The world would be a wondrous place if every customer payment tallied up correctly with the merchant’s bank account balance. Unfortunately, due to the complications of payment delays, discounts, chargebacks, reversals, and payment failures, discrepancies often arise between the final sales reports and funds received in the bank. These inconsistencies in books of accounts can become quite a challenge for accountants. An effective merchant settlement reconciliation system can solve this problem.
What is merchant settlement reconciliation?
Merchant settlement reconciliation is the process of verifying that all electronic payments made by customers through diverse channels reflect accurately in the merchant bank account. Options include payments via all electronic channels such as credit or debit cards, net banking, RTGS, UPI, payment wallets, or any other electronic source.
Payment reconciliation, especially via payment gateways, is a crucial step in business to help keep track of cash flows. Online payment mechanisms have complex discount and chargeback processes as well as the potential for transaction failures that can make reconciliation quite challenging. An effective merchant settlement reconciliation process aligns every step of the payment process to help map the cash flow and hence, catch any faulty transactions or frauds.
The challenge with payment reconciliation
Businesses have many payments that are processed daily via multiple digital channels. However, many times, the final settlement amount is in the form of a batch settlement made in a lump sum at the end of the day or a particular period. Many credit card and debit card payments can take as much as three business days to settle. Chargebacks and reversals have a separate timeline.
The question then is, how does a merchant identify and solve issues with individual invoices?
An automated settlement reconciliation system can ID individual transactions against the amount credited to the merchant bank account. This way, any missing or faulty transactions, double debits, and frauds can be identified swiftly and fixed before the whole accounting process crumbles.
Advantages of an effective payment reconciliation process
Apart from making the process of reconciliation easy for your accountants, having an effective merchant settlement reconciliation system has many benefits for business:
1. Effective cash flow management
A system that can ID individual transactions, including discounts, chargebacks, and refunds, to specific customer payments can help with better cash flow management. Such a system can catch any discrepancies immediately, such as a double refund, which can then be used to dispute the claim with your bank. A robust reconciliation system will save your business money and time.
2. Defense against frauds
Having a line by line tally for every transaction is a great way to ensure that you are not tricked out of money. An automated settlement reconciliation system provides a detailed report of electronic inflows and outflows for every digital channel, helps merchants quickly identify any suspicious activity and report the same without much delay.
3. Keeping track of failures and defaults
Settlement reconciliation reports also provide details regarding failed transactions and patchy networks. It further gives you business insights into the channels that face issues often. You can then warn your customers about the same, thereby reducing the number of failed transactions as well as improving customer service.
4. Better dispute settlement
Having access to detailed reports of customer payments can also help with a more efficient dispute settlement process. A payment reconciliation system can throw up failed transactions or delayed refunds, thereby allowing your team to correct these sooner.
Paytm’s efficient settlement reconciliation
At Paytm, we understand how crucial payments are, especially for small and medium businesses. That is why our Paytm for Business provides easy solutions to reconcile payments processed via our payment gateway.
- Settlement API: Every merchant gets access to our integrated API solutions that gives detailed settlement reports to tally payments against the amount credited to your bank account. With details like transfer reference number, refund amounts, and commissions for each payment, you can map every transaction successfully. The system also provides an option to choose custom date ranges to track down individual transactions for a specific date and time.
- Custom dashboard: Paytm’s settlement dashboard can be customized to reflect specific fields you want to monitor. Having access to only relevant information can simplify the reconciliation process.
- Different notification options: Apart from viewing payment reconciliations on the dashboard, you can also download a reconciliation report. Each of these is also automatically shared on email. You can also enable SMS notification for better visibility.
- Update of transaction status: Paytm also provides you the option to get notified on the status of individual transactions. We provide statuses of successful, failed, or pending transactions that will help with better payments management, dispute resolution, and fraud detection.
Payment reconciliation best practices
- Reconcile payments frequently rather than putting it off till the end of the month or quarter.
- Use Paytm’s different reconciliation options to group payments together to see if the sums tally.
- Analyze individual transactions only if you find that the total does not match.
- Dispute double charges, incorrect refunds/ chargebacks, or suspicious activity immediately.