What is accounts receivable reconciliation?

Accounts receivable reconciliation is the process of matching incoming payments (cash, checks, wires) to the corresponding open invoices in the general ledger to ensure customer balances are accurate.

How do you handle unapplied cash?

To handle unapplied cash, finance teams must investigate the payment source, request remittance advice from the customer, or use automated software to match the payment amount to open invoices.

What is the difference between AR reconciliation and bank reconciliation?

Bank reconciliation ensures the cash balance in the GL matches the bank statement. AR reconciliation ensures the individual customer balances in the sub-ledger match the total Accounts Receivable balance in the GL.

Blog Post

Guide
January 13, 2026

Accounts Receivable Reconciliation: Matching Invoices to Payments

"Cash is king," but only if you can apply it. For Accounts Receivable (AR) teams, the daily battle involves more than just collecting money. It involves matching that incoming payment to the correct open invoice. When customers pay a lump sum for 10 invoices, or short-pay due to a dispute, manual accounts receivable reconciliation becomes a bottleneck that traps cash on your balance sheet.

The Pain of Unapplied Cash

Unapplied cash is money that is sitting in your bank account but hasn't been credited to a customer's account. Why does this happen?

Missing Remittance: The customer sends a wire transfer but forgets to email the PDF listing which invoices they are paying.
Short Payments: The customer deducts $50 for a damaged item but doesn't explain why.
Combined Payments: A single check covers invoices #101, #103, and #107, skipping #102.

Manual Matching vs. Automation

In a manual world, an AR clerk prints out the bank statement and the open invoice list, then spends hours hunting for combinations of invoices that sum up to the payment amount. It's like solving a math puzzle every day.

Automated accounts receivable matching flips this script. Modern software uses algorithms to solve the puzzle instantly.

1. Intelligent Remittance Capture

Advanced tools can scrape remittance advice from emails, portals, and even PDF attachments. They extract the invoice numbers and amounts, creating a digital "cheat sheet" for the matching engine.

2. The "Knock-Off" Logic

The software doesn't just look for exact matches. It looks for logical combinations. "I see a payment for $1,250. Do any open invoices sum to $1,250?" If yes, it suggests a match. This capability drastically reduces the unapplied cash balance.

Handling Discrepancies

What about when the numbers don't match? A good reconciliation tool allows you to:

Create Deductions: Automatically create a "short payment" deduction in the ERP so the rest of the cash can be applied.
Route for Approval: Send the discrepancy to the account manager for review without leaving the platform.

Accelerate Your Cash Cycle with Reconwizz

Reconwizz isn't just for bank recs. Our powerful matching engine is perfect for high-volume Accounts Receivable teams.

By automating the matching of payments to invoices, you reduce your Days Sales Outstanding (DSO) and give your team the visibility they need to chase real collections, not paperwork.

Unlock your cash flow. See how Reconwizz automates the "Cash Application" process. Book a personalized demo today.

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