If you or your team have ever wondered: “Do I really need to reconcile this account?” the answer is a resounding yes. Every balance sheet account, no matter how small or seemingly insignificant, should be reconciled. Let’s look at why this is non-negotiable and how it can save you and your team time and effort in the long run.
No Exceptions
It’s tempting to skip the formal reconciliation process for accounts like equity or suspense accounts. You might think they’re immaterial or don’t change much, so there’s no value in reconciling them. However, even small variances in these accounts can snowball into bigger issues. For example, a $100 balance in a suspense account may seem trivial and not worth your time to investigate. However, this could actually be just the tip of the iceberg. A small variance might actually be the result of two partially offsetting errors that are hiding a larger issue, masked by the small total balance.
Small discrepancies can also point to systematic issues, such as an incorrectly set up recurring journal or a system interface error. When the error is small, it’s the best time to catch and correct it. Left unchecked, these issues can grow into much bigger problems.
Catch Errors Early
Regular reconciliations make it easier to spot and correct errors in a timely manner. It’s easy to say, “I’ll fix this later,” but there’s rarely time later. Trying to dig into past transactions can be far more time-consuming. What might take you 15 minutes to find, fix, and reconcile now could turn into an hour-long job later as you try to remember what was happening in that account.
By reconciling every balance sheet account every month, you’ll be able to trace fresh transactions and identify their causes quickly. This is far easier than trying to track down a journal entry someone posted 12 months ago. Monthly reconciliations help you catch errors when they’re small and manageable, rather than letting them grow into larger, more complex issues.
Additionally, this practice is excellent preparation for year-end and audits. No matter which month or account the auditors select, you’ll have proof of your controls ready to go.
Build Good Habits
Reconciling all accounts every month might seem overwhelming at first, but it becomes second nature over time. Think of it like brushing your teeth — it’s easier to do it every day than to deal with the consequences of neglect. By making reconciliations a regular part of your month-end close process, you’ll develop a rhythm that makes the task feel less daunting.
When you reconcile accounts consistently, you can also invest time in making the process as efficient as possible. For example, you can create effective spreadsheets or leverage tools like
Easy Month End to streamline your reconciliations and turn them into quick, routine tasks.
How to Make Your Reconciliations Manageable
1. Break It Down
If reconciling an account feels overwhelming, break it down into smaller, more manageable pieces. For example, if you have complex revenue products and billing, instead of reconciling the entire deferred and accrued revenue in one large listing, split it by customer, revenue type, or product type. This approach not only makes the task more manageable but also helps you identify patterns or trends in the data.
You can also adjust your balance sheet structure to include more sub-accounts that roll up to the same heading. This makes checking postings and account balances much easier.
2. Leverage Technology Balance Sheet Reconciliation Software can simplify the process by automating repetitive tasks and keeping all your reconciliations in one place. This not only saves time but also ensures consistency across your team. For example, instead of manually updating spreadsheets and moving summary listings from one file to another, you can use software to pull data directly from your general ledger, reducing the risk of errors.
3. Prioritize Efficiency If an account is easy to reconcile, tackle it first. This allows you to send the straightforward accounts for review faster, preventing bottlenecks at the senior accountant or financial controller level. Plus, the extra hour you spend reconciling a small account each month is far less than the hours you’d spend fixing errors later.
The Bottom Line
Reconciling every balance sheet account might feel like overkill, but it’s a best practice that pays off in the long run. By catching errors early and maintaining accurate records, you’ll save time, reduce stress, and build confidence in your financial statements... and if you're smart enough to get great software in your corner (like
Easy Month End, nudge nudge) the process can be more efficient and less daunting than you ever believed possible.
Pete Archer
