Reconciliation in Business: A Must-Know Guide
Not sure what reconciliation means or why it matters to your business? Then you’ve come to the right place.
In this article, we’re going to talk about what reconciliation is, the different types that exist, how it can help you, and more.
Interested? Okay, let’s get started!
What is reconciliation?
Before we go further, let’s talk about what reconciliation in a business context means.
In a nutshell, reconciliation is the process of going over your internal business transactions over the span of a given time and comparing them to external transactions to see if there are differences between the two.
This task is incredibly important.
Because it helps you keep track of what your financial position is. And if there are unexplained discrepancies in your transactions, reconciliation will bring these to light so that you can get to the bottom of what’s going on.
Now, sometimes, discrepancies are nothing to worry about. For example, if you have variations in when payments get made, that may be the reason why your accounts don’t balance out perfectly.
But in other cases, discrepancies can be linked to a real problem, like fraud. That’s why keeping tabs on your transactions and making sure things balance out and make sense is crucial.
Okay, now that we’ve covered what reconciliation means, let’s go over the different kinds out there.
Different types of reconciliation
Here are the major types of reconciliation to know about:
- Bank Reconciliation
- Customer Reconciliation
- Vendor Reconciliation
- Intercompany Reconciliation
- Business-Specific Reconciliation
In each case, the goal is the same: To check that transaction records match. And if they don’t, that’s an opportunity to find out why.
How reconciliation can help your business
Alight, we’ve talked about a few benefits of reconciliation already, like preventing fraud and gaining clarity on your business’s financial position.
But there are a few other reasons to reconcile your transactions.
Let’s take a look:
From a business perspective, fraud isn’t the only issue that can throw a curveball in your operations. Sometimes, billing errors happen and go unnoticed because no one takes the time to double-check that transactions are correct. So, this is a big reason to reconcile your accounts.
Increase transparency and trust
Keeping close tabs on your accounts and having financial records that are in order can help you build trust with everyone you do business with. Consumers value transparency, so the benefits go both ways.
Avoid overdraft fees
No one likes getting charged extra for not having the necessary funds in their account. And as a business, you’re probably no different.
Here’s the good thing: If you keep track of your transactions, there’s no reason to have to deal with overdraft fees. This can save your business a lot of money, but it can also save you the stress of wondering whether you’ll get penalized or not.
By reconciling your transactions, you’ll know – without the guesswork.
Tips and tricks to get started
Alright, now let’s look at the basic steps to business reconciliation:
The first thing you want to do when reconciling your transactions is to gather any relevant information that will help you make accurate calculations. So, this can include bank statements, credit card statements, etc.
Once you’ve gathered the information you need, it’s time to compare your records to make sure they’re accurate. This step is crucial, but it can also take up a lot of time.
And if you try to do it manually, you can end up with more errors than when you started. Don’t worry, though – if you need help, we’re here to make this process a lot easier.
Make corrections if needed
In some cases, reconciliation won’t uncover anything that needs attention. But in others, it will, and it’s always best to know what’s going on in your accounts so that you can take action if necessary.
So, how often should you reconcile? Though you can check your transactions whenever, doing it at least once a month is a good idea. That’s because if you wait longer, it will be a lot more difficult to quickly address any issues that come up.
As we’ve explored, reconciliation is crucial for maintaining your business’s financial health, catching discrepancies, and ensuring transparency. While the process might seem intimidating, it’s a vital part of your business’s success. This is where Genius Avenue steps in. Using API-based technology, we can integrate with virtually any Benefit Admin, TPA, or billing system and help you reconcile payments in real time.
Reach out to us at Genius Avenue below, and let our expertise streamline your reconciliation process, allowing you to focus on growing your business.
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