What Are the Steps in Payment Posting?

Payment posting is a fundamental process in accounting and financial management, involving the accurate recording and application of payments received from customers, clients, or third-party payers. This procedure is central to maintaining precise financial records, managing revenue effectively, and ensuring the financial stability of an organization. By accurately posting payments, businesses gain a clear picture of their financial standing, track outstanding balances, and identify any discrepancies in the payment cycle. It is a necessary step that verifies the accuracy of transactions, ensures correct crediting or debiting of accounts, and reduces the risk of errors and fraud.

Collecting Payment Details

The initial stage of payment posting involves gathering all necessary payment information and supporting documentation. Payments arrive through various channels, each with distinct accompanying paperwork. Physical checks, often received via mail, typically include a remittance stub or a simple note indicating the invoice being paid. Credit card payments, whether processed online or in person, generate electronic transaction records. Electronic Funds Transfers (EFTs) facilitate direct bank-to-bank transfers, often accompanied by an Electronic Remittance Advice (ERA), a digital document from the payer to the provider, detailing how claims were processed, including payment amounts, adjustments, and denials; for healthcare services, an Explanation of Benefits (EOB) is also provided to the patient, outlining how insurance benefits were applied to services rendered, including covered amounts and patient responsibility.

Verifying Payment Information

After collecting payment details, the next step involves a thorough verification process to ensure accuracy before recording. This requires reconciling the received payment amount against the expected amount based on invoices, claims, or account balances. Utilizing accompanying documentation, such as EOBs, ERAs, or general remittance advices, is essential to understand how the payer applied the payment. This verification includes identifying covered amounts, patient responsibility components such as deductibles, co-pays, or co-insurance, and any adjustments or denials. A meticulous matching of individual line items on the payment advice to the corresponding services or items on internal records is performed to identify discrepancies or partial payments.

Entering Payments into Records

Once payment information has been thoroughly verified, the core action of payment posting involves entering this data into the accounting or billing system. This procedural step updates financial records to reflect the received payments accurately. Key fields to update include the payment date, the amount received, information about the payer, the customer or patient account number, relevant service codes, and the specific type of payment received. The accounting system uses this input to update account balances, mark invoices as paid, and apply any necessary adjustments or write-offs. Many organizations process payments in batches for efficient processing and control, which streamlines data entry and ensures systematic recording within the general ledger system.

Addressing Variances

Even after careful verification, received payments may not always perfectly match expected amounts, leading to variances. Common reasons for these discrepancies include underpayments, which can arise from deductibles, co-pays, non-covered services, or partial payments, as well as overpayments or outright denials. Resolving these variances requires investigating the reason for the difference, which may involve examining contracts, reviewing service codes, or contacting the payer for clarification. Appropriate adjustments are then applied, such as contractual write-offs to account for agreed-upon discounts, small balance write-offs for minor differences, or bad debt write-offs for uncollectible amounts. For underpayments, follow-up actions like contacting the payer or customer are initiated, while overpayments may require processing refunds; denials necessitate appeals or further investigation to recover the revenue.

Daily Closing Procedures

At the close of each payment posting cycle, typically daily, specific procedures are performed to ensure accuracy and internal control. This involves reconciling the total amount of payments posted in the system against the total amount of payments actually received. This reconciliation process often includes matching the system’s posted totals with bank deposit slips or electronic payment reports. Generating daily payment reports is a standard practice, providing a summary of the day’s posting activity, including payment types, amounts, and adjustments. These procedures are essential for identifying errors promptly, maintaining financial record integrity, and ensuring cash flow reflection.