What is Payment Reconciliation?
Reconciliation in simple terms means matching your account balance with the statements of payment gateways & merchant’s account with all available transaction details. It is essential to reconcile all payment transactions with your bank accounts to keep track of the in & out-flow of expenses. To check the income & expenses.
The most trusted method to maintain the in & out income is the crosscheck method, which is also termed as payment reconciliation. After every transaction & payment, the bills & the payment received is cross verified to ensure that all finances are recorded correctly.
Why do We Need Payment Reconciliation?
In today’s competitive world, and the pandemic situation to succeed in the market & stay ahead of your competitors, you need to offer attractive deals & all payment methods to your customers. Getting paid fast with minimal risk is the ultimate goal to reach. A safe & secure payment gateway with appropriate payment methods can minimize the payment risk.
Being a merchant, payments can be initiated to your account from any number of sources and tracking each & every payment method is comparatively very difficult with manual means. Managing a large number of orders & invoices processed every day is very difficult. Any payment gateway through which the online payments are received transfers the amount in lump sum in the accounts without correlating with the original attributes. The receiver of the payment may not be able to identify the amount received against which invoice or bill number from which trader. For a successful business owner, it is not feasible to use multiple payment sources to collect payment. He needs a gateway which is connected with all payment methods & his payments are reconciled at one place.
Payments reconciliation for business owners is very frustrating, especially in case the payments are made via electronic methods with minimal information. This causes a serious liability issue for the merchants. This often leads to delay in month closing because of the discrepancies in the transactions which arises a risk of inaccurate revenue calculation.
Observing the current situation, business owners are looking for options to reduce overheads & manual processes. Therefore payment gateway integrated with ERP is the need of the hour. As an added advantage online secure payment gateway also helps you in tracking any transaction by going back in history.
How does Payment Reconciliation Process Work?
Reconciliation has two different methods. The first is internal. When a transaction through billing or payment has been posted or booked, the organization records this transaction. Records can be built up in various manners. Numerous organizations have bookkeeping programming where transactions can be entered and inconsistencies can deal with. Different techniques incorporate saving receipts and chits and keeping a track of billing paperwork, which has a huge chance of committing mistakes because physical paper can be easily misplaced. There is an option to keep up a spreadsheet of inbound and outbound cash.
The external method is when the transactions are processed; the payment records are recorded automatically. Every transaction is listed, and the company keeps a check on every transaction including billing, vendors, payment methods etc.
To reconcile the statements, the company’s internal & external transactions are matched. For any discrepancy found, the company needs to determine the error, if its internal or due to any external payment gateway.
Why is Payment Reconciliation Such a Big Challenge?
In general terms payment reconciliation seems like a simple & easy process, however in actual scenario the case is different. The accountants, distributors, retailers have to face many serious issues while reconciling the transactions. The reconciliation files are sent to the accountants to match against the bank statements.
In other words, it appears to be a relatively straightforward process, particularly as documents like invoices and purchase orders digitize, payments go electronic, and automation technology allows for quick, easy data matching.
Yet the reality is something different that is the reconciliation process is rarely ever straightforward. The ability for finance and accounting teams to capture transaction data across payment channels remains a challenge as information is stored across various portals. Many problems faced with reconciling the payment include multiple errors when done manually.
Payment received via different methods like Credit Card, Debit Card, Wallets, UPI etc.
Payment received against different bills at different times.
Payment received from different merchants.
Multiple file formats.
Other charges, etc.
What is The Need for Automating the Reconciliation Process?
In manual processes, chances of unexpected errors cannot be minimized. Also, the process is extremely tedious, time-consuming & prone to errors, especially with companies with large numbers of invoices & bills. It is very easy to miss over-or-under payments. Automation makes the process comparatively easier & secure.
Conclusion of Payment Reconciliation
Payments reconciliation can be simplified to a great extent by automating the tedious process by using a secure payment gateway. In order to make truly seamless payment reconciliation, you should go for a payment gateway which is integrated with ERP just like MargPay. It will help you cope up with the daily challenges in making your reconciliation effortless.