Invoice reconciliation is sorting each invoice and matching it with the corresponding bank statements so that each transaction can be traced.
An invoice is a legal document issued to record a sale transaction. It includes details of goods sold, quantity, rate, taxable value, etc. Invoicing generates a valid invoice and sends it to the customer to demand payment for goods sold or services provided.
Whereas reconciliation is a process where two records are compared to clear the differences between them. Reconciliation helps to keep track of each transaction regularly.
In accounting, reconciliation is when two sets of records are matched to ensure that they agree with each other. Invoice reconciliation involves matching bank statements with the incoming and outgoing invoices to ensure that the books are correct. Each book entry match is called invoice reconciliation. This reconciliation process ensures consistency and accuracy. It also keeps your accounts up to date and helps in avoiding fraud.
Invoice reconciliation helps to settle discrepancies. It can be done manually or by using an automated process. The mismatch usually occurs due to financial errors committed either by a bank or business entity. Thus this settlement process helps the business a lot.
Follow the below steps to reconcile invoices:
Some of the tips for effective invoice reconciliation are:
Historically, businesses used manual invoice reconciliation wherein each invoice was manually compared with the bank statements. But, manually comparing each invoice with a bank statement is quite time-consuming. Nowadays, companies have moved to automated processes to save time and enhance efficiency. The system automatically identifies the entries with discrepancies. Thus, the identification part is done by the system, then one can reach out to the customers to resolve the discrepancy.
Some advanced systems provide additional features such as probable reasons for errors and suggest adjustments accordingly.
ClearOne software can be used to create GST compliant tax invoices. It facilitates fast-tracking of invoices and also payments due. By using the same mobile number for mobile apps and the web, all the data will be synced, which increases efficiency.