Having to wait longer to get all the financial data needed for forecasting and planning creates a potentially significant opportunity cost for SaaS businesses. Insights gained from these processes provides SaaS businesses greater agility in decision making, allowing them to leverage emerging opportunities in the market and correct course quickly if needed. Balance sheet reconciliation is the process of verifying the balances of accounts listed on the balance sheet to ensure they are correct and consistent with supporting documentation. This process helps identify and correct errors, omissions, or fraudulent activities. It involves comparing the balances in your general ledger to external statements, such as bank statements, supplier invoices, and customer statements.
Use technology to automate processes
By combining policies and controls, companies can ensure a reliable reconciliation process. Subledger to general ledger reconciliation is part of balance sheet reconciliation. The purpose of this reconciliation is to ensure that the balances in the subledger and the general ledger accounts are in agreement and that there are no discrepancies or errors. We focus on reconciling balance sheet accounts because they reflect a company’s assets, liabilities, and equity at a specific point in time.
- Similarly, automated routines speed up reconciliation by taking repetitive tasks off your plate, freeing up time for more critical analysis.
- This includes cash accounts, accounts receivable, accounts payable, inventory accounts, and any other balance sheet accounts that require reconciliation.
- Sometimes, the hardest part of reconciliations, or any accounting task, is getting everyone on the same page.
- Without adequate oversight and control, it’s challenging to track the status of the reconciliation process, identify issues, and ensure that corrections are made promptly.
- Investing in team development also helps improve job satisfaction and employee retention.
Example of Balance Sheet Reconciliation in the Real-World
Balance sheet reconciliation is the process of ensuring your balance sheet information is accurate. The balance sheet reconciliation process includes cross-checking balances and entries with documentation (e.g., bank statements). For example, an internal compliance team bill of materials that checks for any weaknesses in the process.
What are the Common Pitfalls of Balance Sheet Reconciliation?
Here are some other examples of accounts and the source documents you might need for your balance sheet reconciliation. That’s why it’s crucial for accounting teams to get really good at reconciling their balance sheets early on. It sets the stage for trustworthy finances, builds confidence with stakeholders, and paves the way for steady business growth down the line.
As the name suggests, the two sides of the equation must balance out (i.e. they need to be equal to each other). Nigel Sapp is a content marketer at Numeric, partnering with top accountants to break down best practices, thorny accounting topics, and helping teams navigate the world of accounting tech. Additionally, the absence of regular oversight can result in delayed identification and correction of errors, compounding problems over time.
Assets
If this sounds familiar, consider switching to a centralized close management tool. With a central close checklist, everyone gains access to a collaborative workspace where they can see real-time financial data and updates. Features like comment sections enhance asynchronous communication among team members, and you can store all supporting documents and reconciliation notes in one place. These processes are incredibly time-consuming – manually reconciling items can take hours or days, depending on how many documents must be gathered and compared. Outdated technology often lacks the features that modern systems offer, such as automation and real-time data updates, making what is the purpose of having a ledger and a journal in an accounting system the process slower and even less efficient. 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.
After you have all of the records you need from the period, you can move on to the next step. With automation solutions, you also have the opportunity to make use of pre-designed workflows across the board. Not only does this expedite the process, but it also think twice about gifting gift cards makes it possible to standardise the process throughout the organisation.