Keeping your company’s account reconciliation processes in good shape is essential for catching financial accounting misstatements and other issues. The Journal of Accountancy states that balance sheet account reconciliations are “one of the oldest and most important accounting processes,” yet, an underappreciated internal control over financial reporting.
Even if you’re doing reconciliations today, there is likely room for improvement. What should your accounting personnel be doing when it comes to making your account reconciliations better? Here are a few tips:
- Prioritize balance sheet accounts with the greatest risk of error. Not all balance sheet accounts need to be reconciled on a monthly basis. Take a risk-based approach to account reconciliations to focus your resources and reduce workload for your accounting staff who is creating those recons. Risk might be determined by a month-over-month variance threshold or variance from a typical balance (e.g., an account that normally has a credit balance has a debit balance).
- Standardize your account reconciliations. Having a similar format for all account reconciliations will keep your records organized and easy to understand. Include details like the preparer name/account owner, description of the account, general ledger or other reference numbers, supporting trial balance details, journal entry activity for the account, and account recon details.
- Attach supporting documentation. This might include copies of bank statements, journal entries, subledger system reports or email documentation. You must document any variances between supporting documentation and balance sheet account balances. Those might include GL activity or timing differences. Any reconciling items should be addressed too: what actions will be taken and when those items will clear.
- Improve organization around account reconciliations. Accounting staff have many priorities and it is not uncommon for account reconciliations to become rote or even overlooked. Establish ownership of each account to ensure proper attention is paid to each. Staff should be held accountable for timely and complete processing of transactions, and peer review should be a part of the process. Periodic review of account reconciliations is key to identifying process improvements, potential risk as well as upside to financial statements.
- Use software to help. Account reconciliation software can standardize and automate the account reconciliation process, keeping your balance sheet accounts accurate and speeding up the monthly closing process. A software solution can help you improve your balance sheet integrity and avoid the inherent problems of manual account reconciliations—like version control and unidentified discrepancies. Check out BlackLine, Trintech and FloQast for starters (but there are others too).
What if your financial close process isn’t smooth?
If you’ve grown rapidly, acquired another company (or have been acquired), or are short-staffed, and your financial close process is currently chaotic and stressful, it’s important to improve the reconciliation process as soon as possible.
TGRP Solutions can assist. Cleanup projects for accounting departments are one of the specialties of our accounting consulting team, and we are equipped with the skills and team to come into your organization and lighten the load of your overwhelmed accounting staff. We can help automate and improve your reconciliation and monthly close process, whether it is a manual effort using Excel or whether you have software that you’re not putting to use like you should be.
The TGRP Solutions team helps many Colorado companies improve their accounting processes fast. Our professional accounting consulting team can also establish policies and procedures to standardize everything too. That way, your entire staff is on the same page and the reconciliation process is smooth and simple—like it should be.
Call us to learn more about our staff augmentation services and accounting consulting services today at 303.789.1500, or contact us now. Need accounting recruiters in Denver to help you staff up? We’re one of the few locally based accounting recruitment agencies in Denver. Contact us now
