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

The account reconciliation process is crucial for business organizations. It ensures that there’s a balance between financial records and bank statements are the same. It is a process for fixing disparities between the statements to achieve long-term financial success.

But there is always a chance of human errors in the reconciliation process. It is because there are various steps such as reconciling, balancing, posting journal entries and researching discrepancies.

Two Approaches to Account Reconciliation Process

1. Documentation Review

Document review is the most common account reconciliation approach that auditors use. This method includes the use of accounting software wherein you can access account details to know the genuineness of every transaction 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, auditors create an estimate explaining what you should add in the account based on activity levels in the past or other metrics. For instance, reviewing the bad debts amount in the open accounts receivable matches the balance amount in the contra asset account.

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

3. Complete & Accurate Account Reconciliation

It is vital that all the accounts that are appropriate are reconciled along with the new accounts. A policy for reconciliation should be in place that ensures every reconciliation process to have proper reconciliation procedures, account titles, and descriptions along with the inclusion of the documents that 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 that look odd.

4. Timely Account Reconciliation for Reviewal

The very first step to having 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 posted during the open accounting period.

5. Abiding Accounting Principles

One must abide by 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.

6. 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 accuracy.

7. 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 remain updated with the entire process and ensure 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.

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