Payment reconciliation process: How to reconcile payments

When you're sending and receiving payments across multiple currencies or entities, keeping records aligned becomes a daily challenge.   

It sounds simple enough in theory. A transaction takes place, your accounting platform records it, and everything lines up exactly like it's supposed to.

In practice, though, here's what actually happens: Timing mismatches, conversion differences, and missing references turn your books into a giant jigsaw puzzle with no clear edge pieces to get you started. You're left chasing down the difference between what you recorded and what actually happened. It's time-consuming, headache-inducing, and painfully manual. Finance teams spend hours hunting down discrepancies instead of tackling more strategic or impactful work.

But when payment reconcilitation is done right, it protects financial integrity, maintains compliance confidence, and provides clear visibility into your current cash positions (even across currencies).

In this guide, we'll cover how payment reconciliation works, the main types you'll encounter, common challenges that slow teams down, and how automation can make the entire process simpler — especially when you're managing international payments.

What is payment reconciliation?

Payment reconciliation is the process of matching transactions between your internal accounting records and external statements — bank accounts, payment providers, wherever you're holding your money. It helps to catch missing entries, duplicate charges, and transactions that were somehow recorded twice or not at all.

Most importantly, it confirms that what you recorded actually reflects what moved.

Your books say you paid a supplier €5,000. Did that exact amount actually leave your account? Reconciliation answers that question.

The process is crucial for accuracy and compliance — especially when you're managing cross-border payments or operating across multiple subsidiaries. Currency conversions, timing differences, and multi-entity flows all create more opportunities for discrepancies.

Think of reconciliation as your quality control system in finance operations. It protects against errors, catches fraud before it compounds, and prevents misreporting that could trigger compliance issues down the line.

Types of payment reconciliation

Reconciliation isn't one-size-fits-all. Different transaction sources create different risks, so you'll run different reconciliation methods depending on what you're trying to confirm.

Bank account reconciliation

Bank reconciliation compares what you recorded against what your bank's (or payment account's) transaction log says happened.

You're confirming that deposits landed, withdrawals left, and fees got charged exactly as expected. The goal is to catch missing deposits, bank errors, or unauthorised withdrawals before they lead to larger issues in your financial statements.

Accounts receivable reconciliation

Accounts receivable reconciliation matches customer payments against the invoices you issued to verify that incoming funds were recorded and applied correctly.

This helps you spot overdue accounts or unapplied credits that could distort your cash flow visibility — so you know exactly what's outstanding and what was actually collected.

Accounts payable reconciliation

Accounts payable reconciliation confirms that your supplier payments match the invoices and purchase orders you approved.

The goal here is to reduce the risk of duplicate, incorrect or missing supplier payments. As your outgoing payment volumes increase, it's easy for a single missed or duplicated payment to slip through the cracks and cause bookkeeping issues.

Plus, nobody wants to explain why the same invoice was paid twice, then have to ask your supplier to correct the mistake.

Intercompany reconciliation

Intercompany reconciliation aligns balances and transactions between related entities, like parent companies and their subsidiaries.

You're confirming that intercompany payables, receivables and transfers were recorded consistently across both sets of books. This prevents double-counting or missed eliminations when you consolidate financial statements.

It's fairly critical for multi-entity or multinational groups managing frequent cross-border intercompany payments or loans, because one entity's payable should match the other's receivable exactly.

General ledger reconciliation

General ledger reconciliation verifies that all your subledgers — accounts receivable, accounts payable, payroll, fixed assets, and so on — roll up accurately into the general ledger (GL).

You're ensuring every transaction category balances and that your trial balance actually supports your financial statements. This helps catch posting errors, omissions or duplications before they cause issues with reported results. Think of GL reconciliation as your final accuracy check during your month-end close process. In multi-entity structures, it also confirms that intercompany entries have been correctly eliminated or matched in the GL.

Why payment reconciliation matters for financial reporting 

Payment reconciliation helps you maintain reliable records and clear audit trails, supports cash flow forecasting, and strengthens financial oversight as your transaction volumes and complexity increase.

Improves financial accuracy and audit readiness

Regular reconciliation confirms your books actually match your bank balances, preventing unnoticed discrepancies or double payments that compound into bigger problems.

It also gives you a verifiable trail of transactions. When auditors or financial reviewers show up, you're not scrambling to piece together what happened three months ago. The documentation already exists, the trail is clear, and all of your numbers are properly reconciled.

Businesses that reconcile regularly also tend to avoid the issues that delay financial report preparation since you're not trying to hunt down mystery transactions the night before month-end close.

Supports better cash flow visibility

Accurate reconciliation helps you maintain a real-time picture of cash flow and working capital across your entire business. It's also critical for maintaining accurate financial KPI dashboards that you and your finance team rely on for decision-making.

You're not guessing what's sitting in which account or when that payment from last week will actually clear. You know exactly what you have, where it is and what's coming. This helps you track inflows and outflows clearly, making short-term liquidity planning straightforward rather than stressful.

This visibility is even more important for companies managing international payments. If you're working across multiple time zones and multiple foreign currencies, conversion rates and local timestamps can cause all sorts of issues.

Even something as seemingly small as a 0.01% conversion rate applied to a transaction can lead to discrepancies, as a €10,000 payment gets recorded as €9,999 instead. The difference isn't a massive deal on its own, but trying to find that €1 in your transaction logs to reconcile your books is a task you'd prefer to avoid.

Plus, when you're tracking payments across borders and currencies, knowing your true consolidated balance across currencies is critical. It's how you avoid unpleasant surprises when the time comes to pay a supplier invoice and you realise you don't have enough cash on hand to meet the due date.

How to reconcile payments: 4 steps for accurate transaction records

Payment reconciliation typically follows a clear, structured sequence designed to identify and resolve inconsistencies between what you recorded internally and what actually moved through your accounts. Here's how that might look.

Step 1: Gather transaction records and prepare data

You'll collect all relevant transaction records from internal systems, payment providers, and bank statements.

Dates, references, amounts, currencies — everything you need to actually compare records properly. The goal here is to centralise this data in one place, ideally through accounting software or ERP integrations, so you're not juggling five different export files.

For example, if you're managing cross-border payments with iBanFirst, you can access detailed transaction data instantly — references, amounts, currencies, statuses and counterparties (beneficaries and senders). And everything's easily exportable or syncable across your accounting tools through straightforward, flexible integrations.

This is where having best-in-class tools in your finance stack can make the difference between spending two minutes vs two hours gathering data.

Step 2: Match transactions

Now you'll compare each transaction in your internal records against entries from your bank, payment provider, or accounting system to confirm they align.

Most of the time, you're checking three key fields for every line item:

• Amount
• Reference
• Date

If all three match, you move on. When they don't, you flag them for investigation. The discrepancies you're looking for?

• Missing items
• Partial payments
• Mismatched exchange rates

Cross-currency transactions also require an extra check before you conclude there's an error. You're confirming both sides applied the same conversion rate and date, because cross-border payment challenges often show up as apparent discrepancies that aren't actually mistakes.

For example, maybe one side recorded the transaction on Monday morning, the other recorded it on Friday afternoon. As a result, a different exchange rate was recorded. Different rate, different timestamp, but still the same payment.

The good news? Most accounting or ERP software can largely automate this step. The tools pair transactions automatically when reference IDs or counterparties match.

Again, if you're using iBanFirst, you can also directly integrate with major accounting platforms like QBO or Sage to pull real-time balances and financial movement data directly into your accounting environment. No manual exports or messy CSV files needed.

Step 3: Investigate and resolve discrepancies

You've found mismatches. Now you're figuring out why they exist. In our experience, most discrepancies tend to fall into four buckets:

• Timing differences: A payment was initiated Friday, cleared Monday
• Data entry errors: Someone typed €5,000 instead of €50,000
• Currency conversion issues: The wrong exchange rate was applied in your books
• Missing information: A payment reference that didn't sync properly between systems

Once you've pieced together what's causing issues, figuring out how to resolve them should be fairly straightforward. Of course, the solution or fix for each issue will depend on what exactly you found.

Step 4: Finalise and document results

You've investigated the discrepancies and made the proper corrections. The last step is to clearly document everything you found and what you did to fix it. This becomes your audit trail.

You're documenting every adjustment, the reason behind it, and who approved it. When someone asks six months from now why there's a €2,500 adjustment in March, you'll have the answer documented.

Once reconciliations are complete, make sure to have a reviewer sign off before closing the period to confirm balances and documentation are complete. Depending on the size of your finance team and how complex the issues are, you may need multiple review and approval cycles.

Finally, make sure to keep a complete reconciliation log for every cycle. This supports future audits. It also helps you and your entire finance team spot patterns such as recurring timing issues, problematic vendors, system glitches that repeatedly create the same discrepancies, and so on.

Common challenges in payment reconciliation (and how to solve them)

As payment volumes increase, manual reconciliation introduces delays, errors, and visibility gaps that can make accurate reporting nearly impossible. Especially when you're managing FX payments and cross-border transactions.

Manual payment reconciliation leading to human error

By far, the most common practice that causes issues is manual reconciliation.

When you're manually exporting transaction files, matching records in spreadsheets, and copying data between systems, you're introducing risk at every step:

• Duplicate records
• Transposed numbers
• Overlooked entries

Plus, because of how inefficient and time-consuming manual reconciliation is, it's common for small inconsistencies to get ignored or swept under the rug for later. Fast forward a few months and you've got tens or hundreds of transactions that are all slightly inaccurate.

The fix is straightforward: Stop tackling payment reconciliation manually.

You need a payment provider that integrates directly with your accounting software so transaction data flows into your books automatically. Every manual step in the process can lead to issues.

With iBanFirst's direct integrations with platforms like QuickBooks Online, Xero, and Sage, your accounting system stays up to date without any manual updates required. Transaction references, amounts, currencies, counterparties — everything syncs automatically. This makes it significantly easier to reconcile on whatever schedule works for your team, whether that's daily, weekly, or monthly.

And when you eliminate manual data entry, you eliminate the primary source of reconciliation errors. Which means the other challenges we're about to cover? They become much easier to resolve.

Multiple currencies leading to cross-currency confusion

When you're operating across borders, you're reconciling transactions across multiple currencies and time zones.

• Exchange rate fluctuations between when you initiated a payment and when it cleared create apparent discrepancies.
• Settlement delays that span weekends or holidays? More mismatches.
• Different timestamps recorded by different banks = even more confusion.

You're comparing a £10,000 payment recorded in your books to €11,406.58 in your bank statement, and now you're trying to figure out whether the exchange rate applied was wrong, if it was a timing issue, or if the amount you sent was actually wrong.

And this gets exponentially worse when you're working with multiple suppliers and partners across the globe.

The ideal fix? Centralise everything through a multi-currency account designed for international payments. With iBanFirst, you can hold, send and receive funds across 25+ currencies through one account. Depending on your structure and workflows, you may no longer need to convert everything back to your home currency. Instead, you could choose to hold funds in all of the currencies you transact in regularly and reconcile payments locally.

Plus, by managing all of your cross-border payments through the same provider, you can see your current cash position across all currencies, converted back to your home currency.

Delayed reconciliation cycles

The longer you wait between reconciliation cycles, the more complex each cycle typically becomes.

All of the small discrepancies that pop up tend to multiply over time. What started as a singular, relatively small exchange rate difference in January could expand into dozens of mismatched transactions by March, and now you're stuck trying to reconstruct history instead of closing the books for the period.

Reconciling weekly (or even daily) can help catch issues while the context is still fresh. This can mean fixes take minutes instead of hours (or longer).

Of course, the right frequency ultimately depends on your specific business and transaction volumes. But there's often a big advantage to reconciling more frequently — especially if you're managing international payments with currency conversions.

More frequent reconciliation doesn't necessarily mean more work either. If anything, it could even lead to less time spent on reconciliation. It's the same work spread across more cycles, which often means each cycle stays manageable.

Payment reconciliation best practices to produce more accurate records

To wrap up, here are the most important things to keep in mind.

• Document everything: Every adjustment, discrepancy and correction — build your audit trail as you go, not after the fact.
• Automate where possible: Manual reconciliation is the root cause of most issues. Try to eliminate it through direct integrations between your bank, payment provider and accounting software.
• Consider reconciling more frequently: Weekly or daily cycles can help catch issues while they're fresh and manageable — not after they've compounded into multi-day investigations.
• Standardise your process: Consistent procedures across accounts and currencies reduce confusion and make handovers simpler.

Payment reconciliation doesn't have to be overly complex, time-consuming or headache-inducing. Consistent execution with the right tools on hand can make the entire process a walk in the park every time.

Simplify reconciliation across currencies with iBanFirst

Those challenges we just covered? They're significantly easier to solve when your data all lives in one place. iBanFirst connects everything — payments, accounts, transaction data — so everything stays aligned across currencies and entities.

With an iBanFirst account, you can:

• Hold, send and receive funds in 25+ currencies through a single multi-currency account and see your consolidated cash position in real-time
• Sync payment and transaction data automatically with accounting tools like QuickBooks Online, Xero, and Sage (no manual exports or CSV files required)
• Track international payments with detailed references that make matching transactions straightforward
• Get support from a team of FX experts that understand currency markets and your business, rather than trying to DIY everything yourself with (mostly shallow) help docs
  

You get full visibility and control over your multi-currency records without the manual work that creates reconciliation headaches in the first place. Request an account today to see how iBanFirst can help simplify your reconciliation process.