Reconciliation
Reconciliation is checking your invoice records against your bank statement. It confirms that every payment you expect arrived and every payment that landed is accounted for. Do it every month.
What it means
It is easy to mark an invoice paid from memory, or from a client's text saying "just sent it". The payment may never land, or it may land as a different amount. Reconciliation means putting your invoice list next to your bank statement. You check that they agree, line by line.
It also catches errors that do not announce themselves. Examples are a duplicate payment or a bank fee that ate part of a transfer. Another is a client who paid the wrong invoice number. None of these show up unless you compare the two records on a regular schedule.
Your records show invoice 1038 paid on the 12th. The bank statement shows that day's deposit is $40 short of the invoice total. The client's bank took a transfer fee out at their end. Reconciling catches the $40 gap before it gets lost.
Marking invoices paid on a client's word without checking the bank statement. Small gaps pile up for months before anyone sees the total is wrong.
See also
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