The frequency of reconciliations is a common topic of debate in the accounting world. Opinions vary widely—some argue that quarterly or annual reconciliations are sufficient for certain accounts, while others advocate for the standard approach of monthly reconciliations. However, the best practice is clear: reconcile every account, every month, no exceptions. Here’s why.  

1. Timely Error Detection 
Monthly reconciliations allow you to catch and correct errors quickly. For example, imagine a $5,000 manual journal entry is accidentally posted to the wrong account. With monthly reconciliations, you’ll spot the mistake within weeks rather than months. This not only saves time but also reduces the risk of material misstatements. 
Now, consider if this manual journal is a repeating entry. What starts as a small $5,000 mistake can quickly balloon into a significant error. If you’re only reconciling quarterly or semi-annually, that $5,000 misstatement could grow to $15,000 or even $30,000. Reversing a $5,000 error is manageable, but a $30,000 adjustment will undoubtedly draw attention and raise uncomfortable questions about the control environment within the finance team. 
It’s not just the size of the mistake that increases—it’s also the time and effort required to identify and correct it. Reviewing months of past workbooks is never easy and often leads to frustration. Monthly reconciliations help you stay on top of errors before they escalate. 

2. Easier to Manage 
Reconciling three months’ worth of transactions is far more time-consuming than reconciling one month’s worth. By breaking the year’s transactions into 12 manageable chunks you’ll find the process less overwhelming. In fact, the total time spent reconciling 12 months of transactions will likely be less than tackling them all at once.  
Why? Because you’ll be more familiar with the data, your templates will stay up to date, and you’ll avoid the mental strain of piecing together months of activity. For example, trying to make sense of 12 months’ worth of prepayment journals is far more daunting than reviewing just the new additions and releases for the current month.  

3. Trust in Your Financials 
If you can’t confirm the accuracy of your balance sheet, how can you trust your profit and loss statement? Monthly reconciliations ensure that your income statement is reliable and accurate, giving you confidence in your reporting. This is especially important for stakeholders, who rely on your financial statements to make informed decisions.  

The interaction between balance sheet accounts—such as accrued and deferred revenue—and your revenue recognition means that your balance sheet must be accurate to report the correct income. Late adjustments caused by historical errors can lead to unpleasant surprises, eroding trust in your financials.  

Incorporate Reconciliations into Your Monthly Workbooks 
Make reconciliations a seamless part of your month-end close process. By integrating them into your monthly workflows, you’ll ensure they’re done consistently and efficiently. A simple way to do this is by adding a “Reconciliation” tab to your monthly workbooks. This tab can pull in your general ledger balance and summarize your work papers. 
For accounts like accrued expenses or prepayments, this is incredibly straightforward. All you need is a year-to-date (YTD) balance column, and your workbook doubles as your reconciliation. This approach eliminates the need to create an entirely new workbook or move data across multiple Excel workbooks just to bring in the ledger balance. (Or, if you’re looking to streamline this even further, consider using Easy Month End to automate and simplify the process.) 

The Bottom Line
Monthly reconciliations might seem like a lot of work, but they’re essential for maintaining accurate and reliable financial statements. By making them a regular part of your process, you’ll save time, reduce errors, and build trust in your numbers.