The Reconciliations of an Accountant

An accountant doing a reconciliation

Relationships aside, management accountants often find themselves having to reconcile a number of things. The obvious one is the reconciliation of a bank statement to the accounting records. Since most organisations in the developed world have a bank account, the need to perform bank reconciliations ought to be universal.

Anecdotal aside

I say ‘ought’ because I’ve had one of those experiences where I’ve taken a job in a business and found that bank reconciliations had not been done for eighteen months. Having the most fundamental of accounts not in good order is a clear indicator that lots of other problems are hidden in the accounts. It makes for an uncomfortable period as Controller when, over several reporting periods, more and more things come out of the woodwork as the balance sheet is trued up. In my case, bringing the bank account up to date took several solid days of work, but bigger problems were found elsewhere. Maybe others of you have had similar experiences.

Other sources of reconciliation

Back to the subject of the post, in addition to reconciling bank statements, accountants may face several other reconciliation tasks, on either a regular or an occasional basis. Do you recognise any of these?:

• Business systems to general ledger. Some organisations operate a mix of applications, either through historical accident or by design in order to cover needs that are not met by a single application. For example, if the sales order and customer invoicing system is separate to the accounting system then reconciliations are generally required to ensure that revenues are correctly accounted for.
• Intercompany and branch office accounts. Organisations with more than one location or subsidiary frequently share resources and fund or borrow from one another. Where a separate ledger is run for each subsidiary, it is necessary for the intercompany accounts in each one to be matched in order that they remain consistent with one another.
• Stock-take to inventory system. Common in organisations that hold physical stock, different inventory systems give varying levels of assistance to the stock-take process. An accountant or colleague may be required to reconcile a physical count with the system inventory balances.
• Sub-ledger to general ledger. Even where systems are well integrated, it’s often prudent to check that transactions originating in a sub-ledger have not gone awry when posted to the general ledger. Reconciling control reports from each side is not uncommon.
• Closing balances to opening balances. You might think that it should never be necessary to reconcile a previous closing balance to a current opening balance but, unfortunately, the world simply isn’t perfect. When posting a year end journal, both human and system errors are possible. A different scenario might be where a group accountant receives trial balances from subsidiaries month by month, but the latest figures somehow don’t match properly with last month’s…

It’s at the boundaries between systems where the need for reconciliations arises. Maybe you recognise some of these tasks in your own work. I’ve certainly spent much time working on a wide variety of reconciliations over the years and the famous bank reconciliation is typically the easiest and quickest. It’s because reconciliations are so common that I decided, as my first product, to create a tool to make the task as easy as possible. Progress is steady and I’m planning to have Isolist ready for public testing about one month from now.