GLOSSARY TERM
What is Reconciliation?
Definition
Reconciliation (specifically settlement reconciliation) is the process of comparing and matching a seller's order records against the marketplace's payment/settlement records to verify that all expected payments have been received and all deductions are accurate.
Detailed Explanation
Reconciliation is a critical financial practice for e-commerce sellers. It ensures that the money you expect to receive from the marketplace matches what you actually receive in your bank account.
The Reconciliation Process
- Data Collection: Download order files and payment/settlement files from the marketplace
- Data Processing: Parse and organize the data from both sources
- Matching: Match each order in the order file with its corresponding entry in the settlement file
- Variance Analysis: Identify differences between expected and actual amounts for each order
- Discrepancy Classification: Categorize discrepancies (missing payment, wrong deduction, delayed settlement, etc.)
- Resolution: Take corrective action — raise disputes with the marketplace for identified discrepancies
Why Reconciliation is Essential
- Ensures you're paid correctly for all delivered orders
- Identifies overcharged commissions and fees
- Spots missing payments early when they're easier to dispute
- Provides accurate data for business decisions
- Helps with GST filing and tax compliance
- Protects against financial losses from unaddressed discrepancies
Types of Reconciliation
- Payment reconciliation: Matching settlement amounts with expected payments
- Inventory reconciliation: Matching physical inventory with marketplace records
- GST reconciliation: Matching GST charged, collected, and filed