Reconciling your customers invoices is an important step in your accounting process.
Not paying proper attention to this can not only cost your business revenue but also affect the relationship of those you do business with.
Shockingly, a large number of small businesses and SMEs skip this step. Whether you don’t understand the importance of reconciling or are just unsure how to do it you should make it a priority ASAP.
In this article, we will discuss ways to get on top of and drastically improve your reconciliation process.
What is invoice reconciliation?
Invoice reconciliation is the process of comparing two sets of records, in most cases your invoice and bank statements, and seeing if they match up.
In other words, you want to make sure your business was paid what it was owed by your customer.
Performing invoice reconciliation on an ongoing basis is essential. There are several events that can arise that call for invoice reconciliation. Such as;
- Late payment by your customer
- Duplicated invoices
- Misplaces invoices
- A delayed delivery of products to a customer causing a delayed payment
Once you clarify the issue, you can rectify the problem by correcting the issue.
How do you reconcile an invoice?
Reconciling your invoices is an important task to keep your accounting records up-to-date and avoid fraud.
Getting this information together and matching the invoice information to your bank statement keeps you on top of who and who hasn’t paid your bill.
Here are some key pointers to get this under control.
Not all business owners have the time, skillset or patience to manage these figures on a spreadsheet. Inputting data for your reconciliation takes up a lot of time and resources, so opting for a software solution is one of the best options.
With software like PencilPay, those hours of searching, checking off, and comparing statements are all taken away and hundreds of invoices can be reconciled in just one click.
Build the right process
If you are going to go down the manual path, building the right process is essential.
Spreadsheets and stacks of financial documents can take hours or even days to go through so this is something you want to get right.
Here are 5 quick steps to get you on your way;
- Organization; The first step in your reconciliation process is to organize all of your invoices. Sort them by customer name and date.
- Match; Go through each document and match each vendor statement with your invoices. Make sure what you received is reflected on the invoice.
- Mark off; While you are going through each line of your statements and invoices, check off the ones you have approved.
- Identify; place a circle around any inaccuracies you come across. Anything that is on the invoice that doesn’t appear on your bank statement, circle it and make note of this.
- Add; Finally, add up all the total invoices for that one customer and add up the amount on your bank statement to see if these totals match.
Reconciling now and as your business grows
Reconciliation doesn’t have to be a complex task. Using PencilPay can get hundreds of invoices reconciled for each one of your customers.
A slow manual process sometimes just isn’t worth the time but it is better than nothing. However, in a recent Australian study; 56% of small business owners did not have a reconciliation process in place.
This is shocking news. Meaning there are thousands of potential missing payments out there for suppliers.
If you’re interested in automating your reconciling process, book in a demo with the PencilPay team.