Financial reconciliation: what is it and how to do it?

THE financial reconciliation It is a very important control procedure for companies that want to avoid discrepancies in receipt records.

And, considering that any error in recording cash inflows can cause problems when filing annual returns, carrying out periodic checks is also a safety measure.

But how does this procedure work? Who can do it? Is it necessary to hire a professional for this? 

These and other questions will be answered throughout the content below, so if you want to understand how this procedure works, keep reading!

What is financial reconciliation?

Many companies already carry out the financial reconciliation procedure, but they are not even aware of it, as they usually give it other names, such as input control or billing conference.

But the fact is that financial reconciliation is a practice that seeks to check each record of incoming money, in order to ensure that there are no discrepancies with the amount actually received.

This way, that classic situation where the cash register registers more money than actually came in, or the company's account has values below the registered amount, can be easily identified and resolved.

Furthermore, this check also helps to avoid problems with inspections, after all, accounts containing more money than declared results in discrepancies, which can be punished with fines. 

For this reason, carrying out this control is very important for companies that want to closely monitor their finances, and thus avoid any problems, whether monetary or with the inspection.

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What situations can be avoided with this procedure?

When we talk about financial reconciliation, many people don't understand the need to monitor their bank account balance almost daily. After all, wouldn't it be easier to leave this for the annual tax return?

For oversight purposes, this view may even make sense, although resolving divergence issues is much easier when identified early.

But, especially for smaller businesses, financial reconciliation helps avoid cash flow problems caused by attempted scams.

See below for some examples of this:

Ghost Pix 

Virtually every retailer has dealt with the traumatic situation of receiving a ghost Pix, which is basically that situation where the “customer” says they made the transaction, but it's a lie.

By performing daily financial reconciliation, you ensure that this attempted scam is identified as quickly as possible, and especially for online establishments, this prevents the order from continuing.

False payment receipts 

Nowadays, scammers are getting better every day, and even create fake payment receipts to try to complete orders without paying for them.

As a result, Pix receipts with changed payment dates, or even bills with modified amounts, are very common. 

With the daily check, it is easy to verify that the amount did not enter the account, so it was possibly a scam.

Canceled transactions

Another very common situation is the canceled transaction, in which the person makes the payment, but minutes later disputes it at the bank.

This dispute can cause the bank to cancel the transaction, leaving the seller at a loss. However, with verification, this can be identified within a few hours.

Financial and banking reconciliation: what's the difference?

The concepts of financial and bank reconciliation are synonymous, although the latter is used specifically to evaluate the data in a bank account.

So, while the financial conference evaluates entries from all sources, including cash or other accounts, the bank conference specifically evaluates the data from one account.

For this reason, bank conferences are typically a service offered by financial institutions, which aim to provide greater peace of mind to their customers.

General financial assessment is usually a service provided by consulting or accounting firms, in which professionals evaluate all of the client's financial input data.

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How to do financial reconciliation?

To perform a financial reconciliation, you have two main options: evaluate your financial entries yourself, or pay a company to do it.

As we explained previously, banks generally offer a bank conference service, which evaluates all entries and issues reports that facilitate general analysis.

So, the first step to carrying out the check is to contact the banks where you have an account to request these reports.

Once this is done, evaluate each transaction against records from other sources to find out if everything is in compliance.

However, if you prefer, you can contact an accountant or financial advisor to make this assessment for you.

In this case, simply send all your financial data to the professional, including cash receipts, so they can perform a detailed assessment.

For this second proposal, you will have to invest some money, but if you are looking for practicality, it is a good option.

What to do when you identify errors in the procedure?

After performing financial reconciliation, some information may result in discrepancies, either upwards or downwards.

In the event of discrepancies, these may occur due to an error at the time of payment, such as:

• Pix in the wrong amount;
• Problems with employee payrolls;
• Failure to account for discounts when purchasing goods;
• Between others.

In this case, you simply need to identify where the error is coming from and correct it as soon as possible by paying the missing amount or adjusting the conference information.

If the problem is that there are fewer values, this indicates that an entry was made for the incorrect amount, or that an amount was taken out of the account that was not expected.

To resolve the situation, conduct a detailed analysis to identify the error, and once you have the answers, investigate legal means of resolving the situation.

Whatever your situation, the fact is that financial reconciliation allows you to evaluate each entry shortly after it occurs, which helps resolve potential errors.

So, if you don't already do this type of check, stop wasting time and include this task in your routine to avoid losses.

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