Reconciliation is a necessary part of business processes, linking accounting and bank statements, cash records, protecting the business from any potentially fraudulent transactions.
However, not many entrepreneurs feel that they can have the courage to make a bank reconciliation on their own. There are good reasons why they feel this way. Before the start of accounting applications, reconciliation meant comparing the volume of daily transactions with bank statements. It was almost impossible to complete everything at once, as paper records are easily lost and often difficult to replace.
What is account reconciliation and why do I need to do it?
Reconciliation is a large accounting process that compares financial records with an actual bank balance to ensure that the accounts are fully balanced. Alternatively, the reconciliation serves as a means of ensuring that the individual records and general book accounts are complete and completely accurate.
Most businesses prefer to do a monthly online payment reconciliation, however, some may choose to do so more often to address the inconsistencies and prevent fraud. In all, reconciliation needs to be done regularly. It usually depends on the type of business as reconciliation can be done daily, twice a week, monthly, quarterly, or annually. Regular statistical reviews will keep you up to date on the life of your business, allowing you to learn from the ideas it offers.
What are the main difficulties associated with payment reconciliation?
As more and more businesses begin to use cloud computing and their overall sales, many of the past issues are disappearing. You no longer need to keep shoeboxes full of paper receipts to track business expenses. New opportunities allow businesses to sell their products easily and reach a wider audience.
Read More: Know Process Of Payment Reconciliation For E-commerce Sellers
However, many challenges come with switching to e-commerce. Let's take a look at what makes reconciliation difficult for online businesses.
More channels
One would expect that reconciliation would end up being a problem, but other challenges arise from increased revenue. E-commerce businesses, in particular, can be difficult, due to the large number of channels they sell. All of these channels must be counted.
Platform fees
Another challenge linked to online marketing is that all the platforms you sell tend to charge you for their services.
At the end of the accounting period, you will need to be accountable for those amounts paid to payment providers. Otherwise, your income will be blocked at a high rate. Such differences will affect everything from business planning and collection orders to large items such as estimating the amount you owe.
Activity data
Another challenge is that to make an informed reconciliation, you need data. If you have questions about the legitimacy of a particular transaction, you need to be able to identify the customer (or seller) and the products or products in it.
The problem here is that even if your data is imported automatically, without a good solution most of it can get lost along the way, leaving you with empty numbers. This often makes it difficult to identify the source or features of the transaction in question.
Refunds
Another reason your bank balance may not be in line with financial records is that the refund may not be calculated correctly. Unfortunately, refunds are common in e-commerce, and it is important to record accurately.
It is important to record not only all sales and any possible refunds but also any payment platform work done on the refund.
Keep in mind that most retailers will not stop investing in the first transaction. Others will charge you extra for a refund. Everything needs to be properly recorded in your books.
Double-check
Many business experts conclude that handmade reconciliation is more expensive for business owners.
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