Errors and issues often appear during the accounts payable reconciliation process, and if unspotted or unaddressed, they can lead to bigger problems down the line. So we’ve put together 8 easy steps for making your accounts payable reconciliation easy (and accurate). It’s not the end of the world if you finalize your reconciliation a few days behind schedule, but if you do, make sure you are looking at the right reports.
Prioritize invoices
These subledgers feed into the general ledger general ledger reconciliation to create financial statements. Take a look at your vendor invoices and make sure they contain all the necessary information. You’re looking for errors like incorrect or misspelled vendor names, invoice numbers, payment amounts, times, and terms.
Correction of Discrepancies
General ledger to sub-ledger reconciliation type with assets = liabilities + equity step by step instructions. You may need to look at individual transactions to see where the error occurred. Accuracy is more important than speed when reconciling your general ledger. Double-check calculations and verify information to avoid costly mistakes that may affect decision-making later. If there is a difference between the two reports, print the two reports as of a month in the past – again using the same date to maintain consistency.
Customer Reconciliation
- It ascertains that all transactions are accurately recorded and classified.
- Credit card reconciliation involves comparing the list of credit card transactions recorded by the company against the statement from the credit card company.
- In each case, the aim is to identify and rectify any disparities, guaranteeing that the financial statements reflect an accurate and verifiable account of the company’s financial status.
- Customer reconciliation is focused on matching customer payments against the invoices issued by the company.
- This may have been due to an error during update or due to corruption of data records.
- The first way that I can think of that causes a reconciliation issue is due to a system bug of some kind.
Therefore, sub-ledgers serve as support for amounts posted to the general ledger. Sub-ledgers are presented in an electronic form as well (e.g. Excel file, detail of an account in QuickBooks, SAP or Oracle). For example, accounts receivable sub-ledger may contain detail for all issued invoices and cash receipts.
Preparing for Reconciliation
For instance, compare your bank account balance with the balance shown on the bank statement. Next, you’ll need to identify the specific items in the general ledger that require reconciliation. These may include outstanding transactions, such as checks that haven’t been cashed or payments that haven’t yet been recorded. Flagging these items early on will help you focus on resolving discrepancies later in the process. Account reconciliations can vary, including bank reconciliation, vendor reconciliation, customer reconciliation, and inter-company reconciliation. As CEO and Co-Founder, Mike leads FloQast’s corporate vision, strategy and execution.
Some of these items require adjustments to the G/L while others require adjustments to the sub-ledger. Illustration 2 shows where an adjustment is needed depending on the reasons for a difference. To understand what is reconciliation of the general ledger, we first need to learn about the concept of the general ledger.
- Bunker is a cutting-edge financial analytics tool that provides unparalleled insights into your general ledger data.
- Pre-ReconciliationMake sure all subsidiary journals or registers that post to Accounts Payable are updated.
- Confirm any and all payments in your accounts payable system are correctly recorded by cross-checking them against the entries in your bank statements to make sure they match.
- One of Bunker’s most powerful features is its ability to identify the specific transactions and activities that contribute significantly to your costs.
- It compares your internal cash records against your bank’s records for that account, with the aim of explaining the differences between your bank statement balance and your ledger cash balance.
- Prior to founding FloQast, he managed the accounting team at Cornerstone OnDemand, a SaaS company in Los Angeles.
Adjust for any differences due to outstanding checks, deposits in transit, bank fees, or errors to attain a reconciled balance. The Income Statement reflects a company’s financial performance Bookstime over a specific period. The Balance Sheet, on the other hand, provides a snapshot of the company’s financial position at a point in time, outlining assets, liabilities, and shareholders’ equity. Crucial to both documents is ensuring that the balances reported are precise. This includes verification of balance sheet accounts such as accounts receivable and accounts payable, which directly affect the income statement through revenue and expense recognition.
Comparing Beginning and Ending Account Balances
This agility helps you stay ahead of potential issues and capitalize on opportunities as they arise. This centralization is crucial for maintaining an organized and accurate financial record for reporting and decision-making. The other culprit is that it’s possible to remove the reconciliation account ID from the asset GL accounts. Doing so changes them to normal GL accounts which means that the ledger-to-subledger is no longer enforced. At that time, someone can make a direct FI posting to the account, then go back and re-activate the reconciliation indicator as if nothing ever happened. This can cause a reconciliation issue and some people exploit it frequently.