Reconciliation
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Before setting up reconciliation, understand:
- Settlement Lifecycle how transactions move from capture to deposit
- Money Flow fee deductions and who gets paid
- Reading Statements how to interpret processor reports
Reconciliation is comparing what you think happened (your sales records) against what actually happened (your bank deposits). It sounds simple until you try to do it.
The Three-Way Match
Proper reconciliation involves matching three sources:
| Source | What It Shows | Where to Get It |
|---|---|---|
| Your POS/system | Every transaction processed | Your terminal, gateway, or POS software |
| Processor settlement report | Transactions settled, fees charged, chargebacks | Processor portal or API |
| Bank statement | Actual deposits received | Your bank |
All three should match. When they don't, you have a discrepancy to investigate.
Your reconciliation obligation:
Per Mastercard's Rules: "It is the responsibility of each Customer to reconcile the totals and Transactions provided by the Interchange System to its own internal records on a daily basis."
This isn't just best practice. It's a network requirement.
Why They Don't Match
Timing Differences
The most common issue. Your POS shows $10,000 in Monday sales. Your processor report shows $10,000 settled Tuesday. Your bank shows $9,720 deposited Wednesday. This is normal. They're just looking at different points in the timeline.
Fee Deductions
Your sales were $10,000 but your deposit was $9,720. The $280 difference is fees. If you don't account for this, you'll think you're short. See Reading Statements for how to interpret fee deductions.
Batching Differences
You processed 100 transactions Monday. Your processor batched 98 of them Monday night, and 2 of them (captured after cutoff) Tuesday night. Your reports will show different counts for "Monday."
Chargebacks and Refunds
A chargeback or refund gets deducted from your current settlement, not matched against the original transaction. A $500 chargeback on an order from 2 months ago shows up as a deduction in today's settlement.
Reserves and Holdbacks
Your processor might be holding 10% of your settlement in reserve. Your sales say $10,000, your fees are $280, but you only received $8,748. That's the reserve. See Holds and Reserves.
Common Discrepancies
| Discrepancy | Likely Cause | How to Fix |
|---|---|---|
| Transaction in POS, not in settlement | Auth only, never captured; voided; rejected at clearing | Check transaction status in gateway |
| Transaction in settlement, not in POS | System not syncing; manual transaction on terminal | Check all transaction sources |
| Amount mismatch | Tip adjustment; partial capture; currency conversion | Compare original vs settled amount |
| Extra fees | PCI non-compliance fee; chargeback fee; statement fee | Review fee schedule |
| Missing deposit | Batch didn't close; settlement rejected; bank holiday | Check batch status, bank account |
| Unexpected deduction | Chargeback; refund; adjustment; reserve | Review processor deductions report |
Reconciliation Frequency
How often should you reconcile?
| Business Type | Recommended Frequency | Why |
|---|---|---|
| High-volume e-commerce (1000+ txns/day) | Daily | Discrepancies compound quickly; fraud detection |
| Medium retail (100-1000 txns/day) | Daily or every 2-3 days | Catch issues before they age |
| Low-volume (under 100 txns/day) | Weekly | Sufficient for error detection |
| All businesses | Monthly (at minimum) | Month-end close, financial reporting |
The 3-day rule: Discrepancies are 10x easier to investigate within 3 days. After 30 days, some become impossible to resolve.
The Reconciliation Process
Step 1: Export Your Data
- Pull settlement report from your processor (by settlement date)
- Pull bank statement or transaction export
- Export your POS/sales data for the same period
Step 2: Match Gross Amounts
- Total sales from your system
- Total settled amount (before fees) from processor
- Should match (or difference should be explainable)
Step 3: Verify Fees
- Expected fees based on your rate and volume
- Actual fees charged
- Variance should be under 1% (some interchange variation is normal)
Step 4: Match Deposits
- Settled amount minus fees = expected deposit
- Actual bank deposit
- Difference = chargebacks, reserves, or adjustments
Step 5: Investigate Discrepancies
- Document each discrepancy
- Research root cause
- Resolve or escalate
- Track patterns over time
Automation vs Manual
Manual reconciliation works when you're processing a handful of transactions. At scale, you need automation:
| Volume | Approach |
|---|---|
| Under 100 transactions/day | Spreadsheet reconciliation feasible |
| 100-1000 transactions/day | Semi-automated (import/match tools) |
| 1000+ transactions/day | Fully automated reconciliation software |
Most payment processors offer reconciliation reports and APIs. Your accounting software (QuickBooks, NetSuite, etc.) may have integrations. Third-party reconciliation tools exist for complex multi-processor setups.
Settlement Holds and Reserves
Not all of your money makes it to you right away. Processors and acquirers manage risk by holding funds in certain situations.
| Reserve Type | How It Works | Typical Terms |
|---|---|---|
| Rolling | % held each batch, released after X days | 5-10% for 90-180 days |
| Capped | % held until reaching maximum | 10% up to $50K |
| Upfront | Lump sum held before processing | $10K-$50K |
| Minimum | Floor that must be maintained | $5K-$25K minimum |
See Holds and Reserves for complete coverage of why funds get held and how to negotiate reserve release.
Next Steps
Just learning reconciliation?
- Pull your last week's deposits and match them to sales
- Ask your processor for fee breakdown documentation
- Identify your batch cutoff time
Handling discrepancies?
- Understand chargebacks → Disputes cause the biggest gaps
- Build a fee tracking system → Catch overcharges
- Review your processor contract → Know what you agreed to pay
See Also
- Reading Statements - Interpret your processor statements
- Chargebacks - Dispute impact on reconciliation
- Holds and Reserves - Reserve mechanics
- Processor Management - Working with your processor
- Chargeback Metrics - Track dispute impact