Reconciliation

What Is Reconciliation?

Reconciliation is the process of comparing two sets of financial records to ensure they match. When discrepancies exist, reconciliation involves investigating the differences and making appropriate adjustments to bring the records into agreement.

Common reconciliation types include:

• Bank reconciliation: Matching bank statements to cash accounts in the general ledger
• Intercompany reconciliation: Ensuring transactions between related entities net to zero
• Subledger reconciliation: Verifying that subledger totals (AR, AP, inventory) match GL control accounts
• Vendor/Customer reconciliation: Matching your records to statements from trading partners

Why Is Reconciliation Important?

Reconciliation serves several critical functions:

Accuracy assurance: Confirms that recorded transactions are complete and correct

Fraud detection: Identifies unauthorized transactions or misappropriations

Error identification: Catches data entry mistakes, timing differences, and system errors

Audit readiness: Provides documentation that account balances are verified

Financial integrity: Ensures financial statements reflect reality

The Reconciliation Process

1. Gather Records

Obtain both sets of data to be compared:

• Internal records (GL, subledgers)
• External records (bank statements, vendor statements)

2. Compare Balances

Match the ending balances or transaction details:

• Do the totals agree?
• Can individual transactions be matched?

3. Identify Differences

Document discrepancies:

• Timing differences (items in transit)
• Errors (wrong amounts, duplicates)
• Missing items (unrecorded transactions)
• Unauthorized items (potential fraud)

4. Investigate and Resolve

For each difference:

• Determine the cause
• Decide on corrective action
• Make adjusting entries if needed
• Document the resolution

5. Document and Approve

Create a reconciliation workpaper showing:

• Beginning and ending balances
• Reconciling items
• Adjustments made
• Preparer and reviewer sign-off

Common Reconciliation Challenges

Volume: Thousands of transactions to match manually

Timing: Items appear in different periods across systems

Format differences: Data structured differently in each source

Partial matches: Transactions split or combined between systems

Time pressure: Reconciliations due during compressed close period

Manual vs. Automated Reconciliation

Aspect	Manual Reconciliation	Automated Reconciliation
Time required	Hours to days	Minutes
Error rate	High (human fatigue)	Low (consistent rules)
Scalability	Limited by staff	Unlimited volume
Documentation	Often incomplete	Automatic audit trail
Matching logic	Simple exact matches	Complex fuzzy matching

How Go Fig Automates Reconciliation

Go Fig transforms reconciliation from a manual burden to an automated process:

Automatic data gathering: Pull records from both sources without manual exports

Intelligent matching: Match transactions using multiple criteria (amount, date, reference, description)

Exception highlighting: Surface only the items that need human attention

Workflow integration: Route exceptions to the right people for resolution

Audit trail: Document every match and exception with full history

Continuous reconciliation: Run daily instead of just at month-end

Reconciliation Best Practices

1. Reconcile frequently: Daily or weekly reconciliations catch issues earlier
2. Standardize processes: Use consistent templates and procedures
3. Segregate duties: Different people prepare and review reconciliations
4. Document thoroughly: Explain every reconciling item
5. Set materiality thresholds: Focus attention on significant differences
6. Automate where possible: Reserve human effort for judgment calls

Impact of Better Reconciliation

Organizations that automate reconciliation typically see:

• 80% reduction in reconciliation time
• 90% fewer errors reaching financial statements
• Earlier identification of issues
• Faster month-end close
• Reduced audit fees (cleaner workpapers)