What Makes A Good Reconciliation?
Reconciliation is the process of reconciling two sets of financial statements – one set being the historical data and the second set being the current year’s data. With reconciliation, you are trying to ensure that there are no differences between the two sets of data. And this process needs to happen every month.
Why do we reconcile our accounts? Because any difference between the two sets of numbers can lead to fraud and errors. Thus, it is very essential to ensure accuracy of financial information.
But why do we reconcile our accounts every month?
The reason behind this is because the accountants usually reconcile the accounts monthly. It helps them identify possible discrepancies in the previous months’ figures and rectify them before they become evident during the annual audit.
What happens if we miss out on some transactions? Well, this could lead to huge losses for your business. Also, if we fail to check the past records, we won’t know whether the company is running smoothly or not.
So, reconciliation is very necessary for businesses.
How do we perform reconciliation?
Before reconciling the accounts, the auditors must understand each and every transaction made by the company.
The auditors must understand the nature of the transactions and the reasons for making them. They must also know the source from where these transactions were taken.
We call this step ‘audit trail analysis’.
Once the auditors have understood everything, they prepare a report, showing the differences between the old and new reports.
What Is Reconciliation Software Reconciliation software helps accountants to keep track of all the transactions made on a company's books. The software enables them to reconcile accounts, spot any discrepancies, and fix errors automatically.