Best Practices in eCommerce Payment Reconciliation
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Payment reconciliation is the most challenging process for any company’s finance and accounting team, especially in the eCommerce industry. Payment reconciliation is increasingly difficult as more businesses shift to D2C and implement an omnichannel strategy. Companies must now have a clean, error-free reconciliation procedure to handle cash input and outflow.
Customers may now purchase from a company’s website or marketplaces due to digital development and the surge in eCommerce. Still, it’s stressful for finance teams as they have to manually assemble data from thousands of transactions across several channels, each with multiple ways of payment. eCommerce and D2C businesses confront the most challenging reconciliation procedure, and errors cost them a lot of money.
Let’s look at some of the best practices in the payment reconciliation process that businesses may use to make it simple and efficient.
Standardization of Process
Each organization does reconciliations on a weekly, monthly, or quarterly basis. Each time you reconcile your payments, you’ll go through the same stages: data extraction, compilation, recording, matching, and negotiating. Standardizing these activities is critical for financial teams to assure accuracy, eliminate discrepancies, and avoid mistakes.
It’s imperative to document the procedures involved in the reconciliation process and develop templates that can be readily followed by any new or current finance team member. Also, the templates should be reviewed regularly to correct gaps and look for ways to automate the procedures. These steps will help standardize the process.
Establishing Internal Controls
Regarding eCommerce payment reconciliation, it’s crucial to incorporate a series of internal checks that may detect and expose any possible difficulties, such as clerical errors. Internal controls can be included in the entire standardized process, depending on the type of your organization. These internal controls aid in risk mitigation, firm integrity, and the production of error-free financial statements consistently. It’s critical to advise every new team member on these controls via the accountants and have them teach their eCommerce account managers or sales team.
It takes a lot of time and effort to perform the reconciliation for the enormous volume of complicated transactions. Hence, organizations must embrace economic transformations and automate the reconciliation process to aid their F&A teams after standardizing the process. Most technologically sophisticated businesses are automating their standardized process by developing a triggered-based workflow to collect data in real-time from internal and external sources, combine it, and then analyze any differences.
Automated payment reconciliations save time and make the process simple and error-free for businesses. Since workflows are built on events and circumstances, these variables will inevitably alter as the company needs change or new technologies, sales channels, and other factors emerge. As a result, automated workflows, like process standardization, should be reviewed and changed regularly.
Analyze Key Performance Indicators
Payment reconciliation errors can result in bank statement disparities, putting businesses at risk of financial loss. As a result, most eCommerce retailers and direct-to-consumer firms concentrate on making the procedure quick and free of mistakes. However, whether the payment reconciliation process is automated or done manually, it can only be effective if it is reviewed regularly to see any gaps in the process or look for ways to enhance it.
Sellers and eCommerce managers should pay close attention to the average time necessary to complete the reconciliation process, the quality of reconciliations, and the number of inconsistencies detected in each reconciliation. These are critical key performance metrics. You can re-run the procedure in the loop until you get the best results once you’ve established the benchmarks. This study is crucial since it gives total visibility and identifies areas with scope for improvements.
The most challenging component of the reconciliation process is data analytics. During this stage, the majority of mistakes occur. The F&A team focuses on gathering, cleaning, and loading data instead of assessing the outcomes and ensuring that the financial statements are error-free, the F&A team focuses on gathering, cleaning, and loading data. However, service providers on the market may offer payment reconciliation solutions that are simple to implement. Technological solutions that may automatically import and generate transactional data from ERP systems or marketplaces are examples of such services.
It simply identifies the software solutions for eCommerce vendors and D2C businesses. These solutions include capabilities like transactional reporting at several levels and analysis of reconciliation procedures and processes, and data import and reconciliation. By providing access to automatic, updated, and thorough reporting on real-time expenditures and revenues, these solutions relieve the F&A department of stress. Specific applications can provide accurate, simple, and detailed reports immediately. Additionally, the data is updated directly from the sources, guaranteeing that sales and payment reconciliation are quick, fast, and painless. Pre-built ERP APIs that connect these solutions to ERP systems and marketplaces are all required.
The specific methods mentioned to make payment reconciliation procedures more efficient can only be implemented if firms teach and skill their personnel. Companies now understand that meaningful digital transformation requires the adoption of technology platforms and the change of workers. As a result, eCommerce merchants and direct-to-consumer businesses launch internal upskilling and reskilling projects. Members of the finance and accounting teams, in particular, must be taught to deploy and evaluate these automated and integrated solutions.
Payment reconciliation is a time-consuming operation. However, the six principles listed above may greatly aid finance and accounting teams in doing the work successfully. A well-designed payment reconciliation procedure will help companies avoid overdrafts, pay obnoxious fees to marketplaces, decrease risk, create financial statements quickly, and monitor economic patterns in cash inflows and outflows. The F&A staff may save time and focus on identifying and fixing recent errors by automating the reconciliation process or adopting a fully integrated solution.
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