Reconciliation in Accounting is the process of ensuring account balances are correct between two accounts at the end of an accounting period. Reconciliations help automate the financial close process.
Accountants perform account reconciliation with the following steps:
- Compare account balances between various independent systems
- Verify statements and reports for accuracy and investigate discrepancies when identified
- Take action to correct these identified discrepancies
This process is an important internal control in the financial reporting process. Public companies are required to perform these steps as part of their financial close.
What is the Account Reconciliations process?
The account reconciliation process is generally carried out after the close of a financial period. Accountants go through each account in the general ledger of accounts and verify that the balance listed is correct and accurate.
This involves comparing the general ledger account balance with other independent sources of this data, such as bank and credit card statements.
When discrepancies are found, accountants investigate and take appropriate corrective action. This may involve making journal entries to correct balance errors. All information found, analysis performed, and actions taken are stored for audit purposes.
The account reconciliation process must be completed before a company can certify the integrity of its financial information and issue financial statements.
How Does Account Reconciliation Software Work?
Account reconciliation software automates all of the steps in the account reconciliation process. It takes in data from all sources of financial information, such as ERP systems, bank files or statements, credit card processors, and merchant services.
It then compares account balances between these sources, and identifies any discrepancies so they can be investigated by accounting staff. This removes the burden of manually performing this task, and frees accountants to focus on analyzing discrepancies.
Account Reconciliation software features include:
- Automated review and approval workflows with proper segregation of duties
- Reconciliation templates and checklists to standardize processes
- Integrated storage of supporting documentation for easy review and audit
- Links to applicable policies and procedures for easy reference
What Solutions Does BlackLine Offer?
BlackLine Account Reconciliations is designed to streamline all aspects of the account reconciliation process. It adds proper controls and automation, imports data from any source, and is compatible with all major ERP systems.
Configurable validation rules allow for the auto-certification of low-risk accounts, significantly reducing the workload of accounting staff. When discrepancies do exist and require analysis, customizable templates, checklists, and integrated storage for supporting documentation ensure that reconciliation processes are standardized across the organization.
BlackLine Transaction Matching further automates processes by enabling the comparison and validation of transaction-level account data. This allows accountants to view the exact transactions that are not matching in various systems and statements, decreasing the time spent locating discrepancies. This is particularly useful for high-volume reconciliations, such as credit card reconciliations.
Finally, when correcting journal entries are required, the BlackLine Journal Entry product automates this portion of the process as well.
Read this blog to learn more about how your organization can improve the account reconciliation process.