Tentative Reconciliation

Modern Treasury now supports reconciling payment orders, expected payments, paper items, and returns (called “transactables” in this article) to pending transactions on a tentative basis. This is important for payment operations teams that want to closely manage an account throughout the business day by using pending transactions as soon as they show up. This reconciliation is in addition to our existing workflow that matches transactables to fully posted transactions.

When pending transactions are received, Modern Treasury will look for matching transactables that would reconcile to the transaction if it posts. If a match is found for the pending transaction, a new webhook event (“tentatively_reconciled”) will be issued for the reconciled payment items, and transaction line items will be created for the reconciled transactables.

Previously, a company would have to wait until the start of business the next day to be notified that a payment had been reconciled. With tentative reconciliation, they can have confidence of that payment happening as soon as the “pending” transaction is available. However, customers need to know that pending transactions do not always post.

An Example

To illustrate how you might use this feature, let’s imagine you are running a marketplace called Widget Foundry. This marketplace collects parts from Gizmos Inc. and send them to a buyer, let’s call them Regional Retailer.

Let’s say Widget Foundry wants to minimize the time between when funds are collected from Regional Retailer to the time it pays Gizmos Inc. for parts. The Widget Foundry initiates an ACH debit on Regional Retailer’s account through the Modern Treasury API during a business day. The next morning, Modern Treasury sees the pending credit transaction in The Widget Foundry’s bank account which matches the ACH debit initiated earlier that morning and emits a “tentatively_reconciled” event for the ACH debit payment order. The Widget Foundry creates an ACH next-day credit to Gizmos Inc. for the supplies they purchased, which arrives in Gizmos Inc.’s account the following day.

This workflow is a full business day faster than relying on reconciliation only to fully posted transactions.

Technical Implementation Guidance

Modern Treasury won’t “complete” transactables until they are matched to a fully posted transaction. When Modern Treasury tentatively reconciles a transactable to a pending transaction, the state of the transactable will not change.

However, transaction line items will be created, allowing an App or API user to traverse from a transactable to the reconciled pending transaction. Or vice versa from the transaction’s line items to the matching transactables.

When the transaction does post, Modern Treasury will archive the pending transaction and create a new record for the posted transaction. That new posted transaction record will be fully reconciled to the transactable. Note that with tentative reconciliation, a payment order may be reconciled twice to two different transaction records, first to a pending transaction, and then a second time to a posted transaction.

Changes in the App