Reconciliation
Also called payment reconciliation, bank reconciliation.
Checking that two records of the same money agree, such as your ledger and the bank or provider's statement, and explaining every difference.
Last updated
What it is.
Every business that moves money has more than one record of it: its own ledger, the payment provider's reports and the bank statement. Reconciliation matches entries across them and flags anything that does not line up, such as a missing payment, a fee that was not expected or a duplicate.
At low volume it can be a spreadsheet. At scale it is software: importing reports, matching entries by rules, and putting the exceptions in front of a person.
Why it matters
Unreconciled money is money you cannot account for. Small gaps grow into large ones, audits stall and customers are paid wrongly. In fintech products reconciliation is also how bugs in payment code get caught before they reach customers.
In a product build
Reconciliation in a build means report imports, matching rules, an exceptions queue and an audit trail. It is easiest when the ledger was designed for it from the start.
Common mistakes.
- 01
Reconciling monthly when volumes need daily checks.
- 02
Fixing differences by editing records instead of posting correcting entries.
- 03
Matching on amount only, which pairs the wrong transactions.
Work it out with a tool.
Related terms.
- LedgerThe record of every movement of money in a system, kept so that any balance can be explained entry by entry.
- Double-entry bookkeepingRecording every transaction as equal debits and credits in at least two accounts, so the books always balance.
- Settlement (payments)The point when money for a payment actually moves into the receiver's account, after the payment was approved and cleared.
- ChargebackA forced reversal of a card payment, started by the cardholder's bank after the cardholder disputes the charge.
