Balance Sheet Reconciliation Checklist: Pitfalls to Avoid

Since your balance sheet provides your business with an overview of its financial progress and standing, there’s no doubt that you’d want it to be accurate at all times. By crossing off the items on a balance sheet reconciliation checklist, you can make sure that this is the case.

We’re going to explore all there is to know about the reconciliation process and see how automation solutions, equipped with a balance sheet reconciliation template, can streamline and standardise the crucial process.

Coming Up

What is a Balance Sheet Reconciliation?

Why is Balance Sheet Reconciliation Important?

What are the Key Pillars of the Financial Close Process?

What is Included in a Balance Sheet Reconciliation Checklist?

What is the Cost of Manual Balance Sheet Reconciliations?

What are Common Pitfalls of Balance Sheet Reconciliation?

How to Overcome Challenges of Balance Sheet Reconciliation?

The Bottom Line

What is a Balance Sheet Reconciliation?

Balance sheet reconciliation is the process of ensuring that the balance sheet is properly reflecting the company’s assets, liabilities, and equity. To perform a balance sheet reconciliation, you’ll have to compare the information on the balance sheet with external documentation (i.e. bank statements, credit card statements) to cross-check balances and each entry.

Through this process, you can confirm that records are properly reflected and classified. If they aren’t, you can make the necessary adjustments so that when you close your books, your financial information is up-to-date.

Why is Balance Sheet Reconciliation Important?

In any balance sheet reconciliation examples available, you’ll find that they all drive home the same purpose and benefits when conducted correctly.

By performing a balance sheet reconciliation, you’re able to take care of any potential accounting mistakes and/or rectify mistaken account information. Along with these advantages, you will also be able to:

• Spot fraudulent activity and stop it in its tracks
• Reduce and prevent accounting errors
• Find and rectify any discrepant records
• Manage cash flow
• Oversee internal controls
• Review financial activity and make informed decisions

What are the Key Pillars of the Financial Close Process?

Fulfilling your balance sheet reconciliation checklist is part of the month-end close process. With the aid of automation solutions, the financial close process can be expedited and hassle-free. When performed manually, it can be dragged out longer than it should be and prone to errors.

That being said, no matter how you choose to tackle your financial close process, there are four main pillars that outline and protect the process. These include:

1. Close Checklist: This checklist lays out all of the processes that must take place in order to close the books and produce financial reports.

2. Journal Entry: As a vital step, this involves posting journal entries and validating them. They are often looked over and approved by an extra set of eyes to help spot any mistakes.

3. Balance Sheet Reconciliation: As we’re focusing on in this article, the balance sheet reconciliation checklist is a major part of the financial close process. It may be reviewed by auditors and also serves as an internal control.

4. Intercompany: Intercompany trade and the various transactions that take place during the month must be eliminated from the month-end close totals.

What is Included in a Balance Sheet Reconciliation Checklist?

Since the balance sheet reconciliation process involves a lot of data, moving parts, and many hands, it is recommended to make use of a balance sheet reconciliation checklist. By doing so, you won’t forget any of the steps.

To overcome the risk of missing a beat, you can ensure nothing slips through the cracks by implementing an automation solution like SolveXia to execute your reconciliation processes for you.

With or without the software, you’ll want to fulfill the following steps:

1. Gather documentation

Before you can do anything, you’ll need access to the required data. This will include both internal and external documents, such as bank statements, the general ledger, account balance export, and receipts, to name a few.

When performing your bank reconciliation process by hand, you’ll have to spend a lot of time finding the source of all of this data, especially when it can live across systems and spreadsheets.

With a reconciliation tool like SolveXia, all of your data is inherently connected and can be pulled into a centralised repository through the use of APIs. This is particularly time saving if you use many payment providers and haver a high volume of transactions. What can be usually take days to reconcile can then be reduced to minutes.

2. Compare information

Once you have all the information in your hands (or in the system), you will begin transaction matching to check for accuracy. Cross-checking can take a lot of time, especially if you have a high volume of transactions and rely on multiple payment processors.

Again, a tool like SolveXia can ease the burden by automating the transaction matching process, thereby saving your team a ton of time and maximising productivity levels 10x or more.

3. Make adjustments

Should you run into any discrepancies, the whole purpose of the reconciliation process is to fix them! You may need to make adjustments to journal entries. Since version control is so important, automation solutions make this foolproof as they protect all inputted data and store records of any data history.

4. See if your sheet is balanced

Once you’ve completed all these steps, your balance sheet should hopefully be…balanced. That means, your assets equal liabilities plus equity. Now, you’re ready to close your books with confidence.

What is the Cost of Manual Balance Sheet Reconciliations?

You know that balance sheet reconciliations are nothing new. While the steps involved haven’t evolved, the manner by which you can manage them has dramatically shifted in everyone’s favour, thanks to technology.

However, if you’re still conducting balance sheet reconciliation by hand, you’re giving way to preventable costs, such as:

• Time: Collecting, validating, and transferring data drains a lot of valuable time from your team. This time could be better spent on value-add tasks.

• Risk: The risk of manual errors is unpreventable when you’re stuck doing these processes by hand, no matter how professional or experienced your team may be. Fraud risk is also elevated.

• Money: The cost of labour within your finance team adds up quickly, especially considering the opportunity cost that comes along with it.

• Dissatisfaction: Your team may be fed up and bogged down by the repetition and tedious nature of performing these processes by hand, thereby increasing the chance of turnover.

To overcome these hurdles, finance automation solutions are here to help! With automation software implemented, you can increase accuracy, remove key person dependencies, reduce bottlenecks, and streamline the entire process of balance sheet reconciliations.

In turn, your team gets to focus on tasks that spark their creativity and thought, you save money on having less mistakes, reduce risks associated with errors, and undoubtedly save a ton of time.

What are Common Pitfalls of Balance Sheet Reconciliation?

Having conducted the financial close process a time or two (or hundreds) before, you’re well aware of the pitfalls associated with the meticulous process.

One of the biggest challenges that come along with fulfilling your balance sheet reconciliation checklist is the disparate data that often exists within disconnected spreadsheets. Not only is it hard to wrangle everything you need in a timely manner, but it’s also likely that the data in the spreadsheets contains errors.

The slightest mistake can balloon into major issues moving forward, so it makes sense that you’d want to prevent them from the start with an automation solution for pristine data management.

Additionally, balance sheet reconciliation moves through many steps and possibly across multiple desks. Stakeholders and business leaders have a need to know where the process stands at any point in time and to be able to maintain adequate control over its functioning.

When performed manually, it’s difficult to have any oversight. With automation solutions, you have total internal control with utmost visibility as you can always see where the process stands within the system.

How to Overcome Challenges of Balance Sheet Reconciliation?

Despite the hurdles that come along with balance sheet reconciliation, it’s very possible to reduce the headaches and streamline the process. Here’s a look at what can be done:

1. Use Automation Software

The simplest way to overcome the bulk of the associated challenges is to implement automation software that helps carry the heavy weight of it all.

With automation, you not only get to reduce key person dependencies and remove bottlenecks, but you also get to save a lot of time and money through it all.

Instead of your team being stuck manually performing tasks, they can instead use their time more wisely on strategic initiatives and creative responsibilities that require human thought.

2. Use Pre-Configured Workflows

With automation solutions, you also gain access to a library of templates so you can hit the ground running right away. With a reconciliation automation tool like SolveXia, there’s a library of pre-configured workflows, or you can customise your own with its drag-and-drop functionality.

The Bottom Line

Completing your balance sheet reconciliation checklist no longer has to be a painful or worrisome experience. With the aid of automation solutions, you can streamline and standardise the process while reducing errors and increasing oversight.

A tool like SolveXia offers an out-of-the-box, no-code solution so you can reap the benefits of automated reconciliation nearly instantaneously. Want to see how it works? Request a demo, and we’ll be in touch to share everything you need to know to get started.