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Customer Reconciliation

Accounting and Reconciliations

Different types and number of transactions arise while dealing with customers of the entity. Business to business customers have long term relationships with the entity. In and out movement of goods, payments, receipts, returns, discounts and offers. A periodical reconciliation between the entity and its customers' accounts is a healthy practice to foster this long term relationship with customers as they are key to business growth.

In the customer reconciliation statement,a comparison is done between the outstanding bills from the customers with account receivables entered in the general ledger of the company. It acts as solid evidence to prove that there is no material inaccuracy with the records possessed by the company. The process of customer reconciliation is done monthly which helps in identifying any misconceptions and helps prevent the entry of fraudulent transactions into the books of accounts of the business entity. Monthly preparation ensures the rectification of any irregularities promptly and assures smooth preparation of the financial statement and MIS reports.

Benefits of customer reconciliation statement

Customer reconciliation helps the business entity to keep track of all the transactions that take place between the company and its customers. There are other benefits like:

  • Eliminating chances of errors in the trade receivable accounts.
  • Helps in confirming that the sales effected is free from any duplication or dubious entries.
  • Facilitates customer balance confirmation
  • Helps for the final financial statement preparations.

The process of customer reconciliation:

  • Cross verify that all the invoices of a particular period to be reconciled are recorded.
  • Ask the customer for their copy accounts payable ledger and then compare it with the receivable ledger.
  • Track the variations between the company accounts and the customer-given ledger.
  • Once the discrepancies are identified, changes and adjustments have to be made. Pinpointing the cause and correcting it is one of the best practices to maintain proper accounts.

Profito Global can provide assistance in the reconciliation process only if the client provides information regarding the customer’s statement of accounts and the details of the invoices raised. The monthly preparation of the customer reconciliation can take a lot of time. Profito Global’s experts can help in doing the requisites in this line. A dedicated concern is placed on such accounts reconciliation so that the business will not face any sorts of errors or mistakes.

  • Customer reconciliation is of prime importance for an organisation because it helps in identifying the errors committed relating to the invoices raised and the payments received against the same. Such errors can cause tarnishing of the image of the business or can give ground for fraudulent activities. Proper reconciliation on time will help in avoiding the chances of such errors. The comparison through a reconciliation statement can help increase the credibility and authenticity of the business.

  • A third-party service provider is trained to give away such services. Their efficiency will help in rectifying missed reconciliations, error reversals, oversights etc. The service provider will help in matching the receipts with transactions and do the needful promptly every month. It will help in avoiding the ambiguity that can creep up otherwise at the end when financial statements are prepared.

  • When a business disregards the preparation of customer reconciliation statements, it effects the receivables collections process. Receivables management isa very important task associated with organisations. Unless the customer reconciliation is done, receivables collection allocation will be a serious issue. Only if this process is done on a periodic basis, the organisation can confirm that they have received the payments against the invoices raised.

     

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