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Keep Financial Records Up-to-date With Account Reconciliation Process

Last updated: 18 Aug, 2021 By | 6 Minutes Read

The account reconciliation process is an important step followed in business organizations. It ensures that the balances displayed in the company’s financial records and the bank statements are the same. In case there are any disparities between the statements, then they are corrected during this process.

But there is always a chance of human errors in the reconciliation of bank accounts process as various steps reconciling, balancing, posting journal entries and researching discrepancies are involved in it.

Two Approaches to Account Reconciliation

1. Documentation Review

The account reconciliation approach which is preferred by the auditors is the document review. This method includes the use of accounting software wherein account details can be accessed in order to know the genuineness of every transaction mentioned in the account. For instance, during the reconciliation of trade accounts receivable, you should make sure that the sum of the report for open accounts receivable matches the balance amount in the account.

2. Analytics Review

In the analytics review approach, an estimate is created explaining what needs to be included in the account based on activity levels in the past or other metrics. For instance, seeing whether the bad debts amount which is expected in the open accounts receivable account matches the balance amount in the contra asset account.

In order to ensure that the account reconciliation process is performed in an accurate manner for keeping the financial records up to date, the following measures should be followed:

1. Complete & Accurate Account Reconciliation

It is vital that all the accounts which are appropriate are reconciled along with the new accounts. A policy for reconciliation should be in place which ensures every reconciliation process to have proper reconciliation procedures, account title and description along with the inclusion of the documents which support the account balance.

The account preparation and review should align with the account use and its role in balance support. The latest account balances which are correct in every form should be reconciled along with a careful watch on the account balances which look odd.

2. Timely Account Reconciliation for Reviewal

The very first step to have a timely account reconciliation for reviewal is the creation of due dates for reconciliations. A mechanism should be in place to track every reconciliation status and the risky reconciliations should be made due first in order to get hold of any potential difficulties.

Apart from this, it is recommended to have unknown differences’ reviews with important adjustments posting during the open accounting period.

3. Abiding Accounting Principles

One must abide by the local accounting principles such as past costs, full disclosure, and matching during account reconciliation. Apart from following the policies of a company, the reconciliation should identify the differences of the material unidentified. The transactions too should follow the practice of conservatism in the general ledger balance.

4. Process Automation-

The reconciliation process is all about verifying and certifying financial information. This is a tedious and laborious task. By using automated workflows, the accounting team can easily receive submission confirmations, due date reminders, approvals, rejections, assignments, alerts, etc.

This will help in making the process simpler for the accounting team and hence enhance the accuracy.

5. Cloud Usage-

Utilizing the cloud option for bank reconciliation can prove to be extremely useful. This feature enables accountants to have access to the data from anywhere by having an internet connection.

This will help the accounting team in remaining updated with the entire process and ensuring that no mistakes due to lack of coordination occur.

Conclusion

The account reconciliation process surely plays a significant role in managing the finances of a business well. Through regular reconciliations, a business not only saves itself from any possible financial error but also prepares itself easily for tax filing at the end of the fiscal year.

Cogneesol is well known for offering outsourced finance and accounting services to commercial organizations at affordable costs. These services are aimed at enhancing the profitability of the organizations by reducing their operational costs. To get more information, contact us at info@cogneesol.com or call us at +1 646-688-2821.

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