Accounts & Receivable Management The Challenges of Reconciling Across Multiple Channels

In our previous articles, we talked about the importance of understanding leakage in the Order to Cash (O2C) process and shared tools to help measure its financial impact. Now, it's important to understand why leakage is such a common problem in retail, especially for large retailers managing many sales channels. In this article, we'll look at why reconciling sales across different channels is so complicated and why manual processes are no longer enough for today's retail world.

The Complexity of Multi-Channel Retailing

Modern retail isn't just about one sales channel anymore. Today, big retailers sell through many channels—physical stores, online platforms, mobile apps, and even third-party marketplaces. Each channel has its own unique data, payment processors, customer interactions, and settlement processes. Here are some reasons why reconciling across all these channels is so complicated:

1. Multiple Payment Methods and Processors

Retailers offer customers many ways to pay, like credit cards, debit cards, digital wallets, buy-now-pay-later services, and gift cards. Each payment method has its own process, with different payment processors and timelines. Managing reconciliation for each of these payment flows is very challenging, as there are different fees, rules, and schedules for each provider.

2. Aggregated and Fee-Deducted Settlements

With card payments, acquiring banks or payment processors often combine multiple customer transactions into one deposit, and they also deduct fees before the money reaches the retailer’s account. Reconciling each individual sale with these combined, net deposits is very time-consuming and difficult. The difference between gross sales and net settlements often creates unreconciled discrepancies, leading to leakage if not handled properly.

3. Cross-Channel Transactions

Many retailers let customers shop across different channels. For example, a customer might buy something online and return it in-store, or use an app to place an order for in-store pickup. These cross-channel transactions make reconciliation even harder. Sales data, inventory records, and payment details all need to match across systems, which is difficult when each channel is managed separately or lacks proper integration.

4. International Operations

For retailers with international locations, reconciliation becomes even more complex. Cross-border transactions involve different currencies, country-specific payment processors, varied regulations, and different settlement timelines. The more countries a retailer operates in, the harder it is to manage reconciliation across borders, which increases the risk of financial leakage.

5. Data Fragmentation Across Systems

Many retailers use different systems to manage sales, payments, inventory, and accounting. Often, these systems aren’t fully connected, which leads to fragmented data. Fragmented data causes inconsistencies, making it hard to get a clear view of sales and payments. Without a complete view, discrepancies can easily go unnoticed, making 100% reconciliation almost impossible without a lot of manual work.

The Limitations of Manual Reconciliation

Many large retailers still use manual reconciliation processes, where they match sales records with bank statements, acquirer reports, and payment processor data using spreadsheets. Given the complexity of managing multiple channels and the huge number of transactions, manual reconciliation has several big challenges:

1. Time-Consuming and Labor-Intensive

Manually reconciling transactions across multiple sales channels and payment processors takes a lot of time and effort. Finance teams often spend hours matching transactions, handling exceptions, and finding discrepancies. This time could be better spent on more strategic financial activities.

2. Prone to Human Errors

With the large volume of transactions and complex data from different channels, errors are unavoidable when reconciliation is done manually. Mistakes like missed transactions, incorrect data entry, or failure to match combined payments can all lead to unreconciled discrepancies that cause leakage.

3. Slow Financial Close

Manual reconciliation slows down the monthly and yearly financial close processes. The delays in reconciling transactions mean discrepancies build up, creating bottlenecks when finance teams try to close accounts. This delay not only affects timely financial reporting but can also lead to rushed and inaccurate closes, impacting decision-making.

4. Difficulty in Handling Exceptions

When exceptions happen—like a transaction that doesn’t match between sales and settlement data—manual reconciliation makes it hard to find the root cause. Handling these exceptions takes a lot of time, requiring investigation across different systems and payment providers. Without a clear way to manage exceptions, these discrepancies are often left unresolved, adding to financial leakage.

The Case for Automation in Multi-Channel Reconciliation

To manage reconciliation across multiple channels effectively, large retailers need to move away from manual processes and invest in automated reconciliation solutions. Automation can solve the challenges of modern retail by providing real-time matching, efficient exception handling, and complete transparency. Here’s how automation can help:

1. Real-Time Reconciliation

Automated reconciliation systems can reconcile transactions in real time, matching sales with payment data as they happen. Real-time reconciliation reduces the lag between when a sale is recorded and when payment is received, making sure that discrepancies are found and fixed immediately. This helps prevent discrepancies from piling up over time.

2. Handling Aggregated Payments with Ease

Automation makes reconciling aggregated payments and fee deductions easier. Automated systems can break down combined settlements and match each individual sale to the net amount received, including processing fees and commissions. This takes the guesswork out of manual reconciliation and ensures all sales are accounted for correctly.

3. Seamless Integration Across Systems

Automated reconciliation solutions can connect smoothly with different systems, like sales platforms, payment processors, and accounting software. This integration gives a consolidated view of all data, making sure sales, payments, and inventory records are aligned across channels. A unified data flow reduces fragmentation, minimizes inconsistencies, and helps identify discrepancies quickly.

4. Efficient Exception Management

Automated reconciliation tools come with strong exception management features. They automatically flag transactions that don’t match, providing details about the discrepancies. By offering a systematic approach to resolving exceptions, automated tools help finance teams quickly investigate and solve issues, preventing them from causing financial leakage.

5. Reduced Manual Workload and Costs

By automating reconciliation, finance teams can significantly cut down the time spent on manual tasks, which also reduces labor costs. Instead of focusing on repetitive tasks, finance professionals can spend more time on strategic financial planning and analysis. Automation also reduces human errors, further lowering the risk of leakage.

Conclusion: Moving Beyond Manual Reconciliation

Reconciling transactions across multiple sales channels is one of the toughest parts of managing the O2C process for large retailers. The challenges of dealing with different payment methods, cross-channel transactions, international operations, and fragmented systems make manual reconciliation unrealistic. Without automation, achieving 100% reconciliation is almost impossible, leading to financial leakage that affects profits, compliance, and cash flow.

By investing in automated reconciliation solutions, large retailers can handle the challenges of multi-channel reconciliation, reduce discrepancies, and stop leakage. In the next article, we’ll explore how automation can transform reconciliation for large retailers and why it’s crucial for staying competitive in today’s retail world. Stay tuned as we continue to help you strengthen your financial controls and protect your profits.