November 8, 2020

General Ledger Reconciliation & Analysis Top Tips

Finance Leadership
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General ledger reconciliation is a process that verifies the accuracy of account balances in a company’s general ledger. The process is a crucial step in performing financial close. Reconciliation can be time-consuming and relies on keen attention to detail. With the power of automation solutions, businesses can harness the power of centralising data and automating general ledger reconciliation. 

General Ledger Definition

The general ledger stores every transaction that happens within a business. Known as the “books,” each transaction gets documented twice, once as a credit (addition) and once as a debit (subtraction). 

Since the general ledger serves as a company’s main accounting record, it’s vital that general ledger reconciliation takes place in a timely and verifiable manner. While it sounds easy to do because it involves matching records, it requires that all data is easily accessible. Furthermore, it can be a time-consuming process if done manually. When finance teams work on reconciliations across a company, it could cause issues down the line if there is a lack of standardisation. We’ll get into how to easily resolve these concerns with the aid of automation solutions. 

General Ledger Reconciliation Explained 

Following the end of a financial reporting period, an accountant or team of accountants is responsible for conducting general ledger reconciliation. This means that the team goes through each account and checks it against third party statements, like bank statements and credit card statements to ensure they reflect one another. 

With data coming from various sources, the data may appear in a variety of formats. Some companies will pull from multiple ERP systems, internal databases and bank accounts. When you factor in the time it takes for a person to manually pull the right data, you see how easy it is for inefficiency to occur. 

With a software solution like SolveXia, you can connect any system, database or file so that all information is automatically transformed into a standard structure. Then, data aggregation and cleansing takes place so that the software can run reconciliation in minutes. 

General Ledger Reconciliation Process & How To

The general ledger reconciliation process consists of aggregating data, comparing records, updating information, investigating discrepancies and documenting the process. In many instances, a bookkeeper or accountant performs reconciliation. 

However, it’s a process that most high-level executives need to be privy to because the information gleaned from a reconciliation does impact major business-wide financial considerations and decisions. That’s why if a company performs its reconciliations in silos with little transparency, the entire business may suffer the consequences of having incomplete access to important information. Automation solutions prevent this from occurring by supporting transparency (more on this later). 

First, let’s take a look at the general ledger reconciliation process step-by-step:

  • Set-up: The process begins by having an understanding of what accounting policies are applicable to the account you’ll analyze. For example, you may need to know the depreciation rules. 
  • Data sourcing: When reconciling any account, you’ll need the data sources, like bank statements, for example. There’s other supporting documentation like cancelled checks or subsidiary ledgers like accounts receivable. It’ll be easiest to reconcile if all data is structured in the same way to make the matching process easier. Alternatively, if you use a software solution, all of this will be handled automatically. 
  • Account review: You’ll check both the external statements and general ledger against one another. If there’s missing information in either, you’ll have to conduct research to understand if it’s an explainable difference (like timing) or something more serious (like fraud). 
  • Update data: Once you’ve located any discrepancies and found their reasons, then you’ll update each account to reflect one another. Make note of any data entries you’ve manually entered and the reason the adjustment was made. 
  • Documentation: Since all public companies could be audited on their reconciliations, it’s best practice to thoroughly document that process. Not only is this used to lessen compliance risk, but it also lays the ground for future reconciliations to follow the same steps. 

Reconciliation Software: How it Works

Put simply, general ledger reconciliation software automates the entire process so that you need little to no human intervention. The software compiles data from all sources (i.e. ERP, bank statements, credit card statements, general ledger systems). It transforms data to be formatted in the same structure for easy comparison. 

When data matches up, it will certify it’s correct. If data shows discrepancies, it will alert the responsible party of the issue. In a manual process, when an issue comes up, it requires that the person stop matching all the accurate data to find the source of the issue for the anomaly. With a reconciliation software tool, the matching data will continue to be processed as the discrepancy is being investigated. It allows for your team to focus on high-level tasks and only be involved when an issue arises. Then, every piece of the reconciliation process is documented, recorded and saved. It can be used for historical reference, auditing, and as a way to standardize the process company-wide. 

Software solutions can save accounting teams about 50% of their time and resources that would otherwise be dedicated to bank reconciliations alone. The market is growing rapidly and automation solutions like SolveXia are meeting needs to transform finance automation by providing teams with a full suite of benefits, including:

Software Solution to General Ledger Reconciliations

General ledger reconciliation is a repetitive and necessary process. As such, it is perfectly suited to be handled automatically with a software solution. 

Here’s a look at some common challenges concerning general ledger reconciliation and how automation software like SolveXia can solve them

  • Centralised Data: Data exists across organisations in various formats and databases. When data is disparately stored, it could be missed or the right person may lack access to what they need to get their job done. With SolveXia, the system will do the work to collect, manipulate, cleanse and analyse data quickly. 
  • Standardisation: Different regions and tools may utilise their own tools or policies to match data. This means that audit trails will be difficult to come by or explain. The lack of standardisation may cost your business money or can heighten compliance risk. With an automated solution, all information is consolidated and made visual in a central platform. Through the single interface, audit trails can be run and reported so that every reconciliation is transparent and of high-quality. The cloud-based environment makes it easy to access from wherever you are
  • Easy Insights: When reconciliations are performed by individuals in varying locations, there is no one source to receive a big picture view of what’s happening financially in your business. This leads to inefficiency in analytics and can threaten the ability to receive timely insights needed for decision-making. With SolveXia’s system, you can rely on an up-to-date and executive-level dashboard of every reconciliation currently in process or completed. You’ll know exactly where to find information when you need it. 
  • Data Volume: Manual reconciliations have limits as to how much information can be processed at any given time. The reliance on Excel spreadsheets can make scaling a business impossible. Staff will undoubtedly be overwhelmed as transaction volume increases. With a reconciliation software solution, you can say goodbye to manual spreadsheets. A growing volume of data can be stored, processed and compared in just minutes. Without the need of an IT team, the out-of-the-box solution allows your business to grow without affecting the validity and timeliness of the reconciliations performed. 

These are just some of the many benefits that come along with implementing a high-level finance analytical automation solution like SolveXia. A process like general ledger reconciliation is a given in your business, so it’s worthwhile to invest in a solution that will work for you immediately. 


The Bottom Line 

General ledger reconciliation is a process that every business manages. Rather than wasting time and risking meeting regulations through manually performing the process, you can leverage the power of automation tools like SolveXia. Reconciliation software will maximise efficiency, centralise data, automate reconciliations, and store data to create real-time visualisations, reports, dashboards and credible audit trails. See how automation solutions can work for your business by scheduling a demo. 

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