6 tips for reconciliations

By Marc Ursick, CPA, CGMA

Account reconciliation is an important task for many CPAs and CGMA designation holders working in business and industry. These best practices make it easier to do it correctly:

Prioritize your balance sheet. Also known as a "risk-based approach," one key best practice within the reconciliation process is to identify the accounts that inherently have the greatest risk of error. Accounting teams should spend more time during the close process reconciling important, high-risk accounts. A common approach to this is "risk ranking" balance sheet accounts with a designation of high, medium, or low. Risk ranking requires a thorough and balanced analysis of both quantitative and qualitative factors of individual accounts. Ultimately, the risk ranking of the account determines how often the account is reconciled (e.g., monthly, quarterly) as well as the due date of the reconciliation (e.g., business day 6).

Define a standard operation. A single best practice should be identified, and the process should be the same for all parties involved. For example, organizations should standardize account reconciliation policies, processes, and templates across the entire company.

Don't try to be perfect. Not every account can be reconciled to the penny. A common "quick win" improvement is to set tolerances and materiality thresholds across the organization. Rather than wasting time attempting to reconcile low dollar values, team members should work on other accounts or activities. Common thresholds that organizations set include unreconciled differences and required adjustments.

Use metrics to drive improvement. Finance leadership should use metrics to measure performance and improve the reconciliation process. Common metrics that should be reviewed regularly include overdue reconciliations, material reconciling items, and completeness by person or department. Based on these metrics, leadership can adjust the process if needed (e.g., reallocate reconciliations among team members, change due dates, etc.).

Monitor the process. A team would be lost without its head coach keeping everybody on the same page. The same can be said about a reconciliation process without a monitoring lead. Contrary to popular belief, this person does not have to be management, and the role is often a good way to develop up-and-comers in the organization. The main duties of the monitoring lead include tracking the completion status of all reconciliations, making sure the reconciliations are finished on time, and following up on incomplete or late reconciliations.

Use software to drive the process. Technology is important in the account reconciliation space. Companies have developed software to enable a best practice account reconciliation process. The key word is "enable," as any technology implementation should be driven by related process design changes. Key features to look for in a tool include real-time dashboards, system-certification features, automated balance interfaces, and automated notifications to users.

Editor's note: This checklist is adapted from "Best Practices to Improve Account Reconciliation," CPA Insider, Nov. 9, 2015.

—By Marc Ursick, CPA, CGMA (marc.ursick@clearsulting.com), founder of CLEARsulting.


Year-end tax planning and what’s new for 2016

Practitioners need to consider several tax planning opportunities to review with their clients before the end of the year. This report offers strategies for individuals and businesses, as well as recent federal tax law changes affecting this year’s tax returns.


News quiz: Retirement planning, tax practice, and fraud risk

Recent reports focused on a survey that gauges the worries about retirement among CPA financial planners’ clients, a suit that affects tax practitioners, and a guide that offers advice on fraud risk. See how much you know with this short quiz.


Bolster your data defenses

As you weather the dog days of summer, it’s a good time to make sure your cybersecurity structure can stand up to the heat of external and internal threats. Here are six steps to help shore up your systems.