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As businesses grow, the complexity and volume of financial transactions increase, making payment reconciliation a critical yet challenging task. Deciding whether to handle this process in-house or to leverage third-party tools can significantly impact efficiency, accuracy, and scalability.
Are you dreading the end of the month, with hectic schedules and time pressure building up for your finance team? When running month-end reconciliation, finance teams and business leaders often wonder whether there is a more straightforward way of making sure everything is matching up.
We’ll give you an overview of the pros and cons of keeping the payment reconciliation largely in-house using Excel spreadsheets or custom development software compared to third-party tools built to speed up reconciliation process at scale.
Before diving into the in-house vs. third-party decision, it's helpful to establish what payment reconciliation actually means as a process.
At a very high level, payment reconciliation means matching a company's internal transaction records, such as invoices, with external records, such as bank statements, PSP statements, payment solutions documents, and credit card statements.
The goal is to confirm that money leaving and entering the company's accounts aligns with the business's own financial records, ensuring that the accounting entries are correct and reflect the company's actual state.
The reconciliation process enables your company to:
The payment reconciliation process thereby typically involves several key steps:
Different types of transactions often require specialized reconciliation processes:
Regular payment reconciliation, typically done at least each month's end or in more regular intervals, is necessary for your business to avoid errors, detect potential fraud, and maintain the integrity of your financial reporting. It is mandatory for public companies and organizations in regulated industries like financial services.
Now that we've covered the basics let's explore the pros, cons, and key considerations of handling reconciliation in-house vs. using third-party tools.
Most small and mid-sized businesses handle payment reconciliation internally using manual processes or basic accounting software. What are some potential advantages and drawbacks of this approach?
This is just a broad overview, but it illustrates that manual in-house reconciliation does offer some benefits but also comes with substantial long-term costs and risks businesses should carefully consider, especially as they scale.
Discover how Reiterate can streamline and automate your financial operations, freeing up your team for strategic growth initiatives.
Specialized payment reconciliation software such as Reiterate and, in some cases, outsourced services provide an alternative approach, which is often beneficial, particularly to high-growth businesses.
So why do businesses use third-party payment reconciliation? To mention a few, but clearly not an exhaustive list of benefits:
Needless to say, there are also some considerations why businesses may be hesitant to employ third-party reconciliation tools, such as:
For many businesses, however, the depth of capabilities and efficiency gains far outweigh the drawbacks of third-party tools.
Determining the right reconciliation approach requires carefully evaluating your business's specific needs and priorities across a number of factors. Key elements to consider include:
Before making a vendor decision, it is clearly a good practice to look at the above questions and compare vendors in terms of how they cater to the relevant needs.
To make this decision process more concrete, let's walk through a fictional case study examining how a rapidly scaling Forex broker may automate payment reconciliation with Reiterate.
ForexCo is a mid-size online forex and CFD trading broker serving active traders globally. They have:
With rapid user growth, ForexCo may struggle to efficiently reconcile client deposits and withdrawals across global bank accounts and payment methods using spreadsheet-based processes.
It became imperative for ForexCo to implement automated reconciliation to support its growing client base.
After reviewing the options, ForexCo may use Reiterate to reconcile its global payments.
Reiterate’s intelligent matching engine automates the reconciliation of client deposits and withdrawals, reconciling transactions across forex trading accounts, payment methods, and reporting currencies.
Within months of implementing Reiterate, the business can expect to see the following benefits:
Automating reconciliation may help ForexCo scale efficiently while providing clients with reliable and secure service.
The case study above provides one example of how third-party reconciliation tools can offer transformative benefits to growing businesses. As a business leader:
Ready to kick-start automation in your reconciliation process? Speak to us now to schedule a demo to see who Reiterate speeds up your processes and improves accuracy and customer satisfaction.