Revenue collection is a ride or die in a business. Keeping track of the expenditure and revenue are two integral processes that make a business. Well chronicled accounting practices ensure businesses are operating well and are heading towards growth. The only failproof way to safeguard the financial fitness of your business is by establishing a dynamic payment reconciliation detail. Payment reconciliation tactics have been in every industry since times immemorable. It is often considered to be extensive and never-ending but once you understand how it works wonders, you will integrate your business with payment reconciliation.
Payment reconciliation is a mode of record-keeping that compares and contrasts financial records that are housed within statements from the bank to make sure that the accounting is precise. When a statement from a bank arrives, the costs and payments are checked against each other to make sure everything tallies. Business owners who keep a track of everything always become successful in managing their business. It is like drawing a budget. You pen down all your expenses and analyze them at the end of the month and if the expenditure exceeds the budget, you strive to manage it more in the next month.
What is automatic payment reconciliation?
Bank reconciliation comprises the tallying of the information held in your bank account to the information held in your accounting records. Automatic payment reconciliation enables you to automate this pesky process. This empowers you to cut down the time, cost, and potential loopholes concerned with manual bank reconciliation.
In the long haul, automated payment reconciliation helps you reduce the financial risks your business may have. Bank reconciliation is a tedious process. It is labor-intensive, time-taking, and has room for significant errors. Whereas, Automated payment reconciliation, leaves no room for error in this integral process.
Is fully automating payment reconciliation possible?
You must be wondering about whether the complete automation of payment reconciliation is possible. A lot of payment reconciliation tools are optimized for complete automation, a large extent of manual labor is still required. Your accounting software may not be able to blend in with your business’ bank account. This means that you will be required to download the bank statement and upload it. Also, you will be required to enter a series of passwords throughout the process of reconciliation, which will further increase the amount of manual work needed by this ‘automated process’.
What is involved in the Payment Reconciliation Process?
Knowing about the components of the payment reconciliation process will give you clarity about how the process works and will help you understand the concept in and out. It is a multi-step process. The processes may differ for automated payment reconciliation and manual payment reconciliation. The four primary steps are as follows:
- Retrieving the internal records of your business: This comprises checking the transaction made in the name of your business and invoices, whether they are in your account software or in a spreadsheet. You are required to get these documents from their source and compare them to the external records.
- Procuring the external records: This includes retrieving your bank statements. They need to be prepared for review against your internal records.
- Tallying and reconciling: Start where you last left off and begin the manual or automated process of going through your internal as well as external records. Compare and contrast, and mark the irregularities or anomalies.
- See-through the anomalies: Investigate the irregularities and try to resolve them before moving towards closing the month-end.
Why is automated payment reconciliation beneficial for your business?
There are many benefits of automating your payment reconciliation process. Businesses that automate their payment reconciliation processes can have quicker month-end closes. They also achieve a higher degree of transparency. Automatic payment reconciliation can prove beneficial for your business in the following ways:
- It is time-saving: The biggest flex of automatic payment reconciliation is that it saves precious time. The process is seen through fast and is made less arduous. All the expenditures and receipts are tallied with the information held in your bank account.
After all the aspects such as balance sheet, capital and income, and cash flow are tallied, the process is declared successful. It is way faster than tallying all the components by hand.
- No room for errors: Automatic payment reconciliation is devoid of human errors that are usually infested in manual payment reconciliation. Additionally, not being able to detect a discrepancy increases the work and makes it tedious.
With manual reconciliation, several factors influence the month-end to get delayed. But with the kind of algorithm automatic payment reconciliation processes have, anomalies and errors are detected and resolved, resulting in a timely or even quicker month-end.
- Gives you confidence: Automated payment reconciliation provides you with an assurance that your accounts are accurate and coherent. Because of the accurate information, automated payment reconciliation offers a business, a business owner is able to keep precise records or expenditures and the money that comes in.
- Reduction of fraudulent practices: Since it is rapid and precise, automated payment reconciliation can help safeguard your business against fraud. Any anomalies and irregularities will be detected in a quick span of time and this makes it possible for them to be investigated without a delay. This way, even if fraud occurs, due to the timely detection, it will be contained and will prove less damaging to the business.
- Enhanced transparency and accountability: During the process of payment reconciliation, making use of automated technology will ensure that everyone is on the same page and see the process that is being made towards closing the month-end.
There is no need to manage separate interactive sessions for everyone involved in the process. This is beneficial for the operations that are conducted on a global level, or for organizations that have many entities. Everyone in the finance department will be provided with clarity and transparency.
Conclusion
Payment reconciliation is a significant part of financial management for any business. Automated payment reconciliation aims at making the lives of business owners easier with its demand-oriented nature and easy execution. When you are a business owner, manual work contributes to the unsatisfactory performance of your team. With automated payment reconciliation, you can boost the efficiency of your team and expand your business by meeting timely goals. Get an easy and secured payment method with Payomatix
