What is invoice reconciliation?

Invoice Reconciliation is the process of matching incoming and outgoing invoices to your bank statements.

The process helps businesses and their accountants stay organised and ensure that all book entries are matched.

Invoice reconciliation requires two sets of records and making sure that they agree.

After invoice reconciliation, your invoices and bank statements must be balanced at the recording period.

As a business owner, you need to know that the money leaving your account matches the money that your invoices are saying you sent.

This makes invoice reconciliation an important business process.

How to do invoice reconciliation

Invoice reconciliation is important for maintaining your accounting records and avoiding fraud.

By managing your bank statements and invoices, you’ll be able to better manage who has and has not paid you as well as who you have paid and are yet to pay.

Some ways to make invoice reconciliation easier are:

Use software

Software saves you time which as a business owner you probably don’t have a lot of.

You can use your existing software like your invoice generator and match it with your expense and income manager.

You will also need to match incoming and already paid invoices with your transactions.

If you aren’t using invoice or expense software, you might want to consider using them for future invoices as it will speed up the process.

Have good admin processes

Good admin processes (which software can help you with) will make invoice reconciliation a quicker process.

Set up a system that will organise your invoices and bank statements in a way that you understand.

This could be organising invoices by month or entering the invoice amounts into a spreadsheet when they are issued. 

If you are using an invoicing software or an expense tracking software, most of this will be done for you.

You can also generate reports from your software to make it even smoother.

The more organised your admin is, the less time you will need to spend sorting through invoices and transactions when you reconcile your invoices. 

It can also be helpful to learn how any of your suppliers structure their invoices.

That way when you reconcile invoices that they have issued you will know where to find the important information.

Make a list of what you need to remember

It can be hard to keep track of everything in your head.

If you write down a list of different things to think about, you will eliminate errors and reduce the amount of time you spend doing invoice reconciliation.

Here are some examples of what you might add:

  • Are there any bank fees involved? Were bank fees paid on top of the amount in the invoice or included? What bank fees might be involved and are there multiple i.e. currency conversion, credit card fees, etc.?
  • Are there any outstanding balances to be paid?
  • Were there any discounts applied?
  • Have you been overcharged or undercharged? Has someone overpaid or underpaid you?
  • Was any amount rolled over from a previous balance?

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You can make as many invoices as you want for free!

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