Medium-Size Companies Settlement Matching vs. Transaction-Based Matching: When Is the Simpler Way Enough?

There are different approaches to payment reconciliation, depending on the size of the company and the accounting requirements. Transaction-based matching, in which each individual payment is reconciled between the cash register/webshop, payments and the bank, is often seen as the best approach. But is this effort always necessary? In this article, we'll look at why it's sometimes enough to just match the rewards (EFT data) with the bank and the benefits of this simpler approach.

What Does Settlement Matching Mean?

Settlement matching means that the collected payments transferred to the bank account by payment processors are reconciled. These payments include all payments received in one day via cards, platforms or other electronic means. Instead of individually matching each transaction made in the store, all transactions made by payment service providers are checked against their collective transfers to the bank.

The advantage of this approach lies in its simplicity. The data is collected and transferred to the bank as a single sum. It is much easier to check this total amount than to check each individual transaction in detail. Particularly for medium-sized companies or for companies where the majority of payments run smoothly, this method offers a reliable and time-saving alternative to transaction-by-transaction matching.

Advantages of Pure Settlement Matching

1. Efficiency: The biggest advantage of the pure settlement matching is that it saves a lot of time. There is no need to check every single transaction, which significantly reduces the workload. Especially for medium-sized companies or businesses with few daily transactions, this method can be completely sufficient. By checking the overall totals, the time required can be minimized and the focus can be directed to other important business areas. Saving time is often crucial for mid-sized companies to focus on growth and customer service.
2. Less administrative work: Transaction-specific matching often requires very detailed checks, which take a lot of time and effort. With settlement matching, it is sufficient to check the totals and reconcile these with the bank deposits, which significantly reduces the administrative burden. This allows medium-sized companies to work efficiently and focus their resources on essential activities instead of spending time and energy on reconciling each individual payment. Less administrative work also means fewer sources of error, as fewer steps need to be carried out.
3. Faster error detection: Errors can be detected quickly during payment reconciliation as there are fewer points to check. If there are differences, this is immediately apparent because the expected amounts are compared with the actual bank deposits. This method works particularly well when the likelihood of errors in individual transactions is low. A simple comparison of the totals makes it easier to identify problems so that discrepancies can be dealt with more quickly, which in turn leads to an improved financial overview.
4. Cost savings: Transaction-accurate matching requires additional cash register interface configurations and rules, which can be expensive for medium-sized companies. Settlement matching, on the other hand, can be performed with simpler tools, which reduces the cost of accounting processes. Lower costs allow mid-sized companies to better utilize their budget and allocate the saved funds to other important business areas.
5. Transactions still visible: Although no transaction matching takes place, the settlement transactions (EFT transactions) can be viewed. These are also read by ReconHub for the settlement matching and can therefore be displayed.

Challenges of Transaction-Based Matching

The advantage of transaction-based matching is that every payment can be tracked in detail. However, this accuracy also has disadvantages:

• High effort: the configuration for importing data from POS systems, which can vary in complexity depending on the provider and often does not deliver the best data quality, is time-consuming. Handling exceptions can also mean additional work. Especially for medium-sized companies that do not have enough staff, this effort is often not justified. Setting up and integrating different POS systems can be very time-consuming, especially if each system has different requirements. This effort can quickly outweigh the benefits of transaction-based matching.
• Complexity: If there are many transactions and different POS systems, the effort required to integrate the POS data increases significantly. The more different POS systems are used, the more difficult it becomes to integrate them, which often does not justify the additional effort. This complexity can outweigh the benefits, especially if most transactions are processed correctly anyway. Maintaining and reconciling multiple systems increases complexity and the risk of errors, which can be an unnecessary burden for mid-sized businesses.
• Handling exceptions: Transaction-accurate matching also needs to handle any exceptions, such as declined payments, refunds or technical payment issues. This can take a lot of time and energy as each issue needs to be investigated and resolved individually. Handling exceptions makes transactional matching particularly time-consuming and complex, which is often difficult to manage for medium-sized companies that need to work quickly and efficiently.

When Is Settlement Matching Sufficient?

Settlement matching is particularly useful when:

• The number of transactions is manageable: if the business only has a limited number of transactions per day, settlement matching is usually sufficient to ensure that payments are correct. In such cases, the additional effort required for transaction-by-transaction matching is not necessary and the simpler method can deliver good results.
• There is a high level of trust in the payment processes: If the payment providers are reliable and hardly any errors have occurred so far, the additional effort of transaction-accurate matching is often not necessary. If the payment processes have proven to be stable and reliable, payment reconciliation can be a practical and time-saving alternative.
• Resources should be conserved: Medium-sized companies or those with few accounting staff benefit from keeping the workload low. The settlement matching makes it possible to check the most important points without having to follow every transaction in detail. The time saved can then be spent on other important tasks, such as customer service or expanding the business. Saving resources helps medium-sized companies to be more flexible and productive.
• Weighing up costs and benefits: If the cost of conducting a transactional matching is higher than the benefits it brings, settlement matching is often the better way to go. For many companies, it's about finding a balance between accuracy and cost, and settlement matching often offers the best compromise.

Conclusion: Finding the Right Balance

Transaction-by-transaction matching may make sense for large companies or those with very complex payment processes to have maximum control. However, for many medium-sized companies or businesses, payment reconciliation is often completely sufficient. It provides a quick and easy way to check the settlements in the bank account without getting lost in the details of each individual transaction.

A solution like ReconHub can help to efficiently and automatically perform payment reconciliation of compensation data with the bank so that discrepancies can be identified and resolved immediately. This saves time and ensures that the accounting department always has a good overview of payment flows. Ultimately, it's about finding the right balance between effort and accuracy - and for many companies, this is exactly what settlement matching offers. It helps to check the most important points and save resources without sacrificing security and clarity.