Best practices to improve account reconciliation

From prioritizing your balance sheet to defining a standard operation, these tips will help your organization improve.
By Marc Ursick, CPA

Account reconciliation is an important task for many CPAs and CGMAs working in business and industry. While it already may be a familiar task, there is always room for improvement.

I’ve led many organizations through account reconciliation improvement projects. Below is a summary of key best practices I’ve learned—framed in sports-related terms to make them easier to remember.

Prioritize your balance sheet

Also known as a “risk-based approach,” one key best practice within the reconciliations process is to identify the accounts that inherently have the greatest risk of error. When a football team prepares for a big game, do the coaches spend more time preparing their starting quarterback or the backup punter? The QB is much more important to the team’s success, so he obviously gets more attention. Similarly, 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. A thorough and balanced analysis of both quantitative and qualitative factors of each individual account is required to place each account into a high, medium, or low risk rating. Ultimately, the risk rating 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

Golf courses are a great example of a standardized, controlled operation. Every golfer playing a course follows the same process, teeing off on the first hole and completing the round on the 18th hole. Chaos would ensue if holes weren’t numbered and golfers could choose to play any hole they wanted at any time. The same holds true with a company’s account reconciliation process. One, standardized “best practice” should be identified, and the process should be the same for all parties involved. For example, organizations should standardize account reconciliation policy, process, and templates across the entire company.

Don’t try to be perfect

In bowling, it’s unlikely that every roll will be a strike. Similarly, not every reconciliation will be able to 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.

Utilize metrics to drive improvement

As any sports fan knows, analytics are a huge part of modern games. Many coaches utilize advanced statistics to drive their game plans. Finance leadership should also utilize metrics for both performance measurement and to improve the reconciliation process in future periods. Common metrics that should be reviewed on a regular basis include overdue reconciliations, material reconciling items, and completeness by person or department. Based on these metrics, leadership can make adjustments to 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 they are finished on time and following up on incomplete or late reconciliations.  

Utilize software to drive the process

Technology—such as instant replay, ball and player tracking systems—has made a significant impact on sports in the modern era. Technology is also important in the account reconciliation space. Companies such as BlackLine, Trintech, and Hyperion are among those that 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.

Utilizing a combination of these best practices can help make your team winners during the reconciliation process.


Marc Ursick, CPA, is the founder of CLEARsulting.


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