

Whether you’re answering interview questions about problem solving or writing a cover letter, you should only choose examples where you got a positive result and successfully solved the issue.

Example answer:

Situation : We had an irate client who was a social media influencer and had impossible delivery time demands we could not meet. She spoke negatively about us in her vlog and asked her followers to boycott our products. (Task : To develop an official statement to explain our company’s side, clarify the issue, and prevent it from getting out of hand). Action : I drafted a statement that balanced empathy, understanding, and utmost customer service with facts, logic, and fairness. It was direct, simple, succinct, and phrased to highlight our brand values while addressing the issue in a logical yet sensitive way.   We also tapped our influencer partners to subtly and indirectly share their positive experiences with our brand so we could counter the negative content being shared online.  Result : We got the results we worked for through proper communication and a positive and strategic campaign. The irate client agreed to have a dialogue with us. She apologized to us, and we reaffirmed our commitment to delivering quality service to all. We assured her that she can reach out to us anytime regarding her purchases and that we’d gladly accommodate her requests whenever possible. She also retracted her negative statements in her vlog and urged her followers to keep supporting our brand.

What Are Good Outcomes of Problem Solving?

Whenever you answer interview questions about problem solving or share examples of problem solving in a cover letter, you want to be sure you’re sharing a positive outcome.

Below are good outcomes of problem solving:

• Saving the company time or money
• Making the company money
• Pleasing/keeping a customer
• Obtaining new customers
• Solving a safety issue
• Solving a staffing/scheduling issue
• Solving a logistical issue
• Solving a company hiring issue
• Solving a technical/software issue
• Making a process more efficient and faster for the company
• Creating a new business process to make the company more profitable
• Improving the company’s brand/image/reputation
• Getting the company positive reviews from customers/clients

Every employer wants to make more money, save money, and save time. If you can assess your problem solving experience and think about how you’ve helped past employers in those three areas, then that’s a great start. That’s where I recommend you begin looking for stories of times you had to solve problems.

Tips to Improve Your Problem Solving Skills

Throughout your career, you’re going to get hired for better jobs and earn more money if you can show employers that you’re a problem solver. So to improve your problem solving skills, I recommend always analyzing a problem and situation before acting. When discussing problem solving with employers, you never want to sound like you rush or make impulsive decisions. They want to see fact-based or data-based decisions when you solve problems.

Next, to get better at solving problems, analyze the outcomes of past solutions you came up with. You can recognize what works and what doesn’t. Think about how you can get better at researching and analyzing a situation, but also how you can get better at communicating, deciding the right people in the organization to talk to and “pull in” to help you if needed, etc.

Finally, practice staying calm even in stressful situations. Take a few minutes to walk outside if needed. Step away from your phone and computer to clear your head. A work problem is rarely so urgent that you cannot take five minutes to think (with the possible exception of safety problems), and you’ll get better outcomes if you solve problems by acting logically instead of rushing to react in a panic.

You can use all of the ideas above to describe your problem solving skills when asked interview questions about the topic. If you say that you do the things above, employers will be impressed when they assess your problem solving ability.

If you practice the tips above, you’ll be ready to share detailed, impressive stories and problem solving examples that will make hiring managers want to offer you the job. Every employer appreciates a problem solver, whether solving problems is a requirement listed on the job description or not. And you never know which hiring manager or interviewer will ask you about a time you solved a problem, so you should always be ready to discuss this when applying for a job.

Related interview questions & answers:

• How do you handle stress?
• How do you handle conflict?
• Tell me about a time when you failed

About the Author

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Analytical and Problem-Solving Skills Needed for Success in Investment Banking

Looking to succeed in investment banking? This article explores the importance of analytical and problem-solving skills in the industry.

Posted May 11, 2023

Table of Contents

Investment banking is a challenging and fast-paced field that requires a unique set of skills to achieve success. Among these are analytical and problem-solving skills, which are essential in interpreting financial data, developing strategies, and identifying opportunities for investment. In this article, we will discuss the importance of these skills in investment banking, what they entail, and how to develop and showcase them for a successful career in the industry.

The Importance of Analytical and Problem-Solving Skills in Investment Banking

Investment banking involves managing large sums of money on behalf of clients, which requires the ability to think critically and logically to make sound investment decisions. Analytical skills are crucial in interpreting vast amounts of financial data, analyzing trends, and assessing risk. Problem-solving skills are vital in identifying and resolving challenges that arise in the course of investment banking, including developing investment strategies, pricing securities, and managing client expectations. Investment banking is a highly competitive industry, and excellent analytical and problem-solving skills are necessary to set you apart from the competition.

Moreover, investment banking is a dynamic industry that is constantly evolving. As such, investment bankers need to stay up-to-date with the latest trends and developments in the financial markets. This requires a keen eye for detail and the ability to analyze complex financial information quickly and accurately. Investment bankers must also possess excellent communication skills to effectively convey their ideas and recommendations to clients and colleagues. In summary, analytical and problem-solving skills are essential for success in investment banking, but they must be complemented by a strong work ethic, a passion for learning, and excellent communication skills.

What are Analytical and Problem-Solving Skills, and Why are They Important?

Analytical skills involve the ability to assess and evaluate complex information, break it down into meaningful components, and draw logical conclusions based on data and evidence. Problem-solving skills involve the ability to identify problems, develop and evaluate alternative solutions, and select the best course of action based on the available information.

These skills are essential in the investment banking industry because they help professionals make sound investment decisions based on historical data and economic trends. They also enable investment bankers to adapt to changing market conditions quickly and solve complex financial problems, both of which are critical to achieving success in this industry.

Moreover, analytical and problem-solving skills are highly valued in many other industries, including technology, healthcare, and engineering. In the technology industry, for example, professionals with strong analytical skills can analyze user data to identify patterns and trends, which can inform product development and marketing strategies. In healthcare, problem-solving skills are essential for diagnosing and treating complex medical conditions. In engineering, analytical skills are necessary for designing and testing new products and systems.

The Role of Analytical Skills in Investment Banking

The role of analytical skills in investment banking cannot be overstated. Professionals in this industry work with complicated financial data, which requires a high degree of numeracy. Analytical skills are necessary for interpreting financial statements, analyzing market trends, assessing creditworthiness, and performing other functions that require an understanding of complex financial data. The ability to analyze data correctly is an essential component of developing investment strategies that minimize risk and maximize returns.

Moreover, analytical skills are also crucial in investment banking for identifying potential risks and opportunities in the market. Investment bankers need to be able to analyze and interpret large amounts of data to identify trends and patterns that could impact their clients' investments. They must also be able to use this information to make informed decisions about which investments to pursue and which to avoid. In addition, analytical skills are essential for creating financial models and projections that help clients make informed decisions about their investments.

Developing Your Analytical Skills: Tips and Strategies

Developing analytical skills is essential to achieving success in investment banking. There are several techniques for developing these skills, including:

Another effective way to develop analytical skills is to participate in case competitions or simulations. These activities provide a hands-on approach to problem-solving and decision-making, allowing you to apply your analytical skills in a practical setting. Additionally, they offer an opportunity to receive feedback from industry professionals and peers, which can help you identify areas for improvement.

It's also important to seek out mentors or coaches who can provide guidance and support as you develop your analytical skills. These individuals can offer valuable insights and advice based on their own experiences, and can help you navigate challenges and overcome obstacles along the way.

Problem-Solving Techniques Used in Investment Banking

Investment banking requires professionals to solve complex financial problems by developing creative solutions. Some of the problem-solving techniques used by investment bankers include:

Another problem-solving technique used in investment banking is

How to Improve Your Problem-Solving Abilities for Investment Banking

To improve your problem-solving abilities in investment banking, consider the following tips:

Another important way to improve your problem-solving abilities in investment banking is to stay up-to-date with industry news and trends. This will help you to identify potential problems and opportunities before they arise, and to develop effective solutions. Additionally, attending industry conferences and networking events can provide valuable opportunities to learn from other professionals and gain new insights into the field.

The Benefits of Good Analytical and Problem-Solving Skills in Investment Banking

The benefits of good analytical and problem-solving skills in investment banking include:

Common Challenges Faced by Investment Bankers and How Analytical Skills Help Overcome Them

Investment bankers face unique challenges in their work, including:

Analytical and problem-solving skills are instrumental in overcoming these challenges in the investment banking industry. These skills enable investment bankers to make informed and effective decisions under pressure, analyze complex financial data, manage risk effectively, and differentiate themselves in a competitive industry.

How to Showcase Your Analytical and Problem-Solving Abilities in a Job Interview for Investment Banking

If you wish to demonstrate your analytical and problem-solving skills in a job interview for investment banking, consider following these tips:

Case Studies: Examples of Successful Use of Analytical and Problem-Solving Skills in Investment Banking

Several examples demonstrate successful use of analytical and problem-solving skills in investment banking. One such example is the 2008 financial crisis, where investment bankers such as JP Morgan, Goldman Sachs, and Morgan Stanley utilized their analytical skills to evaluate risk and identify strategies to mitigate it for their clients. In another example, investment bankers working on mergers and acquisitions use analytical and problem-solving skills to analyze the financials of the companies involved and develop a strategy to merge them.

Training Programs Available to Improve Your Analytical and Problem-Solving Abilities for a Career in Investment Banking

There are several training programs available for individuals looking to improve their analytical and problem-solving abilities in investment banking. These include finance and investment courses provided by universities, targeted training courses provided by consulting firms, and on-the-job training opportunities. By investing time and resources to improve your analytical and problem-solving skills, you can strengthen your career prospects, differentiate yourself from peers, and achieve financial success in the investment banking industry.

Investment banking demands high levels of analytical and problem-solving skills. These are essential in evaluating financial data, identifying strategic investment opportunities, and managing risks. While some people have these skills, all of them can be improved with education and experience.

Developing your analytical and problem-solving abilities requires deliberate practice, active learning, building networks, and making appropriate career decisions. With these efforts, you can position yourself to succeed in the highly competitive world of investment banking, being a valuable as well as an in-demand asset.

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• The joys of problem solving
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Many accountants enjoy problem solving more than number crunching. So what typical problems can you look forward to cracking at work? Iwona Tokc-Wilde reports

Problem solving is something that accountants and finance professionals deal with virtually every working day. In fact, a recent survey by Robert Half shows it is this part of working in the profession that they like best: 41% of accountants say solving problems gives them the most job satisfaction, compared to just 22% who prefer working with numbers.

‘Accountants are usually excellent at dealing with detail and spotting patterns, which makes them good at – and enjoy – problem solving,’ comments Andi Lonnen, founder and director of Finance Training Academy.

If you are at the beginning of your journey into the profession and enjoy tackling problems, you have a head start. Problem solving is also a skill that is one of the 10 most sought-after trainee skills globally (see 'Related links').

Why problem-solving skills are so important

‘The role of accountancy and finance has shifted from a pure focus on fiscal control to one where it has an impact on the business,’ says Phil Sheridan, managing director at Robert Half.

‘The requirement for problem-solving skills is part of this transition as, by mining data and analysing trends, accountants are now translating numbers into actionable insights for the business and are increasingly being seen as strategic partners.’ By putting their data skills and their problem-solving skills to work together, they also help uncover potential areas for concern.

It is vital for accountants in practice to correctly identify, analyse and solve problems too.

‘As trusted advisers, it’s our role to look at everything in detail to pick-up anomalies, patterns and correlations in order to advise our clients on how to take things forward,’ says Shahzad Nawaz of AA Accountants. If they fail to pick up and analyse problems correctly, the accounts could be wrong.

‘This means the business owner would be relying on incorrect data, which could have a detrimental effect on the future of the business. And, of course, if external stakeholders are relying on the data, then we could potentially be misleading them too.’

Incorrect accounts could also have other serious knock-on effects.

‘If the accounting figures are incorrect, then the tax payments relating to the company will be incorrect too. Later on, the client could find themselves with additional tax to pay – with interest,’ says Tanya Addy of BHP Chartered Accountants. 

‘Inaccurate accounting can also land businesses in serious commercial difficulties especially if, as a result, directors/owners have been taking more salary or dividends from the business than they were entitled to. In the worst case scenario, it could even lead to closure of the business.’

Problem solving at work

There are many areas where trainee and new accountants can practise solving problems, depending on the job you are doing.

‘If it’s accountancy, you’ll be looking at helping a business with cash flow, debtors and improving their record-keeping,’ says Nawaz.

At the nitty-gritty level, you will be reconciling control accounts, trying to understand why an account might not be balancing and investigating and clearing old items on reconciliations.

‘The work to balance an account involves finding out what the problem is and then resolving it, for example identifying and correcting transposition errors,’ says Lodden.

If you work in tax, you’ll be involved in advising a client on how much tax they will need to pay (and how much tax they can save) in a particular year.

‘This will require a review of the information provided by the client, such as bank statements and expenses, analysing which expenses incurred are allowable and disallowable for taxation, quantifying the results and communicating them to the client and to tax authorities,’ explains Carolyn Napier, senior ACCA tutor at London School of Business and Finance. 

You will also be dealing with tax implications, and tax cost for both employer and employee, of providing benefits.

‘You will need to ascertain which benefits are taxable and which are tax-free, and then you’ll need to "solve the problem" of which tax or taxes are due and payable, and by what date,’ says Napier.

In industry, you may be given the opportunity to help analyse projects, and communicate your findings to various parts of the business.

‘This is where new and trainee accountants will need to be prepared to utilise their problem-solving skills – noting anomalies and seeking clarification on areas of uncertainly will ensure that a clearer picture can be obtained,’ says Sheridan.

Deborah Adigun-Hameed is an accountant and junior financial analyst at BlueBay Asset Management. By utilising her problem-solving aptitude and skills, she has been involved in major decisions that shape the company she works for.

‘I’ve contributed to key strategic discussions about which market and products are profitable, what we should be selling and how we compare with our competitors,’ says Adigun-Hameed.

‘I may be newly qualified, but my informed opinions and advice are really valued by the management.’

Both in practice and in industry, accountants are also increasingly called upon to help solve technology problems – for example, when a business intends to implement new business software solutions. They help with the evaluation and selection of a solution, and with planning and execution of the implementation process. They also assist in testing the new system and facilitate going live when the system is ready.

Hone your problem-solving skills

Problem solving is about using logic and your technical expertise to assess a situation and to come up with a workable solution. It is connected to other skills such as level-headedness and resilience, analytical skills and good teamworking skills.

It also requires creativity, which is best learnt through collaboration – brainstorming with others to clarify the problem, generate ideas and create as many potential solutions as possible. When putting forward ideas, be confident in your contributions.

‘Everyone, including those newly-qualified, has something to offer,’ says Adigun-Hameed.  ‘Always think outside of the box, as cliché as that may sound. No new idea is insignificant. Innovation can be incremental; change can be small or radical.’

Improving your listening and communication skills will also make you a better problem solver.

‘Learning to communicate well is vital as you need to build rapport with clients. If you have a good rapport with someone, you are confident to ask questions, which is how you can pin down problems and find answers to those problems,’ says Nawaz.

Above all else, getting practical on-the-job experience is how you can get really good at problem solving.

‘The first control account a trainee tends to tackle and perfect is the bank control account; every trainee accountant has had to look for that 1p difference – as painful as that sounds, it certainly helps you learn,’ says Lauren Burt, client manager at EST Accountants and Tax Advisers.

"Everyone, including those newly-qualified, has something to offer. Always think outside of the box, as cliché as that may sound. No new idea is insignificant. Innovation can be incremental; change can be small or radical" Deborah Adigun-Hameed - BlueBay Asset Management

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Navigating the Problems Faced by Bank Employees with 12 Engagement Strategies

12 effective engagement strategies to overcome challenges faced by bank employees. Explore solutions that boost morale, productivity, and job satisfaction.

Table of Contents

The banking sector serves as the backbone of the global economy, facilitating financial transactions, managing assets, and ensuring the efficient flow of capital. Behind the polished façade of gleaming bank branches and sophisticated online platforms, there exists a dedicated workforce of bank employees who tirelessly work to ensure that the wheels of the financial world keep turning.

However, the life of a bank employee is far from a walk in the park. They encounter a multitude of challenges that often go unnoticed by the customers they serve. From stringent regulatory requirements and demanding customer expectations to the ever-evolving landscape of financial technology, the journey of a bank employee is rife with complexities and pressures.

In this blog, we will delve into the common problems faced by bank employees in their daily roles. More importantly, we will explore strategies that banks, both large and small, have employed to engage their employees effectively.

By addressing these challenges and fostering a culture of support and development, banks can not only enhance employee satisfaction but also boost productivity and deliver superior customer service.

Let us explore the journey as we navigate the intricate challenges faced by bank employees and discover the innovative approaches that banks are taking to create a thriving and engaged workforce.

8 Common problems faced by bank employees

Bank employees face a multitude of challenges in their daily work, which can range from regulatory hurdles to customer demands. In this section, we'll delve into eight common challenges faced by bank employees in detail.

1. Heavy workload and stress

Bank employees often deal with a high volume of transactions and customer interactions. During peak hours, the pressure to meet service standards and sales targets can be intense, leading to stress and burnout. Managing this workload while maintaining quality customer service can be challenging.

2. Regulatory compliance

The banking industry is highly regulated to ensure financial stability and protect consumers. Bank employees must navigate a complex web of rules and regulations, including anti-money laundering (aml) and know your customer (kyc) requirements. Staying compliant and up-to-date with regulatory changes is a constant challenge.

3. Technology adaptation

With the rapid advancement of technology, banks are continually adopting new systems and software to improve efficiency and security. Bank employees, especially older generations, may find it challenging to adapt to these technological changes. Training and support are crucial to help employees embrace and utilize these tools effectively.

4. Customer expectations

Customers have increasingly high expectations for seamless and personalized banking experiences. Meeting these expectations can be difficult, especially when faced with complex inquiries or dissatisfied clients. Handling customer complaints and ensuring customer satisfaction are ongoing challenges.

5. Security concerns

Bank employees handle sensitive financial information and are responsible for preventing security breaches and fraud. The ever-evolving tactics of cybercriminals require constant vigilance and training. Security breaches not only put customers at risk but also create additional stress for employees.

6. Sales targets and incentives

Many bank employees are required to meet sales targets, such as selling financial products or meeting cross-selling goals. The pressure to achieve these targets can lead to unethical practices or overly aggressive sales tactics, which may compromise the customer experience and employee morale.

7. Work-life balance

Long working hours, especially during busy periods, can disrupt employees' work-life balance. Maintaining a healthy equilibrium between work and personal life is essential for well-being and job satisfaction. Lack of balance can lead to burnout and decreased productivity.

8. Customer difficulties

While most customers are reasonable and cooperative, bank employees occasionally encounter difficult or irate customers. Handling these situations professionally and resolving issues to the customer's satisfaction requires patience and strong interpersonal skills.

How to engage bank employees: 12 effective strategies

Engaging bank employees is essential for fostering a motivated and productive workforce. Here are 12 effective strategies for engaging bank employees, along with examples of banks that have successfully implemented them:

1. Employee recognition programs

Implementing recognition programs is vital for acknowledging and appreciating employees' efforts. Recognize outstanding performance through peer and managerial recognition, awards, and bonuses. These programs not only boost morale but also create a positive and motivating work environment.

2. Investment in training and development

Investing in continuous learning and development, banks empower their employees to stay up-to-date with industry trends and enhance their skills. Offering relevant courses, workshops, and career path guidance helps employees feel valued and motivated to excel in their roles.

3. Regular feedback and communication

Open and transparent communication is the backbone of employee engagement. Regular one-on-one check-ins and feedback sessions enable managers to provide guidance and address concerns promptly, fostering trust and improving job satisfaction.

Employee surveys also play a crucial role in understanding and addressing employee needs and concerns.

4. Employee wellness programs

Employee well-being is paramount. Banks can promote physical and mental wellness through initiatives like fitness challenges, access to wellness resources, and stress management workshops. Encouraging work-life balance and providing support for mental health challenges can significantly improve overall job satisfaction.

5. Employee development and career growth opportunities

Demonstrating a commitment to employee growth and advancement is key to engagement. Banks can offer opportunities for career progression, promotions from within, and individual development plans that align with employees' career aspirations. Cross-training can also enrich employees' skills and job satisfaction.

6. Diversity and inclusion initiatives

A diverse and inclusive workplace fosters a sense of belonging among employees. Banks should actively promote an inclusive culture through training and awareness programs, diverse hiring practices, and support for employee resource groups.

These initiatives not only improve engagement but also reflect positively on the bank's reputation in the community and with customers.

7. Flexible work arrangements

Offering flexible work arrangements, such as remote work options or flexible hours, demonstrates trust in employees and supports their work-life balance. This flexibility can enhance job satisfaction and loyalty while accommodating individual needs and preferences.

8. Employee empowerment and decision-making

Empowering employees by involving them in decision-making processes and giving them autonomy in their roles can be highly engaging. When employees feel their opinions are valued and that they have a say in shaping the bank's direction, they become more invested in their work and the organization's success.

9. Mentorship and coaching programs

Implementing mentorship and coaching programs allows employees to receive guidance and feedback from more experienced colleagues. These programs can accelerate career development, boost confidence, and foster a strong sense of belonging within the bank.

10. Employee volunteer and social responsibility initiatives

Encouraging employees to participate in volunteer and social responsibility initiatives reinforces a sense of purpose and community. Banks can organize volunteer activities or support charitable causes, allowing employees to contribute to causes they care about, which can lead to higher job satisfaction and engagement.

11. Peer-to-peer recognition

Peer-to-peer recognition programs enable employees to appreciate and celebrate each other's achievements. These initiatives create a culture of appreciation, camaraderie, and teamwork, ultimately strengthening the sense of belonging and motivation among staff.

12. Professional development and educational assistance

Supporting employees in their pursuit of further education or professional development through tuition reimbursement or educational assistance programs can enhance their skills and career prospects. This investment not only benefits employees but also positions the bank as a place for long-term growth and advancement.

In the ever-evolving world of banking, the challenges faced by employees are significant and multifaceted. However, through the implementation of engagement strategies, banks can not only address these challenges but also empower their workforce to thrive. By recognizing the dedication of their employees, providing opportunities for growth, fostering open communication, and supporting work-life balance, banks can build a more engaged and motivated workforce. In doing so, they not only enhance the well-being of their employees but also ensure better customer service, improved competitiveness, and long-term success in the financial industry.

10 Ways of Rewarding Employee in 2024 for Good Customer Service [+Examples from Well Known Brands]

10 ways to show appreciation to frontline workers in 2024, unlock the biggest secret of engagement to retain your top performers., -->guest contributor -->.

We often come across some fantastic writers who prefer to publish their writings on our blogs but prefer to stay anonymous. We dedicate this section to all superheroes who go the extra mile for us.

Let's begin this new year with an engaged workforce!

Empuls is the employee engagement platform for small and mid-sized businesses to help engage employees and improve company culture.

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Do You Understand the Problem You’re Trying to Solve?

To solve tough problems at work, first ask these questions.

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Problem solving skills are invaluable in any job. But all too often, we jump to find solutions to a problem without taking time to really understand the dilemma we face, according to Thomas Wedell-Wedellsborg , an expert in innovation and the author of the book, What’s Your Problem?: To Solve Your Toughest Problems, Change the Problems You Solve .

In this episode, you’ll learn how to reframe tough problems by asking questions that reveal all the factors and assumptions that contribute to the situation. You’ll also learn why searching for just one root cause can be misleading.

Key episode topics include: leadership, decision making and problem solving, power and influence, business management.

HBR On Leadership curates the best case studies and conversations with the world’s top business and management experts, to help you unlock the best in those around you. New episodes every week.

• Listen to the original HBR IdeaCast episode: The Secret to Better Problem Solving (2016)
• Find more episodes of HBR IdeaCast
• Discover 100 years of Harvard Business Review articles, case studies, podcasts, and more at HBR.org .

HANNAH BATES: Welcome to HBR on Leadership , case studies and conversations with the world’s top business and management experts, hand-selected to help you unlock the best in those around you.

Problem solving skills are invaluable in any job. But even the most experienced among us can fall into the trap of solving the wrong problem.

Thomas Wedell-Wedellsborg says that all too often, we jump to find solutions to a problem – without taking time to really understand what we’re facing.

He’s an expert in innovation, and he’s the author of the book, What’s Your Problem?: To Solve Your Toughest Problems, Change the Problems You Solve .

  In this episode, you’ll learn how to reframe tough problems, by asking questions that reveal all the factors and assumptions that contribute to the situation. You’ll also learn why searching for one root cause can be misleading. And you’ll learn how to use experimentation and rapid prototyping as problem-solving tools.

This episode originally aired on HBR IdeaCast in December 2016. Here it is.

SARAH GREEN CARMICHAEL: Welcome to the HBR IdeaCast from Harvard Business Review. I’m Sarah Green Carmichael.

Problem solving is popular. People put it on their resumes. Managers believe they excel at it. Companies count it as a key proficiency. We solve customers’ problems.

The problem is we often solve the wrong problems. Albert Einstein and Peter Drucker alike have discussed the difficulty of effective diagnosis. There are great frameworks for getting teams to attack true problems, but they’re often hard to do daily and on the fly. That’s where our guest comes in.

Thomas Wedell-Wedellsborg is a consultant who helps companies and managers reframe their problems so they can come up with an effective solution faster. He asks the question “Are You Solving The Right Problems?” in the January-February 2017 issue of Harvard Business Review. Thomas, thank you so much for coming on the HBR IdeaCast .

THOMAS WEDELL-WEDELLSBORG: Thanks for inviting me.

SARAH GREEN CARMICHAEL: So, I thought maybe we could start by talking about the problem of talking about problem reframing. What is that exactly?

THOMAS WEDELL-WEDELLSBORG: Basically, when people face a problem, they tend to jump into solution mode to rapidly, and very often that means that they don’t really understand, necessarily, the problem they’re trying to solve. And so, reframing is really a– at heart, it’s a method that helps you avoid that by taking a second to go in and ask two questions, basically saying, first of all, wait. What is the problem we’re trying to solve? And then crucially asking, is there a different way to think about what the problem actually is?

SARAH GREEN CARMICHAEL: So, I feel like so often when this comes up in meetings, you know, someone says that, and maybe they throw out the Einstein quote about you spend an hour of problem solving, you spend 55 minutes to find the problem. And then everyone else in the room kind of gets irritated. So, maybe just give us an example of maybe how this would work in practice in a way that would not, sort of, set people’s teeth on edge, like oh, here Sarah goes again, reframing the whole problem instead of just solving it.

THOMAS WEDELL-WEDELLSBORG: I mean, you’re bringing up something that’s, I think is crucial, which is to create legitimacy for the method. So, one of the reasons why I put out the article is to give people a tool to say actually, this thing is still important, and we need to do it. But I think the really critical thing in order to make this work in a meeting is actually to learn how to do it fast, because if you have the idea that you need to spend 30 minutes in a meeting delving deeply into the problem, I mean, that’s going to be uphill for most problems. So, the critical thing here is really to try to make it a practice you can implement very, very rapidly.

There’s an example that I would suggest memorizing. This is the example that I use to explain very rapidly what it is. And it’s basically, I call it the slow elevator problem. You imagine that you are the owner of an office building, and that your tenants are complaining that the elevator’s slow.

Now, if you take that problem framing for granted, you’re going to start thinking creatively around how do we make the elevator faster. Do we install a new motor? Do we have to buy a new lift somewhere?

The thing is, though, if you ask people who actually work with facilities management, well, they’re going to have a different solution for you, which is put up a mirror next to the elevator. That’s what happens is, of course, that people go oh, I’m busy. I’m busy. I’m– oh, a mirror. Oh, that’s beautiful.

And then they forget time. What’s interesting about that example is that the idea with a mirror is actually a solution to a different problem than the one you first proposed. And so, the whole idea here is once you get good at using reframing, you can quickly identify other aspects of the problem that might be much better to try to solve than the original one you found. It’s not necessarily that the first one is wrong. It’s just that there might be better problems out there to attack that we can, means we can do things much faster, cheaper, or better.

SARAH GREEN CARMICHAEL: So, in that example, I can understand how A, it’s probably expensive to make the elevator faster, so it’s much cheaper just to put up a mirror. And B, maybe the real problem people are actually feeling, even though they’re not articulating it right, is like, I hate waiting for the elevator. But if you let them sort of fix their hair or check their teeth, they’re suddenly distracted and don’t notice.

But if you have, this is sort of a pedestrian example, but say you have a roommate or a spouse who doesn’t clean up the kitchen. Facing that problem and not having your elegant solution already there to highlight the contrast between the perceived problem and the real problem, how would you take a problem like that and attack it using this method so that you can see what some of the other options might be?

THOMAS WEDELL-WEDELLSBORG: Right. So, I mean, let’s say it’s you who have that problem. I would go in and say, first of all, what would you say the problem is? Like, if you were to describe your view of the problem, what would that be?

SARAH GREEN CARMICHAEL: I hate cleaning the kitchen, and I want someone else to clean it up.

THOMAS WEDELL-WEDELLSBORG: OK. So, my first observation, you know, that somebody else might not necessarily be your spouse. So, already there, there’s an inbuilt assumption in your question around oh, it has to be my husband who does the cleaning. So, it might actually be worth, already there to say, is that really the only problem you have? That you hate cleaning the kitchen, and you want to avoid it? Or might there be something around, as well, getting a better relationship in terms of how you solve problems in general or establishing a better way to handle small problems when dealing with your spouse?

SARAH GREEN CARMICHAEL: Or maybe, now that I’m thinking that, maybe the problem is that you just can’t find the stuff in the kitchen when you need to find it.

THOMAS WEDELL-WEDELLSBORG: Right, and so that’s an example of a reframing, that actually why is it a problem that the kitchen is not clean? Is it only because you hate the act of cleaning, or does it actually mean that it just takes you a lot longer and gets a lot messier to actually use the kitchen, which is a different problem. The way you describe this problem now, is there anything that’s missing from that description?

SARAH GREEN CARMICHAEL: That is a really good question.

THOMAS WEDELL-WEDELLSBORG: Other, basically asking other factors that we are not talking about right now, and I say those because people tend to, when given a problem, they tend to delve deeper into the detail. What often is missing is actually an element outside of the initial description of the problem that might be really relevant to what’s going on. Like, why does the kitchen get messy in the first place? Is it something about the way you use it or your cooking habits? Is it because the neighbor’s kids, kind of, use it all the time?

There might, very often, there might be issues that you’re not really thinking about when you first describe the problem that actually has a big effect on it.

SARAH GREEN CARMICHAEL: I think at this point it would be helpful to maybe get another business example, and I’m wondering if you could tell us the story of the dog adoption problem.

THOMAS WEDELL-WEDELLSBORG: Yeah. This is a big problem in the US. If you work in the shelter industry, basically because dogs are so popular, more than 3 million dogs every year enter a shelter, and currently only about half of those actually find a new home and get adopted. And so, this is a problem that has persisted. It’s been, like, a structural problem for decades in this space. In the last three years, where people found new ways to address it.

So a woman called Lori Weise who runs a rescue organization in South LA, and she actually went in and challenged the very idea of what we were trying to do. She said, no, no. The problem we’re trying to solve is not about how to get more people to adopt dogs. It is about keeping the dogs with their first family so they never enter the shelter system in the first place.

In 2013, she started what’s called a Shelter Intervention Program that basically works like this. If a family comes and wants to hand over their dog, these are called owner surrenders. It’s about 30% of all dogs that come into a shelter. All they would do is go up and ask, if you could, would you like to keep your animal? And if they said yes, they would try to fix whatever helped them fix the problem, but that made them turn over this.

And sometimes that might be that they moved into a new building. The landlord required a deposit, and they simply didn’t have the money to put down a deposit. Or the dog might need a $10 rabies shot, but they didn’t know how to get access to a vet.

And so, by instigating that program, just in the first year, she took her, basically the amount of dollars they spent per animal they helped went from something like $85 down to around $60. Just an immediate impact, and her program now is being rolled out, is being supported by the ASPCA, which is one of the big animal welfare stations, and it’s being rolled out to various other places.

And I think what really struck me with that example was this was not dependent on having the internet. This was not, oh, we needed to have everybody mobile before we could come up with this. This, conceivably, we could have done 20 years ago. Only, it only happened when somebody, like in this case Lori, went in and actually rethought what the problem they were trying to solve was in the first place.

SARAH GREEN CARMICHAEL: So, what I also think is so interesting about that example is that when you talk about it, it doesn’t sound like the kind of thing that would have been thought of through other kinds of problem solving methods. There wasn’t necessarily an After Action Review or a 5 Whys exercise or a Six Sigma type intervention. I don’t want to throw those other methods under the bus, but how can you get such powerful results with such a very simple way of thinking about something?

THOMAS WEDELL-WEDELLSBORG: That was something that struck me as well. This, in a way, reframing and the idea of the problem diagnosis is important is something we’ve known for a long, long time. And we’ve actually have built some tools to help out. If you worked with us professionally, you are familiar with, like, Six Sigma, TRIZ, and so on. You mentioned 5 Whys. A root cause analysis is another one that a lot of people are familiar with.

Those are our good tools, and they’re definitely better than nothing. But what I notice when I work with the companies applying those was those tools tend to make you dig deeper into the first understanding of the problem we have. If it’s the elevator example, people start asking, well, is that the cable strength, or is the capacity of the elevator? That they kind of get caught by the details.

That, in a way, is a bad way to work on problems because it really assumes that there’s like a, you can almost hear it, a root cause. That you have to dig down and find the one true problem, and everything else was just symptoms. That’s a bad way to think about problems because problems tend to be multicausal.

There tend to be lots of causes or levers you can potentially press to address a problem. And if you think there’s only one, if that’s the right problem, that’s actually a dangerous way. And so I think that’s why, that this is a method I’ve worked with over the last five years, trying to basically refine how to make people better at this, and the key tends to be this thing about shifting out and saying, is there a totally different way of thinking about the problem versus getting too caught up in the mechanistic details of what happens.

SARAH GREEN CARMICHAEL: What about experimentation? Because that’s another method that’s become really popular with the rise of Lean Startup and lots of other innovation methodologies. Why wouldn’t it have worked to, say, experiment with many different types of fixing the dog adoption problem, and then just pick the one that works the best?

THOMAS WEDELL-WEDELLSBORG: You could say in the dog space, that’s what’s been going on. I mean, there is, in this industry and a lot of, it’s largely volunteer driven. People have experimented, and they found different ways of trying to cope. And that has definitely made the problem better. So, I wouldn’t say that experimentation is bad, quite the contrary. Rapid prototyping, quickly putting something out into the world and learning from it, that’s a fantastic way to learn more and to move forward.

My point is, though, that I feel we’ve come to rely too much on that. There’s like, if you look at the start up space, the wisdom is now just to put something quickly into the market, and then if it doesn’t work, pivot and just do more stuff. What reframing really is, I think of it as the cognitive counterpoint to prototyping. So, this is really a way of seeing very quickly, like not just working on the solution, but also working on our understanding of the problem and trying to see is there a different way to think about that.

If you only stick with experimentation, again, you tend to sometimes stay too much in the same space trying minute variations of something instead of taking a step back and saying, wait a minute. What is this telling us about what the real issue is?

SARAH GREEN CARMICHAEL: So, to go back to something that we touched on earlier, when we were talking about the completely hypothetical example of a spouse who does not clean the kitchen–

THOMAS WEDELL-WEDELLSBORG: Completely, completely hypothetical.

SARAH GREEN CARMICHAEL: Yes. For the record, my husband is a great kitchen cleaner.

You started asking me some questions that I could see immediately were helping me rethink that problem. Is that kind of the key, just having a checklist of questions to ask yourself? How do you really start to put this into practice?

THOMAS WEDELL-WEDELLSBORG: I think there are two steps in that. The first one is just to make yourself better at the method. Yes, you should kind of work with a checklist. In the article, I kind of outlined seven practices that you can use to do this.

But importantly, I would say you have to consider that as, basically, a set of training wheels. I think there’s a big, big danger in getting caught in a checklist. This is something I work with.

My co-author Paddy Miller, it’s one of his insights. That if you start giving people a checklist for things like this, they start following it. And that’s actually a problem, because what you really want them to do is start challenging their thinking.

So the way to handle this is to get some practice using it. Do use the checklist initially, but then try to step away from it and try to see if you can organically make– it’s almost a habit of mind. When you run into a colleague in the hallway and she has a problem and you have five minutes, like, delving in and just starting asking some of those questions and using your intuition to say, wait, how is she talking about this problem? And is there a question or two I can ask her about the problem that can help her rethink it?

SARAH GREEN CARMICHAEL: Well, that is also just a very different approach, because I think in that situation, most of us can’t go 30 seconds without jumping in and offering solutions.

THOMAS WEDELL-WEDELLSBORG: Very true. The drive toward solutions is very strong. And to be clear, I mean, there’s nothing wrong with that if the solutions work. So, many problems are just solved by oh, you know, oh, here’s the way to do that. Great.

But this is really a powerful method for those problems where either it’s something we’ve been banging our heads against tons of times without making progress, or when you need to come up with a really creative solution. When you’re facing a competitor with a much bigger budget, and you know, if you solve the same problem later, you’re not going to win. So, that basic idea of taking that approach to problems can often help you move forward in a different way than just like, oh, I have a solution.

I would say there’s also, there’s some interesting psychological stuff going on, right? Where you may have tried this, but if somebody tries to serve up a solution to a problem I have, I’m often resistant towards them. Kind if like, no, no, no, no, no, no. That solution is not going to work in my world. Whereas if you get them to discuss and analyze what the problem really is, you might actually dig something up.

Let’s go back to the kitchen example. One powerful question is just to say, what’s your own part in creating this problem? It’s very often, like, people, they describe problems as if it’s something that’s inflicted upon them from the external world, and they are innocent bystanders in that.

SARAH GREEN CARMICHAEL: Right, or crazy customers with unreasonable demands.

THOMAS WEDELL-WEDELLSBORG: Exactly, right. I don’t think I’ve ever met an agency or consultancy that didn’t, like, gossip about their customers. Oh, my god, they’re horrible. That, you know, classic thing, why don’t they want to take more risk? Well, risk is bad.

It’s their business that’s on the line, not the consultancy’s, right? So, absolutely, that’s one of the things when you step into a different mindset and kind of, wait. Oh yeah, maybe I actually am part of creating this problem in a sense, as well. That tends to open some new doors for you to move forward, in a way, with stuff that you may have been struggling with for years.

SARAH GREEN CARMICHAEL: So, we’ve surfaced a couple of questions that are useful. I’m curious to know, what are some of the other questions that you find yourself asking in these situations, given that you have made this sort of mental habit that you do? What are the questions that people seem to find really useful?

THOMAS WEDELL-WEDELLSBORG: One easy one is just to ask if there are any positive exceptions to the problem. So, was there day where your kitchen was actually spotlessly clean? And then asking, what was different about that day? Like, what happened there that didn’t happen the other days? That can very often point people towards a factor that they hadn’t considered previously.

SARAH GREEN CARMICHAEL: We got take-out.

THOMAS WEDELL-WEDELLSBORG: S,o that is your solution. Take-out from [INAUDIBLE]. That might have other problems.

Another good question, and this is a little bit more high level. It’s actually more making an observation about labeling how that person thinks about the problem. And what I mean with that is, we have problem categories in our head. So, if I say, let’s say that you describe a problem to me and say, well, we have a really great product and are, it’s much better than our previous product, but people aren’t buying it. I think we need to put more marketing dollars into this.

Now you can go in and say, that’s interesting. This sounds like you’re thinking of this as a communications problem. Is there a different way of thinking about that? Because you can almost tell how, when the second you say communications, there are some ideas about how do you solve a communications problem. Typically with more communication.

And what you might do is go in and suggest, well, have you considered that it might be, say, an incentive problem? Are there incentives on behalf of the purchasing manager at your clients that are obstructing you? Might there be incentive issues with your own sales force that makes them want to sell the old product instead of the new one?

So literally, just identifying what type of problem does this person think about, and is there different potential way of thinking about it? Might it be an emotional problem, a timing problem, an expectations management problem? Thinking about what label of what type of problem that person is kind of thinking as it of.

SARAH GREEN CARMICHAEL: That’s really interesting, too, because I think so many of us get requests for advice that we’re really not qualified to give. So, maybe the next time that happens, instead of muddying my way through, I will just ask some of those questions that we talked about instead.

THOMAS WEDELL-WEDELLSBORG: That sounds like a good idea.

SARAH GREEN CARMICHAEL: So, Thomas, this has really helped me reframe the way I think about a couple of problems in my own life, and I’m just wondering. I know you do this professionally, but is there a problem in your life that thinking this way has helped you solve?

THOMAS WEDELL-WEDELLSBORG: I’ve, of course, I’ve been swallowing my own medicine on this, too, and I think I have, well, maybe two different examples, and in one case somebody else did the reframing for me. But in one case, when I was younger, I often kind of struggled a little bit. I mean, this is my teenage years, kind of hanging out with my parents. I thought they were pretty annoying people. That’s not really fair, because they’re quite wonderful, but that’s what life is when you’re a teenager.

And one of the things that struck me, suddenly, and this was kind of the positive exception was, there was actually an evening where we really had a good time, and there wasn’t a conflict. And the core thing was, I wasn’t just seeing them in their old house where I grew up. It was, actually, we were at a restaurant. And it suddenly struck me that so much of the sometimes, kind of, a little bit, you love them but they’re annoying kind of dynamic, is tied to the place, is tied to the setting you are in.

And of course, if– you know, I live abroad now, if I visit my parents and I stay in my old bedroom, you know, my mother comes in and wants to wake me up in the morning. Stuff like that, right? And it just struck me so, so clearly that it’s– when I change this setting, if I go out and have dinner with them at a different place, that the dynamic, just that dynamic disappears.

SARAH GREEN CARMICHAEL: Well, Thomas, this has been really, really helpful. Thank you for talking with me today.

THOMAS WEDELL-WEDELLSBORG: Thank you, Sarah.  

HANNAH BATES: That was Thomas Wedell-Wedellsborg in conversation with Sarah Green Carmichael on the HBR IdeaCast. He’s an expert in problem solving and innovation, and he’s the author of the book, What’s Your Problem?: To Solve Your Toughest Problems, Change the Problems You Solve .

We’ll be back next Wednesday with another hand-picked conversation about leadership from the Harvard Business Review. If you found this episode helpful, share it with your friends and colleagues, and follow our show on Apple Podcasts, Spotify, or wherever you get your podcasts. While you’re there, be sure to leave us a review.

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This episode was produced by Anne Saini, and me, Hannah Bates. Ian Fox is our editor. Music by Coma Media. Special thanks to Maureen Hoch, Adi Ignatius, Karen Player, Ramsey Khabbaz, Nicole Smith, Anne Bartholomew, and you – our listener.

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