Best Invoice Reconciliation Software: Ultimate Guide

Looking for ways to streamline your invoice reconciliation process? We’re going to explore why invoice reconciliation software is a must-have solution. 

Knowing how to choose the right solution involves a lot of consideration, so we’ll share what to look out for and how the best reconciliation software can improve your operations. 

Let’s dive in. 

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What is Reconciliation?

Before we discuss what tools you can use for reconciliation, let’s review what reconciliation entails. 

Reconciliation is the finance process of comparing two sets of records to ensure that they match up with one another. There are different types of reconciliation, but each compares an internal document with external statements.

 It is used as an internal control so that businesses can be confident that their financial health and financial statements are accurately reflected. 

What is Invoice Reconciliation?

Invoice reconciliation compares invoice information with a different type of record, such as a company ledger or bank statements. 

Invoices show in detail services that were rendered or goods that were sold in line items, along with their prices and tax charges. They also include information for payments and terms. 

Invoice reconciliation is performed to compare these items with the money that a business sends or receives. For example, if you paid an invoice, you’d want to make sure the money that left your bank account matches the invoice amount. 

If you’ve earned payment for an invoice you sent, the money entering your bank account should align. 

What Tools are used for Invoice Reconciliation?

Companies can leverage various types of tools to help perform invoice reconciliation, each with their own pros and cons. 

Here’s a look at what they include: 

1. Spreadsheet software

Spreadsheet software is a widely used solution for invoice reconciliation, but also is one of the most basic options. Spreadsheets provide tables to enter, store, and manipulate data as needed using formulas, filters, and functions. It is highly manual, and thus, prone to errors and key person dependencies. 

2. Accounting Software

Accounting software automates accounting functions with utmost accuracy and speed, thereby minimizing or potentially preventing the need for human intervention. 

3. Invoice Reconciliation Software

Invoice reconciliation software is a tool that’s designed solely for the purpose of automating invoice reconciliation by validating invoices, matching across documents, submitting for payments, and generating reports. 

Finance automation tools like SolveXia can be used to streamline key finance processes, including: reconciliation, expense management, regulatory reporting, rebate management, and more. 

4. Artificial Intelligence (AI)

AI applies algorithms and models to extract invoice data and reconcile them. Plus, with machine learning, computer vision, and natural language processing, AI can learn from history data to improve itself over time. 

What are the Types of Invoice Reconciliation?

What exactly can go wrong with an invoice? Knowing the types of invoice reconciliation enables you to know what to look for and how to cover all the bases during the reconciliation process. 

The good news is that when you implement a reconciliation solution like SolveXia that can do the tedious checks for you, you can rest assured knowing that every one of these possibilities has been checked. 

1. Payment Amounts

Discounts may cause discrepancies between bank statements and invoices. 

2. Lost Invoices

Misplaced or lost invoices can cause mismatched account balances. 

3. Incomplete Payments

Customers may choose to pay portions of an invoice at a time. 

4. Currency Exchange

If an international transaction takes place, currency exchange amounts have to be taken into consideration. 

Why is Invoice Reconciliation Important?

Regardless of the industry in which you operate or the size of your business, invoice reconciliation is crucial as it affects finances, operations, customer relationships, and business strategy. 

Invoice reconciliation helps to:

• Verify financial accuracy, which is used for budgeting and decision-making. 
• Understand and monitor cash flow management
• Maintain solid working relationships with vendors 
• Ensure regulatory compliance and auditing 
• Detect fraud early on and control it 
• Rectify any discrepancies for payments 
• Uphold customer satisfaction with accurate pricing strategies 
• Improve operational efficiency 

When Should You Reconcile Invoices?

Invoices should be reconciled on a regular basis to ensure that you’re being paid what you are owed and that you pay what you owe. It’s also important to reconcile invoices consistently to keep an eye out for any fraudulent activity or mistakes. 

At the very minimum, it’s advisable to conduct invoice reconciliation once a month, but if you have a high volume of transactions, it could be better to do so more frequently, such as weekly, or in some cases, daily. 

While manual invoice reconciliation will undoubtedly slow down business operations and also take your finance team’s time away from other high-level tasks, it’s easy to accomplish frequent invoice reconciliation with the aid of finance automation software, such as SolveXia.

This way, your finance team can focus their efforts on value-add tasks and strategy, all while getting the tedious work finished up without worry. 

What are the Steps for Invoice Reconciliation?

What exactly does invoice reconciliation call for? Although every business may move through their own motions at their own pace, these are the steps that must be completed to successfully execute invoice reconciliation:

1. Collect All Documents

Gather invoices for a specific vendor and organize them by dates in the same way your bank statement is organized chronologically. 

2. Transaction Matching

Look at the external statement (i.e. bank statement) against your internal ledger and documentation to ensure the transaction details match. 

3. Investigate Discrepancies 

If there are mismatched transactions, the reasoning may be explainable, such as timing delays or accidental duplicate entries. Or, it may be something more sinister, such as fraud. That’s why it’s important to investigate right away. 

4. Update the Ledger

After you’ve investigated discrepancies, you can record transactions and authorize necessary payments. 

What are Best Practice Tips for Invoice Reconciliation?

To set yourself up for success when performing invoice reconciliation, check out these best practice tips:

1. Create an organization system for invoices as soon as you receive them (invoice software can automate this for you) 

2. Set and keep a consistent schedule to conduct invoice reconciliations - typically, most businesses perform reconciliation at least once a month during the month end close process 

3. Use a system to document which invoices are paid, partially paid, or unpaid 

4. When you locate any errors, rectify them as soon as possible 

The ultimate best practice for invoice reconciliation, and any reconciliation for that matter, is to deploy a finance automation software in your business. This way, every type of reconciliation can be performed more quickly, accurately, and consistently. 

What is Manual vs Automated Invoice Reconciliation?

In the past, before the advent of technological solutions, invoice reconciliation could only be performed manually. 

Manual invoice reconciliation means that it is performed by hand, with someone having to go through all the details on an invoice and cross-check it with the company ledger or a bank statement to see that the line items are reflecting the same information. 

As you can imagine, or may know from your own experience, manual invoice reconciliation is massively time-consuming and inherently error-prone. 

The alternative solution is automated invoice reconciliation, which applies modern software to scan invoices, match records, and locate errors. Automated invoice reconciliation performed by solutions like SolveXia can speed up your processes by 100x and reduce mistakes by 90%. 

The use of automation is especially effective and necessary for businesses that are dealing with a high volume of transactions and the use of multiple payment processors, like eBay, Amazon, PayPal, Worldpay, etc. 

SolveXia automatically matches transactions within minutes, which would otherwise have taken days or weeks when performed manually. 

What are the Key Features of Reconciliation Software?

With the many reconciliation tools out there, it’s easiest to start narrowing the playing field by having a checklist of key features to look for. 

Some of the most important features for reconciliation software to possess include:

1. Data Importing

The software should be able to connect to your various existing systems and automatically import data in order to save time and reduce manual efforts/errors. 

2. Record Matching 

As the key function of reconciliation, the tool should be able to compare the data from the different sources to locate any discrepancies. 

3. Security 

Dealing with sensitive data requires adequate security. Seek solutions with bank grade security protocols, including encryption, two-factor authentication, and constant updates. 

4. Scalability

The goal is for your business to grow, which means transaction volume, and in turn invoice volume will too. Choose a solution that can keep up with your business without sacrificing speed or quality in the process. 

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Take a look the full range of reconciliation software features like SolveXia here to learn more. 

What are the Benefits of Reconciliation Software?

The best account reconciliation software is implemented without disruption and delivers ROI quickly thereafter. When you deploy reconciliation software like SolveXia, you can expect to experience these beneficial outcomes:

1. Standardization

Your processes will be standardized, making it simpler to achieve process improvement, accuracy, and know how to deal with issues when they arise. 

2. Transparency

With an automation solution at work, stakeholders and management alike can access more information about the business and processes, even when they are currently taking place. This added layer of visibility and transparency helps maintain internal control. 

3. Compliance

With standardization, audit trails, and security measures in place, businesses are able to lower their compliance risk and ensure reconciliation accuracy. This also helps maintain confidence in a business’ own financial statements. 

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Ultimately, finance automation software will save any business time, money, and mistakes.

Wrap Up 

The process of reconciliation is ongoing, so it’s in every business’ best interest to have an optimized process in place, along with automation solutions that can keep it moving seamlessly and accurately. 

With invoice reconciliation software, businesses are able to validate invoices in seconds, rather than days or weeks, generate automated reports, leverage insights to make better decisions moving forward, and maintain good standing in their relationships with vendors. 

Want to see how invoice reconciliation software like SolveXia can be plugged into your business? Request a demo today!