The process slows month-end close, consumes accounting bandwidth, and increases audit risk. Without automation, teams spend more time fixing issues than analyzing the numbers. Manual account reconciliation often leads to delays, errors, and increased compliance risks—especially as transaction volumes scale.
Account reconciliation applies to various accounts, each serving a unique purpose in ensuring financial accuracy. Instead of having to rely on paper documentation or multiple different tools to manage your expenses, Volopay can do it all for you. All you need is a single platform to pay your vendors, process payroll, settle reimbursements, and even use prepaid corporate cards effectively.
Take 5 minutes to learn more about the most advanced financial close platform.
Account reconciliation is the systematic approach of comparing internal financial records with external documents, such as bank statements or supplier invoices. This fundamental task helps businesses identify discrepancies, prevent errors, and safeguard against potential fraud. Account reconciliation is comparing financial records from different sources to ensure they match. This could mean verifying internal ledger balances against bank statements, invoices against payments, or accounts payable against vendor records. Account reconciliation is a crucial accounting process that compares a company’s internal financial statements to external statements from banks, credit card providers, and other financial institutions. It ensures that the recorded transactions in the general ledger match actual financial activity, confirming that all funds are properly accounted for and discrepancies are identified and resolved.
AI-led, automated account reconciliation software brings structure, speed, and control in one system, speeding up the process. Bank reconciliation involves comparing your internal cash ledger with the actual bank statement. Discrepancies often arise due to unrecorded bank charges, interest income, or pending transactions. Finally, without adequate account reconciliation processes in place, both internal and external financial statements will likely be inaccurate. The account reconciliation process involves methodical steps to ensure accuracy in financial records. Doing your data entry manually can lead to human-made errors such as typos, misplaced decimals, or even missing zeroes.
The customer reconciliation statement serves as proof that there’s no material inaccuracy in the accounts. Accuracy and completeness are the two most important things in the account reconciliation process. Additionally, it is extremely important to make reconciliation a continuous process.
A closer review confirmed the payment was processed in two parts—$200,000 cleared immediately, while $50,000 was held due to a bank processing delay. Regular account reconciliation should be combined with invoice reconciliation as part of your internal controls in accounts payable. Keeping your accounts reconciled is the best way to make sure that your balances are accurate and an important part of ensuring adequate financial controls are in place. Financial institutions might adhere to regulations requiring daily reconciliations to ensure compliance and prevent misconduct. Public companies subject to the Sarbanes-Oxley Act may implement quarterly reconciliations as part of internal control processes. Balancing regulatory obligations with operational capabilities is crucial for establishing an effective reconciliation schedule.
- A second pair of eyes ensures completeness and flags anything missed, which is critical for high-stakes accounts.
- These discrepancies occur due to data entry errors, missing transactions or necessary adjustments, among other reasons.
- In order to correct identified discrepancies, relevant accounting adjustments must be made, from correcting errors to including missing transactions or eliminating duplicate transactions.
- If you need a streamlined process for managing reconciliations, we have Accounts Payable reconciliation and Accounts Receivable reconciliation checklists you can use.
- Whether it’s reconciling a bank account or matching vendor invoices, this process ensures accuracy, prevents fraud, and builds a solid foundation for financial decision-making.
Internal control weaknesses
- Some businesses with higher transaction volumes or greater complexity may reconcile more frequently, such as weekly or even daily.
- It also makes sure that deductions, such as taxes and other benefits, are processed correctly.
- It’s no secret that performing account reconciliation can be time-consuming, especially when done manually.
For example, when your company makes a sale, it will debit cash or accounts receivable (AR) on your balance sheet and credit revenue on your income statement. Conversely, when what is account reconciliation your company makes a purchase, the cash used would then be recorded as a credit in the cash account and a debit in the asset account. Every company has its own rules and regulations regarding the frequency of its account reconciliations.
Free up time for analysis
Accounting software automation and adding a procure-to-pay software, like PLANERGY, can streamline the process and increase functionality by automatically accessing the appropriate financial records. No matter what you’re reconciling, it will involve comparing two sets of records to determine accuracy. Transaction matching using AI helps finance teams automate reconciliation, reduce errors, and save time with scalable financial workflows.
Introducing automation tools to your accounting staff will open up doors to more creativity and flexibility. You won’t have to worry about where to store all your documents when you have an automated accounting system. After your accounts have been reconciled, you also want to validate your data again.