Article authored by Shagun Malhotra, CEO of Skystem
General ledger reconciliation is a critical component of the financial close process, ensuring consistency and accuracy in your organization’s financial statements. As an essential aspect of maintaining your company’s financial health, it is crucial to continuously seek ways to optimize this process for efficiency and effectiveness.
Here, we will explore various strategies and best practices that can help streamline your general ledger reconciliation process, improve visibility and control over your financial data, and accelerate the month-end close procedure. By implementing these best practices, you can enhance the overall quality of your reconciliations while reducing time-consuming manual tasks.
Read on to discover how automation tools like SkyStem’s ART can revolutionize general ledger reconciliations by minimizing errors and maximizing productivity. Additionally, learn about the benefits of real-time tracking of reconciliations for improved audit readiness and compliance as well as strengthened internal controls through increased collaboration among teams.
Increased Accuracy in General Ledger Reconciliation
Automation significantly reduces manual entry errors, resulting in increased accuracy throughout the general ledger reconciliation process. Software like ART imports data from various sources and automatically creates the reconciliation checklist along with carrying over open items within standard forms, ensuring consistency across all account balances. This not only enhances the reliability of financial statements but also strengthens internal controls.
Reduction of Manual Entry Errors
- Data import: Automation tools can seamlessly integrate with general ledger systems, subsidiary ledgers, etc. to pull relevant information for reconciling accounts.
- Error detection: Automated software is designed to flag discrepancies between independent systems (e.g., GL vs. Bank), enabling accounting teams to investigate differences and correct them before they impact financial reports.
- Less Reliance on Spreadsheets: Using automation allows teams to have less reliance on spreadsheets and allow algorithms and machines to deliver real time information on status, completion and exceptions. This also minimizes issues such as version control, formula errors and basic management of the work.
Time Efficiency with Automated Reconciliation Processes
One of the most significant benefits of automating your general ledger reconciliation process is the time efficiency it provides. By using tools like ART, organizations can quickly identify exceptions within individual accounts during the financial close. This allows for timely adjustments before issuing financial statement and also frees up valuable time for finance professionals to focus on more strategic tasks.
Timely Adjustments Before Annual Audits
Achieving accurate financial reports requires making necessary adjustments based on findings during the reconciliation process. Automating general ledger reconciliations allows organizations to make these adjustments in a timely manner, ensuring that financial statements are accurate and compliant with applicable policies before annual audits begin.
Some benefits of automating the close and reconciliation process include:
- Real-time Tracking: Automated systems provide real-time tracking of all reconciliation processes, making it easier to monitor progress and ensure consistency across the team’s work.
- Smoother Audits: By having well-documented and accurate financial reports ready ahead of time, businesses can expect smoother audits with fewer surprises or last-minute scrambling to investigate discrepancies.
- Faster Close Times: With automation handling much of the heavy lifting during general ledger reconciliations, finance professionals can enjoy a faster and more predictable close process.
Incorporating automated tools into your organization’s general ledger reconciliation process is a surefire way to increase efficiency while improving accuracy in your financial reporting.
SkyStem’s automated reconciliation process improves the documentation quality with the ability to electronically attach supporting evidence for easier reviews by auditors.
Key Takeaway:
Automating general ledger reconciliation processes saves time and reduces errors, allowing accounting teams to focus on more strategic tasks. Automated systems provide real-time tracking, faster resolution of discrepancies, and allows for timely adjustments with fewer surprises and last-minute scrambling.
Improved Documentation Quality through Automation
Automating general ledger reconciliations ensures that all supporting evidence is attached electronically, is not lost, and is easily retrievable. This process simplification not only makes it simpler for auditors to perform their work but also will demand less time from the accounting team.
Electronic Attachment of Supporting Evidence
The use of account reconciliation software allows accounting teams to attach relevant documents such as invoices, bank statements, and credit card statements directly within the system. This eliminates the need for manual filing or searching through physical files when supporting account balances. By having all necessary information readily available within the platform, finance professionals can quickly identify any issues and resolve them in a timely manner.
Incorporating automation into your company’s general ledger reconciliation process not only improves accuracy but also enables easy access to the correct documentation. By leveraging technology solutions like SkyStem’s ART, finance professionals can save time, reduce errors, and ensure a smoother audit experience for all parties involved.
Key Takeaway:
Automating general ledger reconciliations through solutions like SkyStem’s ART improves documentation access, as all supporting evidence is attached electronically. Auditing becomes more efficient with automated general ledger reconciliations, allowing for improved compliance and a simpler financial reporting process. Additionally, electronic attachment of supporting evidence eliminates the need for manual filing or searching through physical files when investigating discrepancies in account balances.
Best Practices for Effective General Ledger Reconciliations
Adopting best practices in general ledger reconciliations is essential to ensure the accuracy and reliability of financial statements. Companies should adopt best practices in general ledger reconciliations to reduce the risk of errors or discrepancies.
Proper Closing Procedures and Cross-Checking Ending Balances
To achieve accurate general ledger reconciliations, it’s crucial to follow proper closing procedures at the end of each financial reporting period. This includes verifying that all transactions have been recorded correctly in subsidiary ledgers, ensuring that ending balances are consistent with independent systems such as bank statement records, and cross-checking figures against third-party statements like credit card statements.
Closing procedures: Ensure all transactions are accurately recorded in subsidiary ledgers before moving on to reconcile accounts within the general ledger system.
Cross-checking: Verify ending balances by comparing them with independent systems (e.g., bank statement) and third-party statements (e.g., credit card).
Investigating Variances and Reviewing Adjusting Journal Entries
In addition to following proper closing procedures, companies should also investigate any variances between beginning balance figures compared with prior periods. This may involve analyzing trends or patterns in account activity to identify potential errors or inconsistencies that could impact financial reports. Additionally, reviewing adjusting journal entries made throughout each period helps ensure consistency across all account balances while identifying areas where additional controls may be needed.
Analyzing trends: Investigate variances between beginning balance figures and prior periods to identify potential errors or inconsistencies.
Reviewing journal entries: Examine adjusting journal entries made throughout each period to ensure consistency across account balances and identify areas for improvement in controls.
Continuous Assessment & Improvement of GL Recon Processes
Updating Policies and Adopting Innovative Software Tools
To maintain a robust general ledger reconciliation process, it’s crucial to keep abreast of changes within both your organization and the broader accounting landscape. Regularly review internal policies relating to reconciliations – such as those governing journal entries, balance sheet accounts maintenance, or expense account reviews etc – ensuring they remain relevant and effective over time. Additionally, consider investing in cutting-edge software like SkyStem’s ART platform which offers intuitive workflow management features designed specifically for finance professionals responsible for month-end close activities.
– Review and update internal policies to ensure consistency with industry standards.
– Stay informed about new software tools that can enhance your general ledger reconciliation process.
– Incorporate feedback from accounting teams, auditors, and other stakeholders to drive continuous improvement in financial close processes.
By actively assessing and refining your general ledger reconciliation processes, you’ll be better equipped to maintain the accuracy of your financial statements while also reducing the time spent on manual tasks. This not only helps streamline audits but also frees up valuable resources for more strategic initiatives within your organization – ultimately contributing to improved overall financial health.
Key Takeaway:
Regularly assessing and improving general ledger reconciliation processes is crucial for accurate financial reporting. Identifying gaps in controls and automation opportunities, evaluating current procedures against best practices, updating policies, and adopting innovative software tools like SkyStem’s ART platform can streamline the process while freeing up resources for more strategic initiatives within an organization.
Frequently Asked Questions General Ledger Reconciliation
How do you reconcile general ledger accounts?
To reconcile general ledger accounts, follow these steps: 1. Obtain the account balance from your accounting system. 2. Compare this balance to an independent source, such as bank statements or invoices. 3. Identify and investigate any discrepancies between the two sources. 4. Make necessary adjustments to correct errors or omissions in the accounting records.
What is a general ledger reconciliation?
General ledger reconciliation is the process of verifying that financial transactions recorded in an organization’s general ledger are accurate and complete by comparing them with external documents like bank statements, invoices, or other supporting documentation.
What are the challenges in GL reconciliation?
Challenges in GL reconciliation include manual data entry errors, lack of standardization across multiple systems and departments, time-consuming investigations for discrepancies, difficulty tracking changes made during reconciliations, maintaining audit trails for compliance purposes and ensuring timely completion of reconciliations within tight deadlines.
Conclusion
Automating your general ledger reconciliation process can help streamline the entire month-end close process, provide better visibility and control of financial data, and accelerate the overall timeline. By taking advantage of automation solutions like SkyStem’s ART to reduce manual effort in reconciling accounts across multiple systems, accounting teams are able to save time while gaining improved accuracy for their general ledger reconciliations.
Take control of your month-end close and reconciliation process with SkyStem‘s ART. Enjoy real-time tracking, smoother audits, faster close times, and strengthened controls for a more efficient accounting team.
This article includes a client of an Espacio portfolio company
