What is payment reconciliation?
Payment Reconciliation is an accounting process that verifies account ratings to ensure that all records are accurate, consistent, and up-to-date. Businesses can sync their accounts daily, weekly, or monthly. It is good to do it as often as possible (once a week), but if that does not happen, you should aim to do it at least once a month.
Variation is rare, and most are harmless. Payment time, deposits, and pending transactions can affect the bottom lines in bank accounts. However, entities can use the payment reconciliation process to detect and avoid balance errors, identify fraud, track failed payments, and chase late invoices.
How does the reconciliation process work?
The reconciliation process proceeds in two stages: internal and external.
First, inside. An entity records the transaction - such as a payment or payment - in its accounting software, spreadsheet, or its record-keeping system. Businesses can also save receipts, invoices, and billing papers (although this method may fall into human error).
Second, external. The bank is recording the transaction as it processes. Then make the statement available to the business, explaining important details such as the payer, the payer, the amount, date, and method of payment.
Finally, internal and external records are merged. The business evaluates whether the internal and external function is the same. In other words, the total income and expenses according to internal records should be equal to the total income and expenses according to the bank.
If the figures are not the same, the business may investigate the cause of the fluctuations. In most cases, internal errors. But in some rare cases, the bank is at fault.
Why does your business need to sync transactions regularly?
Reconciliation is not just another thing on your to-do list; the most important process that protects your business maintains consistency and benefits your financial flow.
Here are three benefits of payment reconciliation:
Reconciliation discloses errors and unauthorized payments
Reconciliation keeps you in line with your business finances. By comparing internal and external records, you can catch errors faster than before, ensuring faster adjustment and improved cash flow. In addition, you may see unauthorized payments or security breaches in your bank account.
Reconciliation helps you to reject unpaid or late invoices
You have sent an invoice, but you have not received any money as a refund - a common practice for large and small businesses. By regularly syncing your accounts, you can be sure that every missed or late invoice is tracked and resolved.
Reconciliation ensures that your business's financial records are accurate
Without accurate financial records, you cannot go beyond your business's health, make informed business decisions, or easily disclose your financial status to banks, investors, and lenders.
Also, some industries and sectors are considered in terms of needs and record keeping. In these cases, accuracy is important in ultimately keeping up with and protecting your business from structures.
Common pitfalls of reconciliation
Even with the best of intentions, the following traps could be your reconciliation with Achilles' heel:
You are always refusing to pay late, which means your internal and external accounts are not compatible with the original. This is a complex process of reconciliation and leads to injustice;
You do not know what customers, clients, or vendors have and do not pay, which means you cannot pinpoint the cause of this discrepancy;
You do not have a single source of truth. Instead, you skip between programs and spreadsheets, aiming to merge merged captions;
You do not always sync your accounts. When you finally sit down to it, you get frustrated with the number of things you have to deal with.
Read More: Understand Procedure of Flipkart Payment Reconciliation
Payment reconciliation is the best way
Reconciliation is an accounting process that should contribute - without interruption - to the profitability of your business. Here are two good tips you can follow to sync your accounts with a little extra money to raise money:
Best practice # 1: High frequency is important
Don't wait until the end of the financial year to sync your accounts. At that point, you'll have plenty of statement trucks to drive. Instead, do it once a week. If that does not happen, try returning at least once or twice a month.
Best practice # 2: Change your reconciliation
Manual processes are subject to personal error, and if members of your team approach reconciliation in a variety of ways, it will lead to inconsistencies.
A question to consider; Does any business have time to sync accounts every week? Default process. The distribution of reliable money is the key to unlocking huge profits and financial growth. And with automation, you can cut the price of payment management, too.
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