Payment reconciliation is the process by which companies ensure their records of payments made and owed match the payment transactions that appear on things like bank and credit card statements. Payment reconciliation ensures a construction company always knows where it stands financially so that it can formulate accurate budgets and financial statements.
Why is Payment Reconciliation Necessary?
There are numerous reasons why a construction company’s records may not match ranging from a failure to record the payment in the general ledger, to an accountant entering the wrong amount into the books, to outright fraud. It is crucial that companies uncover discrepancies as quickly as possible before they create a cascade of problems that will be increasingly difficult to track down and correct. Payment reconciliation is how you do that.
The Importance of Payment Reconciliation
No company that hopes to last long will take on new expenses without first having an accurate picture of their financial situation. They need to know how much they are owed and how much they owe others and when those payments are due or they will stumble into financial hot water that could be their undoing.
Payment reconciliation is how construction companies determine where they stand in terms of pending financial transactions with suppliers, customers and, should they be involved in performing work for the public sector, the government. It paints a clear picture of the company’s finances while at the same time unmasking errors and, on occasion, instances of fraudulent behaviour.
Helping to Facilitate Prompt Payment Activity
The UK government has set a goal of paying 90% of all undisputed/valid invoices from SMEs (including construction companies) within 5 days of receiving them and paying 100% within 30 days. Qflow enables you to verify goods received quickly and effectively which in turn enables fast and accurate payment reconciliation which will help your construction company meet its Prompt Payment targets.
Summary
Construction companies are often operating within tight financial constraints. Payment reconciliation enables them to keep their records up-to-date so that they can make informed decisions. At the same time, reconciliation enables them to unearth bookkeeping errors and shine a light on potentially fraudulent activity.
