From a Day to Real-Time: Invoice and Payment Reconciliation

Traditional wasted activity in the modern world: payment reconciliation

How do you match the payment received against the invoice sent if you’re working in a business with a high frequency of transactions? It’s a mess, isn’t it? It starts at 3 PM when the finance guy will look at each bank statement. Businesses usually have more than three bank accounts, depending on the company's size. Any received payment will be traced by the finance by looking at the three aspects: (1.) the sender, which can be traced from the bank account of the payor or by a virtual account that receives the payment; (2.) the amount of the payment, and (3.) the invoice that is being paid. The invoice that is being paid is usually not stated clearly. The finance team must open the list of outstanding invoices from the client and match them manually based on the payment amount, which sometimes does not match. If the payment came for multiple invoices or partial payment, then the finance team has to make their judgment on how to match the invoice amount with the payment made. Usually, the finance team will reconcile the payment against the invoice with the oldest due date to get a better Day Sales Outstanding (DSO).

Have you successfully imagined the mess? The process above does not mention the collection process from the customers who have not made payment for their due invoices. Understandably, the finance team cannot do the payment reconciliation continuously when the payment is made. Furthermore, a delay might occur since the settlement time of a Virtual Account may vary, ranging between 2 - 3 days. Therefore, the management cannot know the payment and their A/R performance in real-time. It might take around 3 - 4 days, assuming the reconciliation process will take one day. This complexity happened frequently in several industries, such as FMCG, raw food suppliers, manufacturing, and logistics.

The Antidote Comes by Sewing Up Payment and Automation

Digitalization by using payment platforms like Paper.id is the antidote. By sending invoices digitally, the system can trace the billing traffic to the end client and match the payment to the respective transaction. Smart reconciliation logic can advise the finance team to do reconciliation based on longest-due invoices. This solution resulted in real-time payment reconciliation without the finance team doing the hustle. Management can also receive the payment information even if the fund has not been settled.

Not only does it function, but paper.id is also built for B2B and focuses on user experience. Payment reconciliation is in place not only for the A/R side but also for the A/P side. Once payment has been made, a WhatsApp notification will be triggered to both the payor and receiver for information transparency. The settlement offered by paper.id is faster than the industry standard. It also has a B2B fraud detection system for your peace of mind.

The reconciliation data can be connected via API to your ERP system, and the money received can be settled in your bank account. You don’t have to worry about double input or additional work by doing so. All information is centralized in your ERP, and all your money is centralized in your preferred bank account. Paper.id acts as a bridge for digitalization between you, your customer, and your supplier.

One of the challenges in adapting digital payment is the change management, which can be handled smoothly by our users in logistics industry. They emphasized the flexibility of payment offered by paper.id to their customers. Multiple banks are now available for bank transfers, making the B2B payment faster and cheaper. Also, card payment and installment are also available for those who require a purchase but have limited cash. The flow of information will be smooth and transparent for both supplier and customer, leaving less dispute to happen in the future.

The Major Impact Created from Minor Changes

Our client has also adopted digital payment on the A/P side, where they can pay up to 50 suppliers with various bank accounts at one time to enjoy automatic real-time reconciliation notifications. When cash is unavailable, our client can use card payment to prolong their payment term. Via card payment, the fund will still be settled fast at the suppliers' bank account, leaving a win-win for everybody in the business.

We believe that each business is unique, along with its complexity. That’s why we built our modular product and complement our solution with experienced business consultants ready to tailor our solution based on your primary needs. Learn more about how Paper.id can streamline your procure-to-pay and order-to-cash process and book our time now.