Reconciliation

Reconciliation

Tie the ledger to the thing outside it — the bank, the processor, the payroll provider — and account for every difference.

When to use

• A period is closing.
• An account balance is being relied on for anything.

Steps

1. Fix the scope. Entity, account, period, currency. Assuming any of the four is how most reconciliation errors happen.
2. Get the external source, not a copy of it from another system. A statement, an export, a provider report.
3. Match what matches, then work the difference. Timing differences, uncleared items and fees are the usual three, in that order of frequency.
4. Explain every remaining difference. Not summarise — explain, with the transaction behind it.
5. Never plug. Anything still unexplained is an exceptions row with the amount and what it was traced to. unknown is a legitimate value; a rounding entry that makes the difference disappear is not.
6. Record the account on the closes row under reconciled, named rather than summarised.

Output

A tied-out account, an exceptions row for every unexplained difference, and the closes row updated. A period does not close over an open exception without somebody saying so explicitly.