Understanding Balance Sheet Reconciliation: A Guide for Accountants

Balance sheet reconciliation is a foundational task for every accountant and finance professional. Much like checking your personal bank statement to ensure your records match what the bank reports, companies use reconciliation to verify their own financial health.

What is Balance Sheet Reconciliation?

A balance sheet reconciliation means comparing the balances of accounts in the company’s general ledger with corresponding balances found in bank statements or other external documents. For example, if a company’s records show a $10,000 bank account balance but the bank statement reflects $9,500, the reconciliation process identifies this discrepancy and investigates causes—such as unrecorded fees or outstanding checks.

Why Is Reconciliation Required?

Reconciliation isn’t just a formality. It provides financial controllers with reasonable assurance that reported balances are accurate and properly accounted for. This practice:

• Detects fraud, errors, and discrepancies in the accounting records

• Ensures compliance with accounting standards and regulations

• Supports effective internal controls, crucial for publicly traded companies

• Aids timely, accurate transaction reporting and financial statement preparation

Who’s Responsible for Reconciliation?

The account owner, often a senior accountant, has a pivotal role in this process. Their responsibilities include:

• Accurately recording and reviewing transactions, posting debits and credits, and reconciling accounts to supporting documentation

• Ensuring compliance with policies, standards, and regulations

• Resolving discrepancies and unauthorized transactions

• Providing documentation for auditors, management, and stakeholders

• Collaborating with departments like AR, AP, or inventory for correct transaction recording

• Reviewing and signing off on account balances, confirming their accuracy and completeness

Tools & Technologies

Modern reconciliation is often powered by technology:

• Accounting software: Offers built-in features to automate posting, reconciling accounts, and generating reports

• Spreadsheets: Easy to build reconciliation templates and track discrepancies

• Cloud-based solutions: Provide real-time access and advanced reporting, useful for distributed teams

• Automated reconciliation software: Examples include Blackline, Oracle Hyperion, and NetSuite, which match transactions across sources

• Robotic Process Automation (RPA): Automates rule-based reconciliation tasks, such as data entry and transaction matching

Conclusion

Balance sheet reconciliation is essential for maintaining financial integrity, meeting compliance requirements, and providing transparency to stakeholders. Every accountant should master this practice and leverage the right mix of process and technology to ensure their business stands on a solid financial foundation.