Everything You Need to Know About Merchant Reconciliation

17 March, 2023

With the advent of digital technology, the way payments are executed and processed has also transformed drastically. Today digital payment processing methods have become increasingly popular. Especially for business owners like you, digital payments have made your operations run more efficiently and quickly. However, an aspect of digital payments that are often overlooked in that of payment reconciliation. Continue reading to learn everything you must know about reconciling your payments.

What is Payment Reconciliation?

Payment reconciliation is a process wherein you can compare the financial records with bank statements to verify accurate accounting. It helps you cross-check account balances to ensure that all data about your business aligns and is up-to-date. Payment reconciliation involves keeping track of expenses and income earned via your business. It helps ensure that your business’s internal financial records align with any external bank or vendor statements.

You can also decide the time frame for which you would like to reconcile your accounts according to your preferences. You can do so daily, weekly, or monthly and make a head start on detecting fraud and discrepancies in your balance sheets.

What Is The Payment Reconciliation Process Like?

The payment reconciliation process takes place in two ways; external and internal.

• Internal reconciliation:
  
  With internal reconciliation, you must record a transaction, whether billing or payment, in various ways. You can use accounting software, payment gateway receipts, or maintain a spreadsheet. It is crucial to choose wisely while reconciling payments internally, as manual paperwork can prove risky. Thus, relying on alternative methods to maintain track of your cash flow can help you achieve accuracy and reduce room for error.
  
  

• External Reconciliation:
  
  When you process transactions using different payment methods, banks also simultaneously maintain records of the same. They pass on these bank records to your business through monthly statements. As a business owner, it falls upon you to cross-check your internal cash book with these bank statements to spot errors if detected. Ideally, the total amount debited and credited in your records should be the same as is reflecting in the bank statements.
  
  

What are the Benefits of Regular Payment Reconciliation?

As a business owner, regularly reconciling your payments can help you with the following:

• Detect errors and unauthorised transactions: Payment reconciliation helps you stay up to date with your business’ finances. This helps you spot errors at the right time and allows you to devise resolutions. You can also prevent financial loss by spotting unauthorised transactions and security breaches.

• Timely Payments: Payment reconciliation can help you avoid dealing with unpaid invoices and late payments. You can use this process to keep track of missed or late invoices and follow up to ensure timely settlements.

• Accurate financial records: With payment reconciliation, you can ensure that your financial records are in order. This practice helps you stay on top of your business’ financial health and make informed decisions.
  
  

Now that you know more about payment reconciliation you can adopt this practice to improve your business. We are aware of the role effective payment collection and invoice management plays in payment reconciliation and HDFC Bank has created a one-stop business growth solution - SmartHub Vyapar. With SmartHub Vyapar, you can collect payments via different modes and pay off suppliers and vendors on time. You can also grow your business digitally, access banking services, or easily avail of loans as and when you need it.

To Download SmartHub Vyapar App By HDFC Bank, Click Here.

To Read More About How To Pay Your Vendors, Click Here.

​​​​​​​*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. HDFC Bank SmartHub Vyapar is available to only Individual & Sole Proprietorship entity and for select Current Account variants only. For other entity types, please connect with the nearest branch.