Stress level: Reconciliation
It is all too familiar: The stress test for every accounting department is reconciliation - the comparison of all incoming and outgoing payment transactions with actual cash flows. Often, numerous sources of information come together. Different accounting circles and accounts, payment advice (so-called settlement files or APIs) from credit card or payment service providers need to be considered. Only then to be reduced by fees, chargebacks and withholds.
But David Schophaus, Product Lead Accounting at Riverty, remains at ease.
In the dynamic environment of payment methods, regulations, and challenging processes, he stays on top of things. With his team, he finds solutions for complex challenges. He argues that payment reconciliation, accounting, and automation should be on the agenda early in every market entry.
But let's start at the beginning.
David, what exactly are your responsibilities at Riverty?
I've been dealing with accounting, reconciliation, payment reconciliation and automation for over 20 years. Currently, I'm developing our Accounting as a Service product with a team of experts, end to end. At Riverty, we work together with our teams from sales, marketing, controlling, and operations. Our responsibilities include foreseeing challenges in the market environment, customer requirements, finding ideas, and of course, making the ideas a reality.
What makes accounting so complex?
The speed of the market is constantly increasing. And at the same time, the landscape of payment methods and service providers involved in transactions is becoming more complex. When different payment methods, payment advice, currencies and many interconnected systems are involved, the reconciliation process becomes intensive and entangled. Especially within eCommerce, mobility and digital media, there has been incredible scaling in recent years. New buyer groups and business models are being rolled out to entire continents. As a result, accounting efforts naturally increase, which becomes especially visible towards the end of the month and year. Therefore, the process of reconciliation, i.e., the allocation of incoming payments to open items, is becoming increasingly important and should take up as little time as possible.
What has changed in accounting in the last 20 years?
I witnessed a lot of change and upheaval, especially in the telco industry, during the beginnings of eCommerce and the following years. 20 years ago, accounting and reconciliation looked quite different and were much more manual. Honestly, it was even quite adventurous, because Excel was both a friend and a foe at the same time. It was completely common for payment reconciliations to be done using spreadsheets, and due to formula errors, faulty imports, incorrect entries, or references, we often spent nights searching for phantom differences. That was one of our driving forces to introduce a close control system quickly. Using the entire month to carry out manual checks, refining and automating processes more and more.
What does accounting look like for companies today?
Excel has still not disappeared from many companies, of course many processes are now automated, ideally digital. However, the biggest change is that more and more payment methods, bank partners, and countries have joined the process. At the same time, IT resources for adjustments and extensions are very scarce in most companies, and accounting issues are simply not the top priority for most of our customers. As I also said at the beginning, complexity is increasing. Our customers, often merchants, must be fast. Occupy niches, shorten the time-to-market further and further. We help with a standardized integration into existing systems, so that the merchant incurs almost no effort for the connection, yet a very fast accounting system with high market maturity and maximum automation level is available. A payment that gets stuck somewhere and is not detected in time can lead to a disruption in the end customer relationship as well as a financial loss for the merchant.
What can go wrong if the accounting processes are not in balance?
Well, pretty much everything. It starts with dysfunctional reconciliation processes, often based on Excel, which make it almost impossible to reconcile payment receipts. This can lead to unresolved differences, erroneous fee calculations by payment providers going unnoticed, and a company having to write off millions of euros. No merchant wants that, and neither do I. But we also take on the tough cases (he laughs) and can provide important impulses towards digitization and automation. If we can help a customer this way, it’s really motivating.
So, a good reconciliation process ensures secure revenue for companies.
How else can it contribute to corporate success?
In addition to the hard aspects, clean reconciliation can achieve something very important: payments that are booked in a timely and accurate manner can prevent unjustified demand notes. The customer receives refunds quickly and reliably, and customer service is less burdened. In short, customer satisfaction also increases, which is an important KPI for our clients.