What the Invoice Reconciliation Process Really Looks Like in Practice
Did you know that 82% of businesses fail in the US because of cash flow issues?
That’s right, despite all the hurdles businesses face, financial problems are what bring most of them to a standstill. A diligent and systematic invoice reconciliation process can help sidestep cash flow problems.
Whether you’re a sole proprietor, a partnership, or a small business owner, invoices are a major part of your business. However, handling a barrage of incoming and outgoing invoices can be a huge challenge. That’s where invoice reconciliation comes in.
Reconciling invoices can be a daunting process for business owners, but it doesn’t have to be. In this blog post, we’ll break down what invoice reconciliation is and what it involves. We’ll also provide some tips on how to make the process easier for small business owners.
What Is Invoice Reconciliation?
Invoice reconciliation is the process of matching invoices to the corresponding transactions. This ensures that all invoices have been accounted for and helps to prevent errors and discrepancies.
The invoice reconciliation process usually involves three steps:
Reviewing Each Invoice Individually
When you receive an invoice, you should take the time to review it carefully. Check that the invoice date, invoice number, and purchase amount are all correct. If you spot any errors, contact the vendor and ask for a corrected invoice.
Comparing the Invoice to Your Records
Once you’ve reviewed and verified an invoice, you should compare it to your records. This includes your purchase orders, receipts, and other documentation. This step will help you identify any discrepancies between the invoice and your records.
Resolving Any Discrepancies
Resolving discrepancies is arguably the most important step in the reconciliation process. This may involve contacting the vendor or your accounting team. Once the discrepancy has been resolved, you can then update your records accordingly.
Updating Your Records
Once you’ve reviewed, verified, and resolved any discrepancies with an invoice, you should update your records. This includes your accounting software, purchase orders, and receipts.
Ways to Streamline Your Invoice Reconciliation
As mentioned above, reconciling invoices can be very challenging. However, here are a few tips to help streamline the process.
Establish a Procedure
First things first, you need to create a definite procedure for reconciling invoices. The procedure should cover everything from purchase orders to the payment details. It should also include who will be responsible for reconciling invoices and how often you’ll do the reconciling.
Create a Template for Reconciling Invoices
To make your work easier, consider creating a template for your invoice reconciliation process. With the procedure down pat, creating a template should be a breeze. If you’re still having trouble doing so, you can try creating an invoice template online.
Use Software Where Applicable
Using the right software will go a long way toward streamlining your invoice reconciliation process. Remember, you don’t need software specifically for invoice reconciliation. You can use multiple software programs throughout the critical stages of the process.
Reconciling Invoices Simplified!
Now that you have the basics of invoice reconciliation down pat, we’ll leave you top your devices. Use the above tips to streamline your reconciliation process and keep cash flow issues or discrepancies at bay.
For more informative content, check out the other posts on the site.