By providing a universal interface, our Pepper software makes it easy to connect POS terminals to your cash register software.
18 November 2022
In a financial context «reconciliation» means matching – that much is clear. You can of course match all sorts of things though. In this article we define the term payment reconciliation/matching, explain what it means for your company, highlight the different types of payment matching (especially electronic payment matching) and clarify the differences between balance matching and transaction-accurate matching.
You’ll also learn how your company could make payment matching much simpler – saving you time and valuable resources in the process.
In principle there are very different forms of reconciliation. One well-known example is inventory: this is when the actual stock is compared to the accounting department’s stock list.
When we’re matching payment data we call it payment matching or reconciliation. In this article, we’re focusing on this payment matching (reconciliation).
With debtor matching, a company checks whether incoming payments match the invoices sent to debtors. With creditor matching it’s the reverse: a company is checking whether all invoices have been assigned to service providers and marked as outgoings. The outgoing and incoming amounts must match the amounts on the invoice exactly.
The obvious reason for differences during creditor or debtor matching is invoices that have not been paid or not paid in full. Inconsistencies with the exchange rate can also cause discrepancies, however, which have to be reconciled.
This means checking whether the accounting department’s cash account matches the actual amount of cash in the tills. Inconsistencies can arise quickly here, if customers have been given too much or too little change, for example.
Payment reconciliation is used for two different things: on the one hand, it is used in the sense of a control to check incoming payment flows and identify any discrepancies between the company’s own sales data (tracked by the tills or the webshop) and the data from external service providers (e.g. acquirer banks).
There is also a legal reason for payment reconciliation, however: all your company’s accounts (credit and debit) have to be reconciled for reliable annual accounts.
Payment reconciliation is both a commercial and a legal obligation for companies. At the same time, it also takes up a lot of time and personnel, because matching payment data meticulously is a laborious task.
According to a study by PWC, reconciliation ties up 25 % of the resources in finance departments. 40 % of the total manual workload could be automated, freeing up the personnel for value-adding activities.
So it quickly becomes obvious why minimising the workload for payment reconciliation is an important strategic issue: companies can free up their employees, avoid human or technical errors – and save thousands of hours of work in the long term with intelligent automation solutions.
Strictly speaking, electronic payment reconciliation is a form of debtor matching , which affects retail companies in the consumer sector in particular. In this instance, the debtors are the payment service providers or the acquirers. Here, data for all electronic payments tracked by the tills is matched to data tracked and listed by the respective acquiring network. In short, you’re checking whether the data from different sources matches.
Electronic payment reconciliation presents companies with particular challenges due to its complexity. The amount of coordination required is often correspondingly high.
It’s not just about checking that all the transactions listed by the acquirer have actually reached the company’s own bank account. You’re also checking whether electronic sales, which were registered at the tills or in the webshop, match the payouts from the acquirer. It’s entirely possible for sales payments to be missing completely.
One reason for the complexity in electronic payment reconciliation is the time difference between the payments being made and the actual payments reaching the account.
Then there’s the fact that some payment providers work with collective transfers: this is when amounts for sales are collated within a certain period and transferred as one sum. The fees charged by payment providers also have to be taken into account with electronic payment reconciliation.
If a company has a multi-acquirer strategy, electronic payment reconciliation is even more complicated, because then different fee models, different transfer times and transfer methods all have to be matched. In these cases at the very least, intelligent software can substantially reduce the matching workload.
Andreas Weishäupl, Deputy Head Group Treasury
In electronic payment reconciliation we differentiate between balance matching and transaction-accurate matching.
Balance matching means comparing the sums of different transactions – per day, per means of payment or per branch, for example.
The advantage here is that the matching workload can be substantially reduced. The disadvantage of balance matching is the lack of accuracy. Even if the balance matches when checked, you can’t be sure that all the individual transactions match.
It becomes truly problematic if the balances don’t match. That’s when the laborious searching for the cause of the differences begins. The advantage of the reduced workload also vanishes at this point.
With transaction-accurate matching, all the transactions are matched individually.
One advantage is that you get an exact overview of all payment flows (keyword cashflow). You can also identify any discrepancies straight away, because you can see what the till has tracked and what the acquirer network has recorded for each transaction.
The disadvantage compared to balance matching is the high workload if the electronic payments are matched manually. Luckily, there is software that automates this process, such as Matchbox from treibauf.
When time saved becomes time lost: The only alternative is to search painstakingly and time-consumingly for the cause of the differences. This can quickly turn into the proverbial search for a needle in a haystack.
Greater transparency means greater security: Transaction-accurate matching also offers companies far greater transparency over their own financial flows. This substantially reduces the risk of internal fraud. Quite simply because discrepancies are identified much more quickly.
Legal obligation: proving the source of funds: Providing exact proof of the source of funds is an obligation under accounting and tax law. Only transaction-accurate matching can provide this exact proof. In the case of balance matching, companies are not able to prove individual gains, which may have legal consequences for the company.
Andreas Grossenbacher, Executive Director & Melanie Wettstein, Senior Manager
As explained above, electronic payment reconciliation causes a particularly high workload for several reasons. If you want to use transaction-accurate matching on top of that, the workload for manual matching would be enormous.
The solution to this dilemma? Smart software solutions that automate electronic payment reconciliation – thus saving hours of work per month. Matchbox from treibauf is one such software for electronic payment reconciliation, which also facilitates analysis and control over electronic payments thanks to its integrated Payment Analytics Center.
Wolfgang Mähr, Head of IT, SPAR Gruppe Schweiz
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