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Blog » Business Account Reconciliation: Major Challenges and Their Solutions

Business Account Reconciliation: Major Challenges and Their Solutions

Last updated: 17 Nov, 2023 By | 6 Minutes Read

Account Reconciliation

Account reconciliation can have a significant influence when understanding the monetary wellbeing of your business. This makes it a vital process for any business, regardless of size and industry. However, streamlining the bank account reconciliation process can be complex for certain organizations.

Research by Adra Match states that only 28% of finance professionals have faith in their month-end numbers. Hence, for every business, reconciliation is necessary to obtain essential insight regarding a business’s cash flow, leading to more faith in their month-end numbers. However, there are additional causes as well for making this a priority.

Challenges Faced by Businesses and How to Overcome Them

Typically, accounts do not instantly reconcile. It requires some investigative work to determine where discrepancies originate and what entries you enter to ensure accuracy in books. In other cases, potential reconciliation issues can arise the requirement for new payment terms for business partnerships, available banking options, or withdrawal security. Lets’ dive into the challenges that industry experts face and suggestions for tackling them.

1. Determining Deposits

Stephanie NgStephanie Ng, CPA at New Sight Eye Care

In day-to-day accounting, one bank reconciliation challenge you might face is determining whether or not an item is a deposit in transit. The date you record the deposit in your books and the date the bank processes the deposit can vary, especially during weekends or bank holidays.

When the cut-off period dances around the end of a fiscal period, it’s pertinent to determine which period the deposit belongs in. So, how do you choose the period to ensure the bank and books reconcile? An easy solution is to consider when the entity effectively received the deposit. For example, if a business sent the deposit to the bank on July 30 but didn’t process it until August 1, this is a deposit in transit. But, on the other hand, the business received the funds in July, so accrual basis accounting dictates that we record the deposit in the effectively received period (July).

If you recorded a journal entry to account for the deposit in transit, you’d need to reverse the journal entry you recorded to clear the funds. Without this, you’ll continue to discover the same discrepancy in months or years to follow. Keeping this in mind will help you ensure that you don’t run into any major problems when performing reconciliations at the end of the period!

2. Not Falling Behind

LiamScott Ackerman, CFO at Scott Ackerman Consulting

Suppose the monthly bank reconciliation for your company takes 3-4 hours to complete; however, you’re not getting anywhere. In that case, it may be easier to find an hour a week or 2 hours every two weeks to perform more frequent reconciliations. It sounds counter-intuitive, but the risk is that you fall a few months back. If you’re looking at several days of work to get caught up, it becomes even harder.

3. Unauthorized Withdrawals

Perry ZhengPerry Zheng, CEO & Founder at Cash Flow Portal

Unauthorized withdrawals pose a severe challenge to bank account reconciliation, as they cause the values on bank records and bookkeeping statements to differ considerably. Whether these withdrawals occur internally by an employee or by a third party that has breached the account, they lead to misuse of bank accounts.

In my opinion, the best way to overcome the threat of unauthorized withdrawals is to be preventive and set up robust security measures. Make sure you set up biometrics whenever you have to access your bank account. As a further measure, set up a strong password in case there is some problem with biometric authentication, and don’t share it with anyone else.

    4. Difference in Formating

    Sue Hirst

    Sue Hirst, Co-founder & Managing Director at CFO On-Call

    We live in a digital world where every company has its own formatting system. While it can bring convenience into working, it can also give rise to issues like businesses not finding banks that deal with their way of formatting. This is a prevalent issue faced by every organization when it comes to bank account reconciliation. The most common data communication standard for banks is the SWIFT family, which deduces MX and MT messages. However, a company might not deal with these data communication techniques depending on its location.

    Solution: Banks and companies alike need to regulate data communication standards. For example, banks should establish and strictly follow a set system of formatting to provide a safe and secure way to process transactions. In addition, the SWIFT family system should be introduced in remote locations for better reach and improved communication between banks.

    5. Trade Volume and Compliance Requirements

    Edward MellettEdward Mellett, Founder of Wikijob.uk

    With so many people participating in reconciliation, one of the main issues teams confront is data volume. The sheer volume of trade transactions, the complexity of the instruments, and the varying compliance requirements across worldwide markets provide a significant challenge to teams already under great time constraints. For example, truncated transaction information or missing payment references might make manual matching a headache, halting the reconciliation process.

    Increasing regulatory requirements further complicate reconciliation, notably in transfer pricing. Data mismatches and poor reconciliation methods lead to unrecorded interpretations, unclear deals, and runaway processes because many treasury teams are thinly spread or lack centralized functions. Much of this is due to human error, and even minor errors can be devastating. These can be overcome using a robust accounting software that automates everything.

    Overcoming the reconciliation hurdle

    Treasury teams are constantly challenged to do more with less. They are being pushed to play a more prominent strategic role inside their organizations while simultaneously expanding their operational to-do lists, resulting in thin finance leadership. That’s why, according to PwC’s latest Global Corporate Treasury Benchmarking Survey, 67% of treasury professionals no longer report directly to their company’s treasurer. Reconciliation is currently among the top three time-consuming operational tasks for small businesses, compared to barely a quarter of large companies. Treasury teams must first overcome some frequent roadblocks to speed up the reconciliation process and uncover value in smaller organizations. Fortunately, those obstacles can be easily overcome.

    6. Untimely Transaction Recording

    Adam GarciaAdam Garcia, CEO at The Stock Dork

    Timing is a very sensitive issue when it comes to bank reconciliation. Your business might have all the transactions recorded in your ledger, but some of them take longer than others to process. This is why they don’t appear on your bank reconciliation statement. Examples of such transactions include cash in-transit and outstanding checks. A business would ideally want all of their transactions to appear at the correct time on their statements so there is no mismatch.

    The best solution for such a challenge is to use a reconciliation software, which will mark any such transaction as ‘open’ and wait until they are processed by the bank. In extreme cases, where the bank is taking too long, these can also be carried forward to next month’s reconciliation.

    7. Outstanding Checks

    John Marsano, CEO & President at Inheritance Advanced

    When you issue a check and there is a delay before depositing or encashing, reconciliation issues can occur. Checks that are not clear and are not present in the book may also cause reconciliation problems for businesses. Typically, you have 90 days to encash the check, once you cross the timeline, you need to take additional actions. What you need to do is maintain a balanced checkbook to avoid this issue. Also, if a check is outstanding, always inform the payee so they can get involved, or issue you a new check.


    Keeping all these challenges in mind, it is obvious why bank reconciliation needs great effort and attention to obtain desirable results. During the closing of the month, reconcile your business transactions, and take care of exceptions. That is why numerous companies rely on specialized external experts that offer account reconciliation services which relieve them from the burden of managing the complete process themselves. The value which this option brings is significant and spread in many areas.

    However, it is essential to choose a competent accounting services firm that can efficiently help you streamline your accounts reconciliation process. Cogneesol is one such firm that offers intelligent, cost-effective, and customized accounting services to businesses and CPAs worldwide. To learn how we can assist you, Call us at +1 646-688-2821 or email at [email protected].

    Read Also:

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    Bank Account Reconciliation – 10 Smart Steps to Smooth up your Process