Account Reconciliation – A Vital Step of the Financial Close Process
Account reconciliation is one of the most important steps in the financial close process, and oftentimes lays the foundation for the beginning of the process itself. The process involves matching transactions and balances to see if there are any differences between the two, and it ensures that accounting records are accurate.
The practice of comparing balances across accounts in a company’s general ledger (GL) to the balances in an independent statement and investigating any differences helps reassure accountants and business executives that their companies’ books are up to date, accurate and complete. It’s also an important outcome, since GL balances flow into a company’s financial statements, which are used for internal and external decision-making.
Reconciliation can also identify unusual activity, eliminate any gaps in the financial process, and spot cash flow disruptions that may be missed on a day-to-day basis. In summary, it is vital to accurately and efficiently reconcile as part of the financial close process.
However, many organizations are still managing the reconciliation processes manually with spreadsheets and even off-line documentation, which takes time and effort, utilizes resources that can be used elsewhere, and also is more prone to human errors. In some cases, organizations are unable to pinpoint if all discrepancies in their books are accounted for or if they require further revision.
Manual reconciliation can be a slow and arduous process. Finance and accounting departments are usually inundated with work and may not give their full attention to the reconciliation process, which is oftentimes seen as a time-consuming process involving a lot of resources. In many cases, the manual process also uses several systems at once, and errors can happen when these different systems must work together. The scope for error is large when even one mistake can derail an entire reconciliation process.
Challenges associated with Account Reconciliation
It’s best for organizations to carry out account reconciliations regularly to ensure that the account balances displayed within their specified time frames are accurate. Doing this helps them detect errors or fraud early — or even avoid them.
For many firms, reconciliation is a monthly process, although it is often difficult to dedicate the appropriate amount of resources to effectively tackle it. Deadlines to close the books can also conflict with completing the task efficiently.
The sheer amount of accounts that need to be reconciled can also be an issue. A single organization can have between hundreds and thousands of accounts that need to be reconciled across the various subsidiaries of the organization.
Due to the sheer volume of data that the account reconciliation process involves, it is ripe for automation. AI technology can perform matching at rates that are much faster than general staff, and can do so without errors.
IVP’s Reconciliation Solution allows companies to quickly and efficiently complete the financial close process and free up key team members to focus on other high-level work. The solution improves reconciliation accuracy, oversight, and coherence, and provides analytics and insights to improve workflow as well.
To learn more about the benefits of IVP’s Reconciliation Solution, visit: https://www.ivp.in/products/reconciliation-solution/ or contact us at email@example.com.
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This reconciliation solution uses AI and ML to increase efficiency, accuracy, and flexibility. It features “any-to-any” reconciliations, including bank reconciliation, and processes millions of transactions in minutes.