Customer Reconciliation

The trend of credit sales is prevalent in the corporate world. In fact, credit sales play a significant role in maintaining business relations between the company and the clients or customers.

By opting for credit sales, a company can increase the sales, and the consumer gets the flexibility to pay after a specific period. In the credit sales, a company issues a bill to the customer. These bills are encased after a specific time period. However, it is essential to manage the account receivables properly.

Accounts receivable reconciliation or customer reconciliation is a critical activity for every business. It is a process of analyzing the statements related to receivables for unveiling any error or irregularities. Customer reconciliation is a useful tool for exposing fraudulent activity pertaining to accounts receivable.

What is Customer Reconciliation?

Customer Reconciliation is the process of comparing the outstanding customer balance or bills to the accounts receivable as recorded in the general ledger.

The customer reconciliation is a part of accounts closing activity and is usually conducted at the month-end before issuance of monthly financial statements.

Customer reconciliation statement is of great importance for internal auditor as well as the accounts manager since it is a proof that there is no material inaccuracy in the financial statements of the company.

Also, if any irregularity is detected while conducting customer reconciliation, the same can be corrected on time before preparing monthly financial statements.

How to reconcile customer accounts?

The process of customer reconciliation is based on two data sources:

  • Details related to accounts receivable
  • General Ledger

Details of accounts receivable comprise of bills issued to the customers.

In general ledger, the information recorded under the account trade receivables is required for the reconciliation purpose.

In the process of customer reconciliation, details of accounts receivable and its total amount is compared with the balance of trade receivables. In case of any irregularity, details of each individual bill and trade receivable account of the general ledger are scrutinized to find out the reason for disagreement.

Benefits of Customer Reconciliation

Customer reconciliation is of great importance for every company since it affects the revenue. Also, customer reconciliation statement is required while auditing, thus companies cannot afford to ignore it. Reconciliation services are important for every business in order to keep a track of their accounts.

Following are the benefits of customer reconciliation:

  • Eliminating the possibility of error in the trade receivable accounts.
  • Prevents the material inaccuracy in financial statements of the firm.
  • Saves the revenue of the firm.
  • It facilitates internal auditor while auditing the accounts.
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