How to Do Balance Sheet Account Reconciliation

During the financial close, one of the most common and necessary steps is completing thorough balance sheet reconciliations.

Accountants must reconcile credit card transactions, accounts payable, accounts receivable, payroll, fixed assets, subscriptions, deferred accounts, and other areas against the general ledger, or balance sheet.

Balance sheet reconciliation verifies the accuracy of the balance sheet by comparing the numbers on the general ledger to other forms of documentation, to explain any discrepancies.

Essentially, reconciliation is done to verify that accounting for a certain period has been accurately portrayed on a company’s books.

While the definition of balance sheet reconciliation may be straightforward, the logistics can be a nightmare when all the tasks are being done manually. This is especially true as businesses grow, and accounting teams struggle to keep up with the pace of business.

All of the tasks that go into the financial close—completing checklists, balance sheet reconciliations, submitting journal entries, ticking and tying unmatched transactions, doing flux analysis against prior periods—make the traditional, manual methods of accounting unsustainable.

These processes are made even harder by outdated technology and disconnected data from multiple ERPs, subledgers, banks, and other sources, requiring extensive use of spreadsheets and a huge amount of manual, repetitive work.

Modern accounting technology has changed the way so many people do their work, especially as we’ve been tasked with adopting a virtual workplace over the course of the last year.

The pandemic forced accounting and finance teams to figure out how to close virtually, almost overnight, and those who already had the right technology in place were able to close on time—and with confidence.

Modern accounting technology has made the virtual close process—and specifically the balance sheet reconciliation process—unified, automated, and continuous.

By integrating financial close technology into your balance sheet account reconciliation processes, you’ll gain:

• A central workspace with automated trial balance imports

• Standardized reconciliations with automation

• Tracking for dynamic and transparent close activities

• Role-centric reporting and proactive task alerts

• Rules-based transaction matching for bank files

• Enhanced controls

Reconciling your organization’s balance sheet is a critical component of the financial close.

For strategic finance and business decisions to be made in a timely and effective manner, business owners need to be confident that they’re getting accurate information from the balance sheet.

Modern accounting technology provides unification across your systems and data for a single source of truth, and standardizes processes for consistency, efficiency, and control.

Modern accounting technology embeds automation into your processes, which reduces time spent on rote, manual tasks and frees your team to focus on higher value activities like analysis and explanations for exceptions or variances.

Modern accounting technology allows you to continuously execute on Accounting at the speed of business to deliver real-time information and analysis to inform larger business decisions and strategy.

Continuing to perform Accounting in the same traditional, highly manual way keeps great companies from realizing their true potential—decisions are made based on inaccurate data, time is wasted in the minutia of Excel spreadsheets, and your teams burn out from lack of stimulation and inefficiencies.

There are five true costs of manual account reconciliations:

1) Time
Along with spending valuable time compiling, validating, and processing spreadsheets, manual processes also make it more difficult to begin planning, forecasting, analyzing, and modeling for the future of the business.

2) Cost
The costs of running an accounting and finance department vary widely. But, across the board, companies can reinvest in business support, analytics, and forecasting when automation inevitably provides valuable cost savings.

3) Risk
There’s a lack of assured accuracy when it comes to manual accounting, which can elevate the chance of fraud and pose risks to the integrity of financial statements.

4) Audit & Compliance
Hands down, some of the most critical accounting activities are related to regulatory compliance and auditor requests. Manually tracking and complying with controls in the reconciliation process can lead to a lack of visibility, and ultimately end up costing further time and money.

5) Talent
Manual processes can negatively impact your talent pool as employees become disengaged and their productivity wanes, ultimately decreasing the value each one brings to the organization. Accountants who are using technology to increase efficiencies are ultimately more satisfied in their jobs, and able to execute on value-added activities.

Technology has proven to be a key factor in our ability to maintain productivity throughout these unprecedented times, and the benefits of modernizing your financial close and accounting processes will continue to pay off long after the pandemic is behind us.

There’s no need to keep doing your balance sheet reconciliations manually when there are modern solutions that are sure to save you time, money, and restore your peace of mind.

Learn more about how to fast-track your F&A organization’s path to financial close efficiency and balance sheet integrity.