We covered some fundamental reasons of why we need to do customer account reconciliations.
There can be hundreds of reasons why this need arises, and we covered just a few of them. A lot would depend on the type of business your client has. If the item value or the quantity is small, the number of reconciliation items will be large. If discount / early payment structures are complex, or if the sale product is fragile, the adjustments will be more and this would lead to a larger number of reconciliation items.
Now coming to what is really done in this activity of customer account reconciliations?
This activity may comprise of the following steps / sub-processes:
- Extracting / collecting statements as per your client and his customer
- Comparison of transactions
- Identification of differences
- Classification of the reasons of the differences
- Segregation of desired activity source – at your client’s end / at his customer’s end
- Verification, validation and approval of rectification requirements
- Collation of documentary evidences for rectification / other required accounting entries / treatment
- Contacting the client’s customers (of the sales representatives / authorized personnel) for clarifications / collation of evidences
- Triggering settlement processes if needed
- Presenting the reconciliation to the management with possible / suggested solutions for the items identified and also for un-reconciled items
- Tracking closure of items
- Preparing and sharing the risk factors and quantification of the same with the client’s management team.
- Compliance requirement reporting, like blocking of funds equivalent to unapplied cash balances etc.
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