Payment Reconciliation Definition
What is Payment Reconciliation?
Payment reconciliation is the process of comparing payments made to a company with the corresponding entries in the accounting records. This comparison is done to ensure that all payments have been correctly accounted for, and to identify any discrepancies.
Payment reconciliation is typically performed on a regular basis, such as monthly or quarterly. The frequency of payment reconciliation will depend on the volume of transactions and the level of risk involved. For example, companies with high volumes of transactions may reconcile daily, while those with lower volumes may only reconcile monthly.
When reconciling payments, businesses compare each payment made to their bank statements or other records of payments received. They then match these payments up with the corresponding entries in their accounting software. Any discrepancies between the two sets of records are then investigated and corrected.
Why is Payment Reconciliation Important?
Payment reconciliation is important because it helps businesses to avoid overpaying or underpaying their suppliers. It also helps businesses to identify any errors in their accounting records, which could lead to incorrect financial reports. Finally, payment reconciliation can help businesses to prevent fraud by ensuring that all payments have been properly accounted for.
