To reconcile invoices can be tedious but it is time well invested. This practice will protect your business from fraudsters attempting to take advantage of lax processes on your end. No one wants to overpay for business overheads and everyone wants to be paid what they are owed by customers.
Double-check what you are paying and what are you being paid is important to every business, large and small. You can ensure that all payments are being made correctly by using the right methods to reconcile invoices.
This is the process of checking that the information on bank statements tallies with the invoices you have sent to clients and those sent to you for goods or services supplied. Most businesses do this monthly to help keep track of all invoices, both paid and unpaid.
It helps your business stay on top of cash flow while also ensuring there is nothing amiss such as balance sheet errors, or worse, that the company is being defrauded. Professionalizing your method to reconcile invoices becomes more important the larger and busier the business is.
As the volume of transactions grows, staying on top of who is owed what becomes much more important and badly set up reconciliation processes become far more prone to error.
Organizing and automating this process as far as possible will not only cut out the errors but also save you and your staff time by reducing the number of queries relating to payments from clients or to suppliers.
The power of software
You can reconcile invoices manually on printed statements is a tedious task and is more likely to introduce human error, which means you may miss out on payments owed to you from customers.
It can also lead to messy accounts, leaving you unsure where your business stands month to month and giving you poor visibility about the status of your cash position.
In the worst cases this can threaten the viability of a business. Accounting software, such as QuickBooks, not only takes out the legwork from this process, but also helps you spot problem areas quickly, speeding up the task of chasing stray payments.
Good software should match payments in and out of your business accounts with invoices more or less automatically so you should not need to do much data checking.
Establish the right processes
While software can take much of the strain, it also pays to develop the right administrative processes to complement your software’s capabilities. The first task is to organize invoices as they come in, usually by month, enabling you to run reports to show when payments are overdue.
Organizing supplier invoices into a common format is also vital to have a smooth and simple reconciliation process.
Suppliers are likely to have their own ways of labeling and formatting invoices, and you may have to ensure your system can understand the reference numbers and other key data of all suppliers and clients. Your software should be able to automate these processes.
Make a checklist
As part of the process, develop a checklist to help you quickly work through instances where you can’t reconcile the numbers. Checklist items could cover areas including the following:
- Did you offer a discount for early payment?
- Did a bank or other financial intermediary charge transfer or currency fees?
- Is the remaining balance going to be paid later?
- Has the supplier under- or over-charged?
- Has an amount been rolled over from a previous balance?
Visit the QuickBooks site to see how it can help you reconcile invoices quickly and easily.