POS Reconciliation | 4 mins read

5 Steps For Performing POS Reconciliation

5 steps for performing pos reconciliation
Jin Hyun

By Jin Hyun

A point of sale (POS) system is the technology a merchant uses for completing transactions. Companies can extract valuable sales data and customer shopping information from the POS. Therefore, understanding how to analyze this data and ensure its accuracy is viral, whether it is a large enterprise or small business.

POS Reconciliation Explained

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POS reconciliation refers to the accounting operation where two sets of records are measured against one another to determine if the figures match. This can include cash reconciliation and balance sheet reconciliation.

The process allows transparency in transactions to understand whether all amounts are accounted for, or whether there has been a discrepancy in the sales recording process. Essentially, POS reconciliation confirms whether the amount that has left the account is the same as the amount that is spent.

Businesses should strive to perform reconciliation accounting about once a month at least. Once the financial institution of that company issues the monthly financial statements, this is a good time to compile all of that data together. However, POS data can be reconciled more often, especially if the business handles large volumes of transactions each day. In this case, it may be best to check POS transactions daily.

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Benefits of POS Reconciliation

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Regular POS reconciliation will ensure that businesses can stay in control of their finances, and are able to notice if any errors or potential fraud occurs. Maintaining this clarity and transparency in financial activity allows for continued cash flow and prevents finance-based discrepancies in the future. Below are additional benefits of performing POS reconciliation.

  • Prevents Accounting Errors
Accounting errors can happen. Especially to businesses that are scaling their operations. In this growth-phase, some transactions can be overlooked, and the purchase order or PO system processes may not be up-to-date to handle this expansion, leading to systematic and human errors in accounting. With POS reconciliation, errors can be quickly caught before they can negatively affect the integrity of the entire financial dataset.

  • Secures Business Deposits
When making deposits, minor errors can lead to big financial discrepancies. For example, if there are regular direct debit payments set up for supplier accounts, these payments could potentially fail if there isn't enough cash to cover them - this can land a business in trouble with their bank and/or the supplier.

  • Simplifies Bill Paying
Automation for bill paying, as mentioned above, can be a great way to simplify the accounting process. Businesses can further protect themselves with POS reconciliation and have confidence in their systems of automation by ensuring stability in cash flow to accurately pay accounts.

  • Highlights Unauthorised Transactions
Miscalculations or odd transactions can be honest mistakes, but they can also indicate something more unappealing. Employee theft costs businesses up to $50 million each year in the United States. Without vigilance in handling accounts, some employees may be taking advantage of this opportunity. Therefore, performing POS reconciliation can help to identify when unauthorized transactions occur, as well as the individuals behind these actions.

  • Saves Money
Quite simply, late payment fees can add up. With transparency over financial data, companies can pay their bills and invoices on time, and save a surprising amount of capital by the end of the year.

How to Perform POS Reconciliation

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Below are the 5 key steps to accurately perform POS reconciliation.

1. Compare Statements and Internal Records

Step one starts with gathering all of the information together, from bank statement balance sheets to the internal accounts register. Compare the numbers of both and mark off the transactions that match as they're found.

2. Identify Transactions that Don't Add Up

As transactions are being matched, also take note of payments or deposits that don't have other evidence to back them up. These could include uncleared checks, overdraft fees, automated payments not cleared by the bank, or ATM charges. Highlight payments on internal account records that are not present on bank statements. The subtotal of all of the unmatched payments will now be subtracted from the total bank statement balance.

3. Verify Incoming Data on Both Documents

Cross-reference the bank statement with internal record checks and deposits. Any of these that are not yet confirmed by the bank should be added to the balance on the statement. Note that bank statements may show deposits that aren't on the internal records yet, and this is where entries to internal records can be added to bring the data up-to-date with the bank account.

4. Communicate with the Bank

Sometimes, although rare, the bank can make an error. After a comprehensive examination of records, if unknown numbers or other data is revealed, businesses will need to contact their bank. This is essentially a bank reconciliation, where the bank will do a thorough investigation on their end to confirm whether this is an error on their side that they can rectify.

5. Keep Records Clear

Once the balances of internal records and statements match, businesses should make note of the discrepancies that came up during the account reconciliation process. Having this information on-hand for reference can help to detect errors faster during the next POS reconciliation, and reveal any consistent discrepancies, which would point to a flaw in the overall system of payments.

Taking the time each month to perform POS system reconciliation can lead to increased financial data accuracy and transparency. By closely monitoring all transactions, business owners can feel more confident in their decision-making processes.

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