The major purpose of account reconciliation is to ensure that all the recorded transactions are accurate so that financial statements are free from any misinformation. However, with the constantly evolving finance and accounting landscape t it might get difficult for businesses to navigate how they can perform reconciliation in the best possible way.
The best practices that might have worked a few years back might not even be relevant to the current accounting practices. This can make reconciliation seem like an enormous and tedious task.
In order to enhance the reconciliation process, businesses need to adopt the latest technologies and accounting best practices.
Here are 5 ways to master account reconciliation:
How to Master Account Reconciliation
- Understand the basics and establish clear processes: In order to master account reconciliation, the first step for businesses is to understand the reconciliation process thoroughly. Businesses need to have a clear understanding of which accounts they need to reconcile and how frequently each account should be reconciled. Other than that, it is important to understand the different types of reconciliations to reconcile different accounts accurately.
Another noteworthy factor for streamlined reconciliation is the establishment of clear processes. This includes standardizing workflows and assigning duties to relevant employees so the reconciliation process can be carried out with minimal obstructions.
- Leverage automated reconciliation software: The traditional methods of reconciliation are increasingly proving to be inefficient, especially in the era of digital transformation. Manual account reconciliation is time-consuming, tedious, requires a lot of resources, and despite the best efforts of finance teams, can lead to erroneous financial statements.
Considering the importance of the reconciliation process for maintaining the financial integrity of businesses, the adoption of advanced solutions like account reconciliation software is imperative. Employing the use of reconciliation software will undoubtedly prove to be highly beneficial for businesses.
- Reconcile accounts frequently: As mentioned above, determining the frequency of reconciliation for each account is of key importance for any business. Depending on the volume of transactions an organization is dealing with, it’s imperative to set clear guidelines regarding how frequently reconciliation should be carried out. Ideally, performing frequent reconciliations, on a monthly or quarterly basis, will allow businesses to lessen the burden at the end of the accounting period, thereby facilitating a faster close.
- Maintain accurate reconciliation documentation: Another crucial aspect of mastering account reconciliation is maintaining an audit trail of all the reconciliations. This helps businesses in case of an audit by acting as concrete proof for financial activity occurring at an organization. Furthermore, a clear audit trail can also help businesses cross-check everything at the end of the accounting period and allow them to maintain financial integrity. Leveraging an accounting system can be of great benefit when it comes to maintaining accurate reconciliation documentation.
- Leverage automated reports and workflows: Automating the reconciliation process is integral to creating accurate financial reports. However, the reconciliation automation is not limited to automated transaction matching. Businesses also need to automate other processes like reporting and workflows related to account reconciliation. By automating reporting and workflows, companies can improve account reconciliation, have a clear audit trail, and segregate duties for risk management and fraud prevention.
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Final Thoughts
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Currently, the finance and accounting industry is being led by a multitude of technological advancements, with automation being a major player. Therefore, the best way for companies to master reconciliation is to adopt automated accounting software capable of speeding up the reconciliation process.
