Handling and keeping records of revenue and investments is an essential procedure for online businesses. Often upgraded and well-managed payments assist businesses in taking the right steps ahead. So, a robust payment reconciliation procedure is the best method to assure the good financial fitness of your company.
Now the question arises, what is payment reconciliation, and how it can help your online business? And this is the topic for today to concentrate on. In this article, we will discuss all the primary factors of payment reconciliation. To clear the concept of payment reconciliation, let’s dive into the article.
What is Payment Reconciliation?
Payment reconciliation is a sort of analysis procedure that assures the validation of online payments in an online business. We can also say that it ensures the timely update and correctness of every transaction from the balance sheet to the bank statement. Every firm handles more than one online transaction around several associates and touchpoints. With numerous gambling payment gateways into function, management, and tracking of every single dollar that your account receives or spends from the account is significant.
The reconciliation procedure assists businesses in interconnecting two various data management. With the help of payment reconciliation, your firm can assure that the complete amount of funds or received amounts relate to the net revenue amount. There is one more definition of payment reconciliation i.e., it is a sort of bookkeeping and comprises the matching of financial transactions. Moreover, these are internally associated with bank statements and managed by accounting systems.
The primary objective of a reconciliation procedure is to manage your business transactions’ accuracy. There is the best example of a payment reconciliation that after arriving at your business’s bank statement, this specific system matches transactions and revenue with each other.
The main reason behind this comparison is to determine if the records match or not. If you find any sort of difference, it indicates hidden or unregistered payments. Such types of payments must be managed in your business’s accounts as soon as possible.
What is the difference Between Payment Reconciliation And Funds Settlement?
There is a specific settlement system or cycle for every payment gateway. The settlement cycle is the time duration of transmitting funds in the business bank account. When a customer performs the payment via payment gateway, through any eWallet, funds will transfer to the merchant’s bank account. Hence, settlement implies the crediting of funds by payment gateway to the international merchant account. Imagine you have an eCommerce business, and the customer bought your product or service via eWallets. So, the transmission of funds into your bank account signifies the “Payment Settlement.”
If we talk about payment reconciliation, it is a different procedure than the payment settlement process. After the completion of payment settlement, the process of payment reconciliation comes forward. We can also define payment reconciliation as the procedure of analyzing business payments. If payment records are associated, your business management system looks accurate and timely upgraded.
On the other side, if any payment doesn’t fit with the complete revenue. Then it directly implies that there is something suspicious with the records. In most situations, it is because of improper management or issues in the transaction records. These issues should be detected and fixed as soon as possible.
Why Does Your Business Require Payment Reconciliation Regularly?
Payment reconciliation is a vital procedure that ensures that the funds received or spent completely fit in the final record of all processed transactions. Reconciliation payments are an essential measure for your online businesses because it is a possibility to identify fraudulent activities and fix issues in final payment records.
The reconciliation procedure must conduct at regular breaks, i.e, weekly, quarterly, or monthly. However, it is similar to the standard accounting methods. But why should your business need to conduct payment reconciliation frequently?
So, these are some primary reasons why your online business needs frequent reconciliation of payments.
- All hidden frauds or scams can be recognized and prevented instantly.
- It enables businesses in specifying all abnormalities like similar records, issues in data records, etc.
- It is an amazing method to verify that the banking statement corresponds to the financial record.
- You will get a rendering of the right tax returns, and your online business conforms to transactions regularly.
- The payment reconciliation procedure frequently controls users or fraudsters from cheating on your business platform.
- You will also get assistance in finding the invoices and bills that are due and for how long.
- This procedure will let you know all the details about any unauthorized transaction performed on your business’s account.
- Reconciliation of payments frequently supports you in maintaining transactions and preparing accurate records at the end.
Which factors made the Payment Reconciliation Procedure Complicated?
As your online business develops and expands globally, there are some complications for the transaction management team to execute the payment reconciliation properly. There are multiple reasons behind these complications, such as:
Numerous payment associates
As your online business expands, many additional payment associates get involved in your business. However, all payment associates have various transaction reporting strategies, settlements cycles, etc. So, the data management procedure is a complicated and time-taking method.
Increased size of Files
Execution of payment with numerous increased sizes of files takes much time and wastes numerous dedicated resources. And this led to the risk of manual issues and makes the reconciliation procedure more complicated.
Schedule of Refunds
Refunds are basically organized on various dates instead of when the actual payment is conducted. So, this can drive the reconciliation procedure complicatedly because it makes the matching of payments tough for the transactions management team.
Conclusion
The payment reconciliation procedure assists your business in decreasing payment record issues and drives your transactions management accurately. Furthermore, it also allows you to specify the misuse of funds without your knowledge. However, it is a highly secure procedure that will facilitate your account management activities.
