A bank transfer has arrived in the account. The amount is clear, the date is clear. But who is the sender and which invoice does it correspond to? If there is only a name in the description field, this question can take hours.
This is one of the tasks where finance teams waste the most time. Moreover, when a mismatch occurs, the problem snowballs: one customer's payment is credited to another customer's balance.
In this article, we explained how incoming and outgoing transfers should be recorded, matching methods, and how to establish description discipline.
Table of Contents
Incoming transfers
An incoming transfer increases the account balance but does not generate an accounting entry on its own. For the record to be completed, it must be linked to a current account.
When this link is not established, the balance goes up, but the customer's debt does not decrease. The result is both incorrect receivable tracking and unnecessary reminder calls.
What is worse is sending a collection reminder to a customer who has already made their payment. This is a completely preventable mistake that harms the commercial relationship.
Therefore, incoming transfers need to be processed on a daily basis. An account reviewed once a week means a week's worth of incorrect balances.
Every processed transfer generates a collection receipt; it must also be specified which invoices this receipt closes.Collection and payment receipt article explains the matching logic.
Matching methods
There are several tips that can be used to link an incoming transfer to the correct current account, and their reliability varies.
Sender IBAN. This is the most reliable method. Once matched with the current card, all subsequent payments are recognized automatically.
Sender title.It generally works, but it has pitfalls. Payments made from a personal account on behalf of the company break this method.
Description text.If the invoice number is written, it gives the most accurate match; however, most customers do not fill out this field.
Amount.An amount that matches an open invoice one-to-one is a strong clue, but it does not work for rounded payments and partial collections.
Combining these clues with a rule engine automates the vast portion of matching; bank integration and rule engine we covered this structure in the article.
Establishing description discipline
The source of the matching problem is often the other party. A wire transfer sent with a blank description field wastes minutes on your end.
Part of the solution lies in communication. Asking your customers to write the invoice number or current account code in the payment description is a simple yet effective step.
Writing this request on the invoice makes the reminder permanent. A note field in the document design can be used for this; document design you can check out the article.
The permanent solution is the payment link. Payments made via the link arrive knowing which invoice they belong to, and the matching step is completely eliminated; payment link we discussed in the article.
Apply the same discipline to the payments you send; making your supplier's job easier also makes your reconciliation easier.
Outgoing transfers
Outgoing transfers are a more controlled process because you create the record. Still, there are points that require attention.
The first rule is that the invoice must be checked before payment. When an unmatched invoice is paid, the chance of catching discrepancies is lost; three-way matching see the article.
The second rule is IBAN verification. The supplier's account information must be saved on the card, and change requests must definitely be confirmed.
This confirmation step seems trivial, but fake account change requests are a common method of fraud. An IBAN change received via email must be verified by phone.
The third rule is to adhere to the payment plan. Payments made before their due date unnecessarily strain cash flow; cash flow tracking article.
Value date and timing differences
Transaction dates and account crediting dates in transfers are not always the same. This difference creates reconciliation issues, especially at month-ends.
A payment sent on the last day of the month may reflect in the counterpart's account the following month. Even if both parties record it correctly, the periods diverge.
Knowing this situation makes it easier to interpret reconciliation variances. A period difference is not an error, but a matter of timing.
Which date to use in records must also be established. The general approach is to base it on the account crediting date; this preserves compliance with the bank statement.
Listing these differences separately during period-end reconciliations speeds up the work; current account reconciliation article.
Unmatched records
Not every transfer can be matched. There may be a payment from an unknown sender, a refunded amount, or a bank correction.
These records need to be gathered in a separate list. When left in the main list, they both create confusion and get forgotten.
The list should be reviewed regularly. If the number of pending records is increasing, either new customers have been added or a rule has been broken.
It may be necessary to call customers for amounts that remain unmatched for a long time. The question "We received a payment, is it from you?" is usually answered quickly.
Tying the number of pending records to a notification upon exceeding a threshold prevents the list from being overlooked; notifications carry this signal.
Authorization and security
Banking transactions are one of the most sensitive areas of a business. Authorization design must align with this sensitivity.
The basic principle is that the person creating the record and the person executing the payment must be different. This separation largely closes the most common fraud scenarios.
Account viewing authority should also be restricted. The number of people who can see all bank movements should be kept narrow depending on the size of the business.
In multi-company structures, accounts should be separated by scope; the responsible party of one company should not see the account of another. Multi-company model provides this distinction.
All these records are kept in the finance module; you establish the authorization design through authorization.
Frequently asked questions
Can a single bank transfer close multiple invoices?
Yes. In bulk payments, a single collection receipt is distributed across multiple invoices; the closed amount of each invoice is tracked separately.
What happens if a customer overpays?
The excess amount remains as a credit in the current account and is offset against the next invoice, or it can be refunded.
How are transfers between my own accounts recorded?
These are not collections or payments, but internal transfers; you can check the internal transfer article.
Where are bank charges recorded?
They are recorded as a separate expense item; see the service and expense definitions article.
Bank transfer management is more a matter of discipline than technique. Once the habit of daily processing and description order is established, hours of searching drop to minutes.
As a first step, we recommend entering the IBAN information of your top twenty customers into their current account cards. This single effort makes the majority of incoming payments automatically recognizable.
Next, add the pending records list to your weekly agenda. As the list gets shorter, both balances stay up to date and unnecessary collection calls end.
By consulting the EQLEM team, you can plan your bank transfer workflow and matching rules.