What problems can arise if regular reconciliation is not done among components of e-commerce?
E-commerce consists of various parties like sellers, transaction facilitators, customers, distributors etc. Since it’s so big, there are bound to be some issues regarding transactions and reconciliations. Such issues have to be dealt with carefully otherwise many can be affected due to a small problem. Delays in transaction updates may lead to delayed services and disappointment amongst all the parties involved and connected to each other. Hence, regular reconciliation is important.
For all the parties, these are the general benefits of going through the reconciliation process regularly.
It lessens down errors
Doing the accounting reconciliation process every month will help you know the error which can take place on either side. These errors may eventually not be repeated. Errors is a costly affair amongst big businesses specially the e-commerce one. It’s a chain reaction for all the other parties related to it.
Keeping a track of delayed transaction
Suppose a seller, distributor or vendor has been paid through check and that party delays in cashing it, for many days, even months, it won’t be possible to remember that age old pending transaction. This is why keeping a track is important. Even for the ones which are quite delayed. You don’t want to be surprised in the last moment about them.
Keeping check of deposits
Errors in bank will lead to other important transaction errors. Suppose, the customer wants to pay for the product, but he or she come to know that previous dues has not been credited in his/her account , this leads to payment of the new product, because the person did not go through regular reconciliation. This is why this routine is important.
Reconciliation saves money as it will let the business or companies many other hidden costs and bank fees that they might know they are paying for. These additional expenses can be removed by talking to the bank or any financial institution. The saved money will have a lot of benefit for the business as they can use it for other better purposes.
Avoiding fraudulent acts
A careful review through regular checks may reveal fraudulent activities. This can be done through appropriate methods, controls and procedure. Fraudulent acts can include illegal or unauthorized payments to vendors, sellers, employees, or extracting higher charges through customers.
The cash outflow schedule may vary between- payments coming in (from customers and clients)-and payments going out (vendors, distributors, employees, sellers). Regular bank reconciliation will help manage a delay of payments that may result insufficient funds/fees, bounced checks, a businesses or company’s overdraft.
Collection actions improved
Suppose a client’s check does not clear, the management becomes alert about this situation and becomes more aggressive about the collection procedure. Hence, better management is seen as the business or companies learn ways to collect payments. This is same for other parties too.
How does outsourcing the reconciliation work help?
Outsourcing is a way where the company or business contracts out another company for its own benefits. The reconciliation work for e-commerce business is expensive and time-taking. It refers to the process of recording final bank entries of debit and credits of the organization’s accounts. This work is a very accurate and an important one for any company. To eliminate extra burden of a company, as there are already many functions to look after, outsourcing some reconciliation work would be a good option. A precise work can be carried out in a categorized and timely fashion if the business chooses to outsource their work.
Since the terms like fixed assets, liabilities, losses and gains, expenses, revenue are a big part of reconciliation process; these have to be carefully looked after in the form of debit and credit transaction or according to the transaction amount. These need to be done by a skilled and experienced accountant who knows how to deal with it.
Here are some reasons why business uses outsourcing and can be of great help