How Can Businesses Improve Account Reconciliation Processes?

Reconciling accounts is a neglected yet critical control activity that plays a crucial role in ensuring the financial integrity of an organization. Inefficiencies and weaknesses in the process can lead to errors on the balance sheet and inaccuracies in your financial reports.

Ensuring account reconciliation accuracy is increasingly important since the introduction of Sarbanes-Oxley and other similar regulations and rules. The need for reconciliation accuracy and reporting has become so important that any material error in the quarterly or yearly SEC report can make the company have to refile or explain their actions, which can be a costly and time-consuming process for a company.

Inaccurate and delayed reporting can also lead to costly decisions. The best way to avoid errors and ensure accuracy is to implement a solid reconciliation process that creates a foundation for supporting company decisions, evaluation performance, and complying with rules and reporting regulations, which is likely to save the business money and time in the long run.

Reconciling business accounts eliminate risk of errors along the way: correcting the issues right away minimizes major problems down the line. Improving the process further reduces the chances of having incorrect credit card and bank statements when they arrive, saving organizations the headache and the long time-consuming process of going back and forth to see what was wrong.

While you may have accounts taking care of the process, here are some additional best practices for improving account reconciliation activities:

Simplify the process

Match the statement beginning balance to the bookkeeping software beginning balance. Next, input ending balance, ending date, and charges or interest income. Then check and compare booking records and statements.

Keep the process simple by doing one thing at a time: tie withdrawals first, deposits later, for example. Similarly, reconcile a page or two of statement at time. A rule of thumb could be to finish the easy recording first, then continue reconciling complex entries in small sections. Then narrow down anything left and it would be easy to sort tricky parts, such as issues in credit card processing comparing bank deposits and merchant statement.

Automate the process

Having the entire process nailed down is important to eliminate any inaccuracies in the balance sheet. While the accounting department can do it all in an Excel spreadsheet or by hand, manual reconciliation leaves the data open to human error. Automation is therefore a critical step in the goal to achieving integrity of the balance sheet.

Resources like Trintech reveal that automation can also help businesses with general ledger account reconciliations, balance sheet certification and variance analysis. Also, organizations have relied on manual processes in case of multiple depositing locations; automation reduces the risk of error, theft, fraud and the time period which can take up to sixty days in case of manual reconciliation.

Follow quality assurance framework

Good processes and tools provide a framework for ensuring accuracy, quality and completeness. They also translate into a quality assurance framework for tracking due dates, assignments and work completion.

A robust account reconciliation policy is going to focus on the right automation on the right activities and bring improvement by giving management real-time information around the close date of processes. Use quality frameworks for improving various type of reconciliations and ease of reviewing completeness and accuracy.