Payment reconciliation: What is it and how does it work?

Payment reconciliation is the process of checking that all transactions are correctly recorded and settled, and that the revenue recorded matches the cash deposited into your bank account.

In a typical payment lifecycle, there can be a delay between when a customer clicks buy and when the funds actually settle. Payment reconciliation acts as a system of checks and balances, ensuring no transactions are lost or miscalculated.

Three main data sources in payment reconciliation

Payment reconciliation uses three data sources to match transactions:

• Internal sales records: Data from your Point of Sale (POS) terminals, ecommerce shopping carts, subscription billing engines, or Enterprise Resource Planning (ERP) systems.

• Payment processor reports: Gross transaction amounts, processing fees deducted by the payment gateway or acquirer, chargeback details, and net settlement amounts.

• Bank statements: Final records of actual cash deposits made by your payment processor into your business bank accounts.

By cross-referencing these data sources, finance teams can verify that every customer purchase corresponds to a processor event and ultimately results in a bank deposit.

Payment reconciliation works by taking transactional data from all sales channels, aligning those records, and investigating variances between internal and external reports.

In the past, this was done manually using spreadsheets and manual data entry. Today, payment reconciliation services and automated reconciliation software offer solutions to streamline the process.

The payment reconciliation process consists of four phases:

1. Data collection: Gathers all transaction records from your internal sales systems, including ecommerce platforms and POS terminals, alongside bank statements and settlement reports from your payment processor.

2. Transaction matching: Compares the unique transaction IDs, dates, and amounts across your internal ledger and external statements to find matching pairs. Modern automated tools use advanced matching algorithms to instantly pair the vast majority of transactions.

3. Discrepancy identification: Flags any records that don’t match, such as missing transactions, incorrect amounts, unexpected fees, or unresolved chargebacks.

4. Resolution and updating: Investigates flagged discrepancies, corrects errors, adjusts for fees or chargebacks, and updates the general ledger to reflect the true financial state.

The main benefits of payment reconciliation are detecting payment discrepancies, improving financial reporting accuracy, and giving businesses better visibility into cash flow and processing costs.

Discrepancy and fraud detection

Regularly matching transactions allows businesses to quickly spot unauthorized charges, double-billing, bank errors, or processor discrepancies before they escalate into major financial losses.

Accurate financial reporting 

Stakeholders and tax authorities require precise financial records, and reconciliation ensures your balance sheets and income statements are 100% accurate.

Optimized cash flow management

By knowing exactly when funds are settled and how much processing fees cost, your treasury team can manage liquidity more effectively.

The main challenges of payment reconciliation are identifying discrepancies, matching transactions across systems, and reconciling payments accurately despite differences in fees, settlement timing, currencies, and data formats.

Identifying payment discrepancies

Payment discrepancies occur when transaction amounts, refunds, chargebacks, fees, or settlement amounts don’t match across payment and financial records. These differences can be difficult to identify when data is spread across multiple payment providers, banks, and accounting systems.

Matching transactions across systems

Reconciling transactions becomes more difficult when payment data comes from multiple sources with different formats, identifiers, and reporting structures. Finance teams often need to manually consolidate data from payment gateways, banks, and accounting systems before they can match transactions.

Managing cross-border payment reconciliation

Cross-border payments add complexity because transactions can involve multiple currencies, exchange rates, payment methods, and settlement timelines. Differences between transaction currencies and settlement currencies make it harder to match payments and accurately reconcile recorded amounts..

Accounting for fees and settlement differences

Payment processors may deduct processing fees, interchange costs, refunds, and chargebacks before funds are settled. Differences between gross transaction values and net settlement amounts make reconciling payments with bank deposits a challenge.

Managing high transaction volumes

Manually matching large numbers of transactions is time-consuming and increases the risk of human error. As transaction volumes and payment methods increase, finance teams need more automated processes to reconcile payments accurately and efficiently.

Below are real-world use cases of leading brands that modernized their payment reconciliation processes.

Rectangle Health

Rectangle Health integrated Adyen’s embedded payments suite into its PayerSync platform, streamlining a complex part of healthcare operations: processing reimbursements and managing payment reconciliation.

Thousands of PayerSync clients saw real impact:

• Faster reimbursements, from weeks to days

• Less manual entry, freeing staff for patient care

• More predictable cash flow through automated reconciliation

By automating healthcare payment reconciliation, practices can reduce manual work and get paid faster.

Atlas

Atlas provides an all-in-one platform that simplifies complex operations for F&B entrepreneurs. At the core of its offering is AtlasPay, an embedded payments solution powered by Adyen for Platforms.

Since partnering with Adyen in 2021, Atlas has streamlined payments, improved the customer experience for its merchants, and supported the growth of its platform business.

By simplifying the payment process, Atlas enables B2B payment automation and reconciliation for its sub-merchants, reducing operational and financial errors by 80%.

RMS

Hospitality platform users were dealing with complex payment setups, with different gateways for different sales channels, such as online bookings and in-person payments. This made it challenging to reconcile payments across multiple gateways and systems, making a hotel payment reconciliation service particularly valuable.

In 2023, RMS introduced RMS Pay, an embedded payment solution powered by Adyen for Platforms. Its goal was to improve operational efficiency, help users combat fraud, and create seamless guest experiences.

As a result, RMS users saved 60 minutes a day on payment reconciliation.

Adyen’s Unified Commerce solution offers automated reconciliation to help businesses eliminate manual back-office tasks and gain full control over their financial data. This includes:

• Unified reporting: Consolidated data from all channels (in-store POS, mobile, and global online payments) in a single dashboard with standardized, downloadable reports.

• Automated settlement matching: Line-by-line matching of every transaction, showing the exact journey from gross capture to net payout, including processing fee deductions and chargebacks.

• Seamless ERP integration: Reports designed to plug directly into leading accounting and ERP systems, allowing your team to automate the final ledger updates.

Managing high-volume payments doesn’t have to mean endless spreadsheets and manual accounting tasks. With Adyen's unified payment platform, you can automate your payment reconciliation, streamline your global operations, and gain complete visibility into your cash flow.

Get in touch with our team today to eliminate manual errors and streamline your financial operations.

• Reconciliation is a financial shield: Payment reconciliation acts as a vital security check, helping businesses detect transaction errors, bank mistakes, and fraudulent activities early.

• Unified data is the solution: Fragmentation is the biggest bottleneck in payment reconciliation; consolidating your payment gateway, processing, and acquiring with a single provider eliminates data silos.

• Automation drives efficiency: Shifting from manual spreadsheets to automated settlement reports drastically reduces human error and frees up finance teams for high-value strategic work.

• Fees must be tracked transparently: Accurate reconciliation requires line-by-line visibility into gross transactions, deducted processing fees, and net settlement amounts to ensure ledger integrity.