Understanding the Payment Reconciliation Process (A Quick Guide)

An efficient payment reconciliation process is your month-end close’s best friend - yet it’s so often overlooked or done inefficiently.

The numbers speak for themselves - research from Pay.UK found that small to medium businesses were spending an average of 3.6 hours a week manually reconciling payments¹, costing businesses an eye-watering £320 million in employee time each year.

To help you avoid this, we’ve put this guide together explaining how accounts payable managers can put a clear payment reconciliation process in place to reduce discrepancies, reduce the risk of fraud, and save time.

And if you’re dealing in multiple currencies and cross-border transactions, we’ve explained how Wise Business can help you, thanks to features like seamless integration with accounting software (such as Xero and QuickBooks), automated bank feeds, and transparent batch payments*.

Register for Wise Business ✍️

*Disclaimer: The UK Wise Business pricing structure is changing with effect from 26/11/2025 date. Receiving money, direct debits and getting paid features are not available with the Essential Plan which you can open for free. Pay a one-time set up fee of £50 to unlock Advanced features including account details to receive payments in 22+ currencies or 8+ currencies for non-swift payments. You’ll also get access to our invoice generating tool, payment links, QuickPay QR codes and the ability to set up direct debits all within one account. Please check our website for the latest pricing information.

Key takeaways

Aspect	Notes
⏱️ Benefits	Payment reconciliation is crucial for reducing the risk of fraud, correcting financial discrepancies, and saving small businesses a significant amount of employee time.
⚙️ Core Process	The fundamental process involves five stages: gathering internal and external data, matching transactions line-by-line, investigating any mismatches, correcting your financial books, and filing the reconciled accounts.
🗓️ Timing & Regularity	Reconciling accounts frequently, such as weekly for a typical service-based business, minimises stress, helps quickly detect potential fraud, and avoids a daunting backlog near the tax return deadline.
🗺️ Strategic Setup	A robust plan requires mapping all incoming and outgoing money, standardising documentation (e.g., using unique reference numbers), defining specific team responsibilities, and documenting the entire system.
🔍 Issue Resolution	Common discrepancies (e.g., missing payments, unexpected fees, currency conversion differences) must be systematically investigated, tracked down, and correctly logged to reflect your real financial situation.
💻 Efficiency & Tech	Automated tools are highly recommended to save substantial operational hours, reduce errors by integrating bank feeds, and seamlessly manage complex areas like multi-currency transactions.
✅ Governance	The system should be regularly audited, reviewed for recurring issues, and formally documented to standardise the process and ensure all team members consistently apply the correct, up-to-date methods.

What are the main aspects of the payment reconciliation process?

1. Gather information
2. Match transactions
3. Investigate any discrepancies
4. Adjust and correct the books
5. Report and file

1. Gather information

First things first: you need to grab all your internal data (your invoices, for instance) and your external data (like your bank statements). Having both sets of data on hand is the only way you’ll be able to make effective, line-by-line comparisons.

2. Match transactions

 You can then begin to examine the two sets of data line by line. For each payment, you’ll want to look at:

• Who paid you
• How much they paid
• The date they paid you
• The reference
• The currency they paid you in
• Any fees

If the information in both your internal and external records match, you can consider this entry reconciled and continue to check the rest.

3. Investigate any discrepancies

If any entries don’t match, you need to work out why and adjust your books accordingly. Some of the most common reasons for discrepancies include:

• Missing or duplicated payments
• Incorrect amounts
• Unexpected fees
• Differences caused by currency conversions

4. Adjust and correct the books

Once you’ve tracked down any discrepancies and the reason why, you can update your accounts so that your real financial situation. This may mean adding in missing payments, deleting duplicate payments, correcting wrong amounts, and logging fees and currency conversion adjustments.

5. Report and file

Make sure that you store these reconciled accounts so that you can access them easily: you’ll need these for audits and tax returns.

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How to develop a strategic payment reconciliation plan

1. Map out all the way money comes in and out of your accounts
2. Decide how often you’ll reconcile your accounts
3. Standardise all your documents
4. Decide who’s responsible for what
5. Find the right tools for your business
6. Create a matching method
7. Decide how you’ll flag discrepancies
8. Audit and review
9. Document your system

1. Map out all the way money comes in and out of your accounts

If you can’t track how money is coming in and going out, you won’t be able to build an effective strategy.

To begin, you need to be clear on all the ways you receive money, all the ways you send money, and which currencies you operate in.

Knowing these facts lets you make smart decisions faster.

2. Decide how often you’ll reconcile your accounts

As a general rule, the more often you reconcile your accounts, the less time and less stressful it will be.

It also allows you to detect any potentially fraudulent activity more quickly, reducing the risk of losing large amounts of money.

We would suggest the following rule of thumb:

Frequency	Recommended For...
Daily	High volume of sales (e.g., e-commerce businesses)
Weekly	Typical service-based businesses
Monthly	Low volume of sales or straightforward transactions

Whatever you decide, it’s best to reconcile your accounts on a regular basis, rather than waiting until tax return season.

3. Standardise all your documents

Making sure all the documents you send are the same can reduce the time you spend searching for information. Make sure every invoice includes:

• A unique reference number
• The buyer’s name, address and contact details
• The quantity, price and type of goods or services you provided
• The date you provided the goods and services
• The date of the invoice
• VAT (if applicable)
• The total amount owed and the currency

You’ll also need easy access to all invoices, payment confirmations, receipts, statements, and fee breakdowns. Doing this as you go will save you time when it comes to reconciliation.

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4. Decide who’s responsible for what

If you’re part of a team, it’s worth establishing who is responsible for:

• Gathering internal data
• Gathering external data
• Reviewing discrepancies
• Final review and sign off

This prevents any confusion and steps being missed or duplicated.

5. Find the right tools for your business

There are a number of automated tools that can make your reconciliation process efficient and save you serious time. In fact, Payit™ by NatWest found that businesses using open banking could save up to 150 hours a year on operational tasks alone.²

But before you look for the right reconciliation tool for you, make sure you know what features you need, the capabilities of any tools you use at the moment, and how many people can access the software.

If you’re using multiple tools, make sure you look at the integration features so that they communicate with each other effectively and efficiently.

If you’re taking payments in multiple currencies, you may want to open a Wise Business account as it integrates with multiple accounting software, working seamlessly with your existing systems.
   

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💡 Our top tip? Be smart, get Wise. If you’re handling international payments, using Wise Business means all your transactions are logged immediately, saving you that manual time and ensuring full transparency.

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****Disclaimer**: The UK Wise Business pricing structure is changing with effect from 26/11/2025 date. Receiving money, direct debits and getting paid features are **not** available with the Essential Plan which you can open for free. Pay a one-time set up fee of £50 to unlock Advanced features including account details to receive payments in 22+ currencies or 8+ currencies for non-swift payments. You’ll also get access to our invoice generating tool, payment links, QuickPay QR codes and the ability to set up direct debits all within one account. Please check our website for the latest [pricing information](https://wise.com/gb/pricing/business).

6. Create a matching method

It’s important to decide which data points need to be identical for the payment to be considered reconciled. You’ll want to track:

• The amount you receive versus the amount on the invoice
• The name of the payee versus the customer name on the invoice
• The currency you invoiced in, received payment in, and the currency rate used
• Any fees incurred during the transaction

You may then want to define the tolerances you’ll accept when reconciling the accounts.

For instance, you may allow a small rounding difference on international transactions, caused by changes in the exchange rate.

Finally, it’s important to agree on a hierarchy for matching payments in order to avoid any false positives. Businesses often look at:

• The reference number first
• Followed by the amount
• Followed by the name

7, Decide how you’ll flag discrepancies

Now that you know how you’ll reconcile your payments, you can determine how you’ll manage any discrepancies. The most important aspects to consider include:

• How to raise concerns over discrepancies: decide what this process looks like for your company
• Who is responsible for investigating discrepancies
• When and who to escalate decisions to
• How to log any corrections

8. Audit and review

Like any system, your payment reconciliation system will work best when it’s reviewed regularly and adjusted to best serve your needs.

This allows you to take a step back, spot any recurring issues, and highlight any steps which could be automated.

9. Document your system

Once your system is up and running, it’s well worth taking the time to document how it works. This future-proofs your business as it means that payment reconciliation training can be carried out faster and that the same, consistent system will be applied, regardless of who’s enacting it.

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How to conduct an accounts payable reconciliation audit

1. Plan and prepare for the audit
2. Evaluate your internal processes
3. Reconcile payments
4. Document and report

1. Plan and prepare for the audit

Take time to inform the team members who need to know, define the scope of the audit, and collect all the relevant data for that time period.

If multiple people are involved, make sure that all the information is easy to access and clearly labelled.

2. Evaluate your internal processes

Before you start the audit, take stock of people’s responsibilities and your internal policies to make sure that everyone’s clear on their role and the process.

You may also want to assess potential risks, such as duplicate or missing payments, and chat with your team so that you understand their perspective.

3. Reconcile payments

Begin to work through the reconciliation process in a logical way:

• Verify opening balance: compare your opening balance with your previous period's closing balance to make sure that you’re starting from the right place.
• Perform three-way matching: match each invoice to the corresponding purchase orders and receiving documents. Any discrepancies you spot will need to be investigated.
• Verify payments: check that you’ve received all the money you are owed from each customer and that you’ve paid all your expenses and suppliers.

4. Document and report

If you’ve found any discrepancies, you’ll need to document these and adjust your books accordingly.

This is so that the data you submit in your tax return is based on what you’ve actually received, rather than what you expected to receive.

You can then summarise your findings, documenting any errors or places where the process could be improved.

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Best practices for payment reconciliation training

1. Explain why it matters
2. Standardise the process
3. Reconcile regularly
4. Use automated tools to help
5. Explain why it matters

As with any training, people learn best if they understand not just the what and how, but the why.

You could start by explaining that improving the payment reconciliation process means that it’ll take less time, freeing them up to focus on other priorities.

1. Standardise the process

Having a clear, step-by-step method brings clarity and means that the process is applied consistently, regardless of who’s involved.

This makes it quicker to get new team members up to date and allows you to spot mistakes faster as you know the exact process staff are working through.

On this point, Wise Business includes invoicing tools, so you can make sure the information you need is on every invoice.

2. Reconcile regularly

Reconciling regularly makes the task less daunting and means that any discrepancies should be easier to find and correct. Based on the challenges SMEs (small and medium-sized enterprises) face, we’d recommend scheduling this task weekly or monthly.

3. Use automated tools to help

Making use of reconciliation tools can help you automate some of the workflow, saving you time. These tools can also integrate your bank feeds directly, making mistakes less likely.

Manage your international payments to vendors with Wise Business

Who says reconciling your accounts has to be stressful or time-consuming? Wise Business makes managing international payments easier - for £50 (Advanced plan) or for free (Essentials plan) you get clear and transparent fees for every cross-currency transaction.

All you need is the Wise Business Advanced plan* and you can hold up to 40+ currencies to spend and receive money with ease.

And as we touched on earlier, Wise Business integrates with your favourite accounting tools, saving you time and ensuring all your data is where it needs to be.

It’s a no-brainer.

Be Smart, Get Wise.

Register for Wise Business ✍️

***Disclaimer**: The UK Wise Business pricing structure is changing with effect from 26/11/2025 date. Receiving money, direct debits and getting paid features are **not** available with the Essential Plan which you can open for free. Pay a one-time set up fee of £50 to unlock Advanced features including account details to receive payments in 22+ currencies or 8+ currencies for non-swift payments. You’ll also get access to our invoice generating tool, payment links, QuickPay QR codes and the ability to set up direct debits all within one account. Please check our website for the latest [pricing information](https://wise.com/gb/pricing/business).

Sources used:

1. Pay.UK, SMEs and payments - challenges and opportunities, June 2022, p6
2. Banking Circle, Mind the Gap: How payments providers can fill a banking gap for online merchants, p14
3. NatWest, UK businesses save 150 hours every year on operational tasks by using open banking, survey reveals

Sources last checked on 12th December 2025