All About Data Reconciliation in Saudi Arabia

Nowadays, data plays an important role for any business across the globe. Further, businesses rely on accurate, updated data to make informed decisions and drive growth. However, inappropriate management of vast volumes of data can lead to errors and discrepancies. Hence, businesses must do data reconciliation to ensure integrity and reliability. 

This article explains data reconciliation, including what it is, its importance, who can implement it, and its role in Saudi e-invoicing.

What is Data Reconciliation?

Data reconciliation, known as data recon, means comparing data sets from different sources to ensure consistency, reliability and accuracy. However, businesses must adopt technology to handle vast amounts of information from various resources since traditional tools are very slow in processing large amounts of data, and manual effort becomes huge. Further, technology usage ensures data integrity and helps business owners make decisions based on accurate information.

Suppose ABC Industries plans to track sales at online stores and physical retail outlets. The total sales from these two sources should match the sales in accounting books for any given period; Otherwise, it can cause a problem. In this scenario, data reconciliation helps find the discrepancies and ensure the accuracy of financial records to reflect the actual performance.

Why is data reconciliation important?

Data reconciliation is crucial for many business functions, including inventories, invoices, sales, contracts, payments, banks, and claims. Hence, a business needs to perform data reconciliations.

Here are a few reasons explaining the importance of data reconciliation:

1. Ensure records and stored information are consistent and reliable.
2. Help early identification of differences and errors in data.
3. Provide an accurate state of the business. 
4. Comply with the regulations and avoid potential penalties/ fines.
5. Disclose the anomalies that might lead to internal fraud or unintentional errors.
6. Identifies the person responsible for any mistake/ error and enhances the internal process.

Which companies can implement Data Reconciliation?

Businesses across different industries must adopt the latest technologies to perform data reconciliations. Here is the list of a few companies that must perform data reconciliation:

What is the role of data reconciliation in Saudi e-invoicing?

The Kingdom of Saudi Arabia (KSA) government has mandated the generation of e-invoices for all sales transactions. Also, large enterprises have multiple systems to record sales at multiple stores/locations. Further, all these invoices must be reported to the government as e-invoices.

Accordingly, businesses should ensure 100% integration between the sales register and e-invoices through a monthly reconciliation/matching for accurate reporting in Value Added Tax (VAT) returns. In case of a difference between the VAT returns and the VAT calculated from the e-invoice data, then the government would send a notice to the business seeking an explanation. Hence, data reconciliation between these two data sets holds importance.

However, manually comparing sales and e-invoice data every month is a tedious process prone to errors. This manual reconciliation leads to unidentified differences between the data, eventually leading to notices and fines/penalties. Moreover, this process takes a minimum of ten days, and if the volume is huge, it can take up to 28 days to complete the reconciliation.

Hence, the tax teams are advised to automate the reconciliation between sales and e-invoice data to identify differences and take corrective actions as required.