Reconciliations are essential for maintaining financial accuracy in your enterprise, which impacts every other aspect of your business. You can’t plan for the future without knowing exactly how many resources you can allocate and where.
This is also why mistakes in the reconciliations should be addressed and corrected immediately to ensure they’re always up to date. However, closing reconciliation discrepancies is easier said than done, especially as more documents pile up.
If you are unfamiliar with the process of closing discrepancies, we have compiled a guide with methods for making it as simple as possible. We will also explore what these discrepancies are, what causes them, and why it’s important to close them.
Reconciliation discrepancies are the differences in balances between any two corresponding sets of records. They are mistakes that need to be corrected to ensure that your financial data is accurate and up to date.
Discrepancies can be a result of various errors, such as:
Now, let’s go over why closing discrepancies is important and what happens if they’re left unresolved.
Closing discrepancies ensures that your financial statements are error-free and ready for auditing. With a clear overview of your finances, you can plan strategically and make accurate projections for the future.
Discrepancies in account reconciliation can have serious consequences for enterprises if left unresolved. Here’s what might happen if you don’t close discrepancies:
Closing discrepancies helps balance the numbers and maintain the integrity and reliability of your financial data.
Let’s go over some of the most common types of discrepancies:
Reconciliation discrepancies are usually discovered during audits, after which they must be corrected to reflect the right balances. Here’s how you can fix any discrepancies in your financial records:
If you plan to upgrade your financial system later, you can make manual corrections for now. Verify which transactions have discrepancies, compare them with the corresponding records and make adjustments.
Don’t forget to look for missing transactions. Go back to the last audit and start reviewing any entries after that date. If the total doesn’t add up, you have missing transactions.
Finally, always double-check your work. Giving everything a second glance gives you more confidence that all the discrepancies have been corrected.
Keep in mind that manual methods are time-consuming and unsustainable long-term, especially for enterprises. Instead, look to automate as many financial processes as you can and bring manual work to the minimum.
Automated reconciliations are less prone to errors because they eliminate the human factor. They also speed up the reconciliation process.
Aico’s Account Reconciliation dashboard provides a clear overview of your reconciliations. You can monitor workflow, risk status, late reconciliations, unreconciled accounts and balances and other potential bottlenecks - in real time.
Here are the different types of automated solutions you can integrate into your system:
Aside from automation, there are other practices you can implement to ensure compliance and data integrity:
The frequency of reconciliations depends on the size and nature of the business. For enterprises, it all depends on the scope of your financial activities. For example, daily reconciliations are recommended for enterprises with high-volume transactions on a daily basis to be able to keep track of all data.
For tasks like payroll and expense management, enterprises with a moderate flow of transactions should perform them weekly. Deeper financial reviews, such as balance sheet reconciliations, should be a standard practice and performed quarterly. Finally, always perform an annual reconciliation of all records to successfully close the books and start the new fiscal year on a clean slate.
Ensure that your team is digitally proficient and capable of using automated reconciliation solutions to close discrepancies. If reconciliation is done manually, make sure every team member clearly understands their role in the process (e.g., one person makes journal entries, and another double-checks for discrepancies).
Stay up-to-date with the latest reconciliation practices to continuously improve the workflow. As your enterprise grows, you’ll naturally have to incorporate new methods to keep up with the increasing complexity.
Document all discrepancies as you identify them and outline the steps you took to correct them. That way, you can go back to them if they happen again.
These practices will help you maintain a smooth and error-free reconciliation process.
Struggling with reconciliation discrepancies? Aico’s automation tools help you resolve discrepancies, saving time and reducing financial risk. Our advanced technology ensures accuracy, compliance and efficiency in your financial records so that you can say goodbye to manual errors and tedious reconciliation processes.
Book a consultation today to see how Aico can transform your financial processes. Call us now or schedule a demo to experience hassle-free reconciliation.