If you are running a high volume ecommerce that relies on warehousing inventory, you will have to, from time to time, do vendor reconciliation. What you’re checking for is if your vendor has shipped what you’ve paid for and have you paid for what they’ve shipped.
The more returns, alterations, backorders, rush orders and restocks you have, the more likely it is that things will not match 100%. Depending on the terms of your vendor contract, you’ll have to decide how much of a difference is just part of doing business and how much is a problem.
Customer reconciliation
In B2B ecommerce businesses, where it’s more likely that credit will be given to customers, it’s possible that customer reconciliations will need to be done from time to time. Like the vendor reconciliation, you’re checking that the customer has received what they’ve paid for and paid for what they’ve received.
For most B2C ecommerce, customers pay at the moment of purchase, so customer reconciliation isn’t needed. The customer may pay with a credit card or choose BNPL, which is also a form of credit, but since it isn’t your company that’s extending the loan, it’s not something that needs to go on your books.
Intercompany reconciliation
This type of reconciliation will almost always be done by an accountant. A parent company with one or more subsidiaries will need a consolidated record of accounts for taxes and forecasting. An intercompany reconciliation deals mostly with things like one business loaning cash to another or declaring dividends.
Expense reconciliation and inventory
The two other main types of reconciliation that apply to ecommerce businesses are expenses and inventory. Expense reconciliation is usually travel and hospitality expenses from sales teams and other company events. The process is the same – do the receipts handed in match the payments made?
Inventory is sorting out how much actual product is in the warehouse vs. how much the ledger says there should be. A big discrepancy means there are some pretty big problems in your recordkeeping or inventory control processes.
Staying on top of these types of reconciliation is important for cash flow, valuation and all sorts of other business processes like forecasting and policy development. The more you know, the stronger your business will be no matter what the future brings.
