What Is a Balance Sheet Reconciliation?

4) Audit & ComplianceHands 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. 3) RiskThere’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. Modern accounting technology provides unification across your systems and data for a single source of truth, and standardizes processes for consistency, efficiency, and control. Since our founding in 2001, BlackLine has become a leading provider of cloud software that automates and controls critical accounting processes.

Empower your people to go above and beyond with a flexible platform designed to match the needs of your team — and adapt as those needs change. Learn how FloQast helped Zoom overall its month-end Close process and offer new visibility for leadership following a successful IPO. In this on-demand webinar, you will learn the different components of your ROI, how to analyze your organization, and what defines a good technology partner. Download our data sheet to learn how you can prepare, validate and submit regulatory returns 10x faster with automation. Find out everything you need to know about hiring an accountant so you can make an informed decision when seeking support. In many companies, often a holiday period is given to customers during which the amounts due can be accrued as a liability.

Now that we’ve covered the basics, let’s talk about why account reconciliation matters. General ledger reconciliation, where accountants check the accuracy of the company’s account balances at the end of an accounting period, ensures the accuracy of financial statements. Reconciling the company’s accounts helps detect fraud and aids in regulatory compliance. Automated workflow management allows you to create project plans and assign specific GL accounts to R2R analysts or user groups for enhanced reconciliation task completion. The ability to leverage standard reconciliation templates or create custom templates can accelerate the reconciliation process. AI-powered matching provides existing matching rules or algorithms to reconcile any two sets of data, such as GL and subledger or GL and bank statements.

Reconciliation in accounting is not only important for businesses, but may also be convenient for households and individuals. It is prudent to reconcile credit card accounts and checkbooks on a regular basis, for example. This is done by comparing debit card receipts or check copies with a person’s bank statements. So, it’s time to fully embrace account reconciliation in your business operations.

Although, a fast close is impressive, but it can also compromise quality for speed. Because the benefit has been received, an expense is necessary and a credit to accrued liabilities offsets that expense. At the time the vendor does invoice for goods or services the invoice will generate a new entry to expense with a credit to Accounts Payable. A QA review can uncover some gaps that may be small and easily addressed as well as others that may not be an issue on their own, but together can create concerns about the integrity and reliability of the results of the financial close. Maybe some reconciliations that had aged over 60 days didn’t have action plans, a signal that managers didn’t understand all the requirements. Perhaps support for an entry is readily available but just isn’t attached within the software solution.

How Modern Accounting Technology Simplifies & Streamlines the Process

Among the most critical aspects of balance sheet reconciliation is bank reconciliation. This involves matching the transactions recorded in the company’s bank statements with those in the general ledger. Discrepancies can arise due to timing differences or errors, making bank reconciliation a crucial process for ensuring that cash accounts on the balance sheet are precise. By leveraging HighRadius’ AI-based account reconciliation software, your business can streamline the entire balance sheet reconciliation process, reducing manual effort, and improving accuracy. The software’s advanced features can help eliminate errors, provide real-time insights, and improve collaboration between departments.

  • However, it’s important to note that while automation streamlines and enhances the reconciliation process, human oversight remains essential.
  • Therefore, it is essential to perform regular balance sheet reconciliation to identify and correct any discrepancies.
  • Along with the data existing across computers, it means that your team needs to work to manually collect data from different sources, which is a huge time suck.
  • A dashboard enables finance professionals to easily see the status and current risk of their balance sheet integrity.
  • Balance sheet reconciliations, a vitally important part of a company’s financial reporting process, is where a company compares its financial records to the numbers on its balance sheet to make sure they match.

Not all balance sheet accounts are controlled and reconciled by campus departments. Certain university balance sheet accounts are reviewed and reconciled regularly by Financial Services personnel. Campus entities are not responsible for reconciling these university accounts, as opposed to department accounts.

What is the difference between balance sheet and reconciliation?

Here are five best practices that can help your organization to improve the account reconciliation process. Using a double-entry accounting system, as shown below, she credits cash for $2,000 and debits her assets, which is the equipment, by the same amount. For her first job, she credits $500 in revenue and debits the same amount for accounts receivable. Read on to learn more about reconciling your balance sheet, including what steps you should take to reconcile your balance sheet and why it’s important to have a reconciliation process.

It involves checking the accuracy of assets, liabilities, and shareholders’ equity by comparing transaction records and supporting documents. This process helps in identifying errors, discrepancies, or omissions in the financial statements, which can be crucial for ensuring financial accuracy and regulatory compliance. They are done at regular intervals and are a part of routine accounting procedures. Balance sheet reconciliation, in its essence, is the meticulous process of aligning a company’s financial records with its actual financial position.


University departments with asset or liability account balances are responsible for reconciling and reviewing the account balances on a quarterly basis. Balance Sheet account balance reconciliations are different than expenditure reconciliations. Similarly, when a business receives an invoice, it credits the amount of the invoice to accounts payable (on the balance sheet) and debits an expense (on the income statement) for the same amount. When the company pays the bill, it debits accounts payable and credits the cash account. Again, the left (debit) and right (credit) sides of the journal entry should agree, reconciling to zero.

Free Up Time and Reduce Errors

As such, technology and automation have paved the way to expedite this process, improve accuracy, require less reliance on key staff and save money while doing so. Here, we will take a look at the importance of balance sheet reconciliation, certified bookkeeper how automation tools can assist in the process, and how manual tasks could become obsolete. Therefore, your accounting team can be freed up to focus their time on human analytical tasks, rather than back-office transactional maintenance.

More than 4,200 companies of all sizes, across all industries, trust BlackLine to help them modernize their financial close, accounts receivable, and intercompany accounting processes. Working capital, cash flows, collections opportunities, and other critical metrics depend on timely and accurate processes. Ensure services revenue has been accurately recorded and related payments are reflected properly on the balance sheet. Technology solutions can facilitate collaboration between different departments involved in the reconciliation process. For instance, cloud-based platforms allow for real-time updates and communication between team members. This can help reduce the risk of errors and ensure that the reconciliation process is completed efficiently.

Most companies have numerous assets including immovable property, machinery, inventory, cash assets, and more. Over time, these assets can be sold or written off according to their stage in the lifecycle or due to depreciation. Accounts reconciliation helps take stock of the assets that a company has and enables the balance sheet to reflect the true value. It is a general practice for businesses to create their balance sheet at the end of the financial year as it denotes the state of finances for that period. However, you need to record financial transactions throughout the year in the general ledger to be able to put together the balance sheet.

To make sure your balance sheet is free of any discrepancies, do a final check to verify that your total liabilities and equity equal your total assets. If they don’t, you know the drill (aka follow the previous steps to find errors). When cross-checking information on your balance sheet with financial documentation, be on the lookout for discrepancies. This includes things like misclassified transactions (e.g., asset instead of liability), transposition errors, and missing information. Learn more about how to fast-track your F&A organization’s path to financial close efficiency and balance sheet integrity. But, across the board, companies can reinvest in business support, analytics, and forecasting when automation inevitably provides valuable cost savings.

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