No matter what the size of your business, payment reconciliation is one of the main problems within accounting that takes their lives. Let’s find out why it’s important for your company and look at the basic challenges associated with this internal control approach.
What is payment reconciliation and why is it so important?
The reconciliation process begins with the files sent from the recipients to the vendors, containing all the processed transactions and costs incurred in each transfer. Subsequently, accountants use these files to match company bank statements and/or transaction records.
Reconciliation is an important part of the reporting cycle, provides a complete picture of your business's cash flow, helps you identify inconsistencies, and is a key indicator of a company's financial integrity. Overall, it is important for accurate, cost-effective, fast, and cost-effective reporting and business planning.
Did you get all your money?
Before starting a reconciliation it is important to first make sure that the reconciliation files you have received from your bank are free of errors. This includes making sure that the bank does not make mistakes and that all your money is paid. This first step is particularly important for service providers and e-commerce companies working with digital assets, as the lack of tangible assets makes it difficult to ensure that the prices obtained are the same as the services provided. In particular, if you do not have thorough payment knowledge or full visibility of all transactions, you need to be aware that errors can occur. Therefore, it is important to make sure that you have a good view of the payments made, which can be obtained by having gate technology that removes mistakes that other parties could not make.
Why is payment reconciliation so challenging?
Once you have verified that the money you have received is the same as opposing the services you have provided, you can proceed with the reconciliation process. At first glance, payment reconciliation may seem like a straightforward process, but in reality, the process brings many challenges for accountants and analysts. In fact, for small firms reconciliation is one of the three most demanding jobs and time, and for large organizations, this is the fifth most difficult task. These challenges stem from having multiple recipients, different time frames for payment methods, various file formats, and refunds.
Now let's look at all the issues listed above and how you can overcome them.
Read More: Why E-commerce Sellers Need Viable Payment Reconciliation?
Multiple receivers, time file formats
Use multiple acquisitions is a common practice for small and medium-sized businesses. There are a variety of benefits associated with having more profitable relationships, such as holding cassettes, durability, reduced costs, and many other benefits. However, most beneficiaries have different billing and accommodation structures and while a smart approach can help to allocate money more efficiently, this basic structure makes reconciliation easier.
In addition, different receivers have different systems for sending recovery files, for example through APIs, SFTP, or email, and all of these files arrive at different times, depending on payment methods. For example, Reconciliation files based on iDeal and Giropay usually arrive within a few days, while credit card transaction files arrive weekly or weekly. Finally, files are often exported in various formats such as Excel, CSV, PDF, or Text, which is another tedious task for file converting vendors. Reconciliation files come at different times and times, making reconciliation time-consuming and compact.
Refunds and Rebates
In the era of digital transactions, consumers appreciate instant repayments and that is why businesses recognize the value of timely returns to support their customer value proposition. However, reimbursement and refunds also add another layer of difficulty to the refund, as speeding up the refund without prior repayment can significantly increase the financial risk of the company. For example, fraudulent transactions or payments that have not been made in advance can cause serious losses and may require considerable effort to resolve. In addition, refunds and refunds cause confusion between bank statements and reconciliation files, which the finance department has yet to arrange.
How can you benefit from a payment reconciliation system?
The automated payment reconciliation system will help merchants track their payments across all orders received. This saves traders the idea that they have to manually sync everything in the spreadsheet, increases efficiency, and gives the seller a better understanding of his financial data. The standard e-commerce reconciliation system can track various payments and business deductions, here are examples: overpaying shipments, overpayment payments, lost inventory without refund, packet payment charges, etc.
Conclusion
In conclusion, it is important to first make sure that the reconciliation files are error-free and that you collect all your money. The process itself has many challenges and a high degree of automation can make the process more efficient. Therefore, the first person needs an easy way to collect all the files from different receivers and payment methods in one place. After that, one has to use the standard format for converting and merging all scattered files into one file. This file can now be used by accountants for reconciliation.
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