Account reconciliation is a non-negotiable for business owners and accounting teams who want accurate books. The reconciliation process checks your opening and closing account balances against a third-party, external source to ensure nothing is missing on either side. A common example of this would be reconciling a bank account in your accounting system against the statement provided by the bank.
This reconciliation will show you any transactions you failed to record — which will be present in the bank statement but not the books — or any errors on the bank side, which will be present in your books but missing from the bank statement. It will also show any items processed in a different period, like a check written in January but cleared in February.
It’s a best practice to reconcile as many accounts as possible on a monthly basis. Manually reconciling is tedious and time-consuming if you have more than a few accounts and a large number of transactions. Fortunately, there is some terrific software on the market to speed up the account reconciliation process. Here are a few ways you can leverage software to help you reconcile faster:
Close management software
Reconciliation is part of the larger monthly close process, where you wrap up your books and finalize any entries for a clean, accurate start going into the new month. Close management software is a great place to find account reconciliation functionality to help you automate this step.
If you find yourself struggling with account reconciliations, it’s likely you are also having trouble with the rest of the monthly close process, are insufficiently staffed, or are pressed for time to handle crucial bookkeeping steps. Close management software, like FloQast, will help you with the entire process in addition to reconciliation. This can save hours or days each month and help ensure accuracy.
Close management software also helps you keep track of monthly closing steps and record who completed each step and when. This is incredibly helpful as an audit trail, should it ever be needed, and as an internal control to ensure that your financial records are being properly kept and monitored by the team.
Accounting software suites
All-in-one accounting packages, like QuickBooks or Xero, often come with reconciliation software included. These tools are much less specialized than close management software and likely will not automate the reconciliation process as much. For example, QuickBooks Online allows you to match the beginning and ending balances for each account against your bank statements and run through a simple checklist of transactions to identify any differences. However, while this process is fairly quick with a small number of accounts, you do still need to go through the accounts one by one and search for transactions if your balances don’t reconcile right off the bat.
Although these account reconciliation tools are likely the least robust of the four types mentioned here, they have the added benefit of convenience. Even if your reconciliation needs are very light, or your budget is very small, you are likely already investing in accounting software for its other functions. Taking advantage of the account reconciliation tools that are built-in will not require any extra investment of time, energy, or money.
Enterprise resource planning systems, like Sage Intacct and NetSuite, include account reconciliation tools as part of the package. Like standalone accounting software, ERPs bundle reconciliation software along with all the other functionality. However, ERP systems are most commonly used only by larger companies.
If you are already utilizing a system like this, look more closely at the reconciliation automation to see if it meets your needs. If you’re not currently using or in need of a full ERP system, implementing one is a massive undertaking worthwhile only if you need all functions system as a whole.
There are also tools available as standalone reconciliation software, with a few additional functions for AP, AR, etc. Cashbook and Bank Rec are examples of software in this category (on-premises and cloud-based respectively). While these are likely the most specialized software, they may not offer much in the way of functionality for their costs. Adding these tools to your tech stack may be a good option if you’re already happy with your accounting and close management solutions and they do not offer account reconciliation automation.
Finding the best choice for you
With all these options, how do you choose the best account reconciliation software for your business? Ultimately, it comes down to the scope and complexity of your accounts, and the additional functionality you need.
Built-in tools in accounting and ERP systems can handle simple reconciliation and will already be present if you are using those systems day-to-day. If your accounting system is more complex, with large numbers of accounts, a high volume of transactions, and a high risk for errors, you’ll want to ensure that you have more robust reconciliation tools.
Specialized account reconciliation software will save you time and stress in handling more involved reconciliations. Close management software includes that same level of functioning and adds many other tools to help with the larger monthly close process.