What is Payment Reconciliation?

15.09.2022

There are probably hundreds of finance teams spending days and nights attempting to process payment reconciliation right now. With the increasing number of payment channels, business locations, and diverse cash inflows and outflows, the process of payment reconciliation is labor-intensive and prone to error when carried out manually. 

Every business needs to track its financial activities to achieve growth and operational efficiency. The best way to ensure the foundation of your financial operations is to maintain proper financial records by tracking every payment. On the topic of payment reconciliation, we’ll shed some light on the most critical areas to track and give you some tips for improving your organization’s financial status.

What does payment reconciliation stand for?

Reconciliation is a basic accounting process that ensures the identity and integrity of data between payment vendors and bank accounts. It allows you to quickly locate a discrepancy between two parameters and eliminate the possibility of error or fraud. As a rule, reconciliation is done at regular intervals, such as quarterly or monthly. It’s an essential part of the accounting process. 

For merchants and SMBs, the main goal of reconciling bank statements is to ensure that the individual’s or business’s recorded balance matches the recorded balance of the bank. Generally, the reconciliation process consists of the following steps:

  • Obtaining initial data, including internal and external records
  • Systematization of payment statements received and processed by multiple banks
  • Reviewing bank statements of completed transactions
  • Identifying payment mismatches and investigating the inconsistencies 

But reconciliation cannot provide 100% accuracy because the payment system cannot halt its operations. A payment hub may process up to 10,000 transactions depending on the size of your business. So for better accuracy, you can use automation tools to keep all your records under one roof. 

As a rule, reconciliation consists of two separate processes. The first is internal. It means that a company records every transaction that has been posted or scheduled. And for the second, external, the bank also keeps track of every transaction and activity. The statement of record enlists every transaction, including its details such as the costs, vendor, and payment method. 

During the process of reconciliation, you’ll need to match the internal and external activities. In case of any discrepancies, you can determine if the errors occurred internally or externally. 

Why do you need to reconcile your payments?

While it may seem like busy and redundant work, keeping accurate and concise records is one of the most critical factors that contribute to a merchant’s success. It’s easy to make an error, lose a receipt, or some technical faults may pop up. Here are some other reasons why you need to reconcile your bank statements:

  • Spot fraudulent activities. During transaction reconciliation, identifying frauds should be your first priority. If a third party has compromised your company account, reconciliation will flag the fraudulent activity and bullet-proof your earnings. 
  • Verify statements. It’s not only banks that can make mistakes. While reconciling bank statements, you can confirm that your financial statements match those of your bank(s). 
  • Reduce chargebacks and reclamations. While reconciling payments, you can verify payment status. For example, a payment may have a failed status in your system, while the payment status in the acquiring bank is marked as successful which may result in chargebacks and reclamations.
  • Data validation. This allows you to identify any mismatches and irregularities such as duplicated entries, etc. 
  • Tax reporting. Without reconciling your payments, you cannot generate a correct tax return. 
  • Verify all the chargebacks and refunds. While reconciling your payments, you can verify and estimate all the chargebacks and refunds that may influence the amount payable by your acquiring bank. 

All in all, reconciling payments can help you identify mismatches and unusual transactions that might be caused by errors or fraud. Note that it’s much easier to recall newer transactions than older ones. 

As a rule, payment reconciliation takes place more frequently than financial ones. With more frequent audits, the process will be streamlined and there will be fewer transactions to reconcile. You can set up an automatic schedule of payment reconciliations if the acquiring bank’s API allows it. Or you can manually export files with transactions from your acquiring bank. Moreover, you can run a payment reconciliation process after every transaction to verify its status. 

What happens if you don’t reconcile your bank statements?

If you don’t perform regular reconciliations, you run the risk of falling victim to unauthorized withdrawals, fraud, and bank errors. When left unchecked, these issues can lead to problems with the IRS and cash leaks resulting in damaged business operations and stunted growth. Not to mention that digital payments sometimes get declined. 

Moreover, the key goal of regular transaction checks is to identify fraud as early as possible since consumers are more protected under federal law than by a business. You cannot always rely on your banks to cover for errors or fraud in your account. 

How Akurateco helps with payment reconciliation 

Keeping all your information in one place can simplify payment monitoring and management. But not all payment solutions support cross-platform data sharing. That is why you need to check multiple apps, admin panels, and accounting and banking systems.

And if you aren’t ready to invest a six-figure cheque into developing your own payment system, you can find a payment service provider or white-label payment platform that already has this feature. 

With Akurateco, you can monitor and store all your data inside a unified system for easier payment reconciliations. The Akurateco system can reconcile everything you need under one roof while dividing financial and operational data. It’s a connectivity box that puts every merchant, their payment accounts, and banking data under one roof. 

Apart from superior connectivity, Akurateco also provides valuable insights into your customers such as payment habits, demographics, and transaction history. And you get all those features and more at a reasonable price. Moreover, you can schedule a free demo to find out if Akurateco is the right fit for your business. 

Simplified reconciliation 

Reconciling means verifying your internal financial records with bank statements. But the more transactions, merchants, and bank accounts you have, the more complicated the process can get. Without regular payment reconciliations, you won’t be able to identify unusual transactions caused by internal errors or fraud.

With Akurateco, you can verify all your transactions thanks to:

  • Keeping all the payment data under one roof
  • Looking at internal records against external financial records like bank statements (financial reconciliation)
  • Verifying payments according to your own schedule to find and resolve discrepancies
  • Running payment reconciliation automatically or manually 

At Akurateco, we’ve implemented all the features and technologies you need to streamline your payment and accounting issues. Thanks to top security standards and 15+ years of payment experience, we know how to protect our merchants, agents, and customers from fraudsters and hackers. Give Akurateco a try and simplify your business life!

Vladimir Kuiantsev

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