Consistent and timely account reconciliation is an important part of running a successful business, yet some companies overlook this step. Reconciling not only flags any discrepancies but also gives the business owners and leaders confidence in the data they use for making decisions.
“If we know that the balance sheet at the beginning of the year is correct, and we know that the balance sheet at the end of period is correct, it forces our profit and loss—the bottom line—to be correct," says George K. Malina, CSPM, part of the accounting services team with the professional services firm Sikich, LLP.
Malina, a partner in the Sikich's Naperville, Illinois, office, is a 32-year accounting industry veteran who's worked largely with small businesses. He notes that many accounting platforms now come with built-in tools that streamline reconciliation.
“The problem is that people often don't use the tools available to them," he says.
Chris Hervochon, a certified public accountant for more than a decade, says that businesses can also integrate third-party, cloud-based applications and take advantage of available interconnected data.
“Being able to leverage that interconnected data, whether it's financial or nonfinancial, helps you make strategic decisions and get greater insights into your business," says Hervochon, who owns the CPA firm SOAR in Hilton Head Island, South Carolina.
Hervochon says that reconciliation tools can help achieve several objectives:
- Standardize the process so everyone is looking at the same reports.
- Automate certain aspects, allowing you to close books faster.
- Improve accuracy and make sure all information is complete.
- Provide substantiation with appropriate documentation.
Automate Cash Reconciliation
The best practice that Malina recommends to all his clients is importing bank and credit card statements into their accounting software. It's an option available inside many platforms such as QuickBooks, Xero or Wave.
“What QuickBooks will do is look for matching transactions and tie them together, and it will clear transactions automatically that it recognizes," he says.
He estimates that identifying mismatches through the import tool could reduce time spent on statements by as much as 50 percent.
“It also doesn't allow you to easily force an entry on the balance, unlike Excel," Malina says.
Hervochon finds it's not uncommon for manual journal entries or other situations to create outages. For finding mismatches, he likes to turn to the optimization tool Solver, an Excel add-in.
“When you reconcile an account in QuickBooks and you end up with an outage, if you don't find a transaction for that exact amount, it means that multiple transactions make up the difference," Hervochon says.
If you can't easily identify the manual transactions that caused the outage, he recommends doing a “data dump" of all those transactions into Excel.
“Then use Solver to help flag the transactions that are likely to make up the difference," he says.
Streamline Document Storage
Linda Herron, founder and CEO of Campbell, California, accounting and advisory firm SimpliProfit, who has served as CFO/controller for various companies, highly recommends Hubdoc. This document collection and management app syncs with your accounting—think of it as “your secure, digital filing cabinet in the cloud," she says.
Hubdoc features include: taking copies and sending paperwork such as receipts and bills; automatically downloading statements from linked bank accounts; and extracting key information from documents such as date, vendor name and amount, then converting it into usable data.
Being able to leverage that interconnected data, whether it's financial or nonfinancial, helps you make strategic decisions and get greater insights into your business.
–Chris Hervochon, owner, SOAR
“There is no more data entry and filing of paperwork," Herron says. “With a click of a button, it syncs to Bill.com (if set up), QuickBooks and Xero. It provides SimpliProfit and my clients with easy access to all financial documents any time and anywhere."
Simplify Accounts Payable
Another cloud-based platform that Herron recommends is Bill.com, which automates bill paying as well as offering an invoicing option. Import bills via email, Hubdoc sync, or dragging and dropping. You can sync all of it to QuickBooks Online, Xero, Sage Intacct and Oracle NetSuite—and skip data entry.
“If a client requires approvals, you can route to your team for review any time and anywhere. Once approved, you click to send payment using ACH or international wire transfers," she says. “So, with a couple of clicks, your payable process is streamlined, and so is your accounting."
More Tools to Help Improve Account Reconciliation
A few other account reconciliation tools based on recommendations from Herron, Hervochon or the technology team at Sikich:
TSheets: An app that tracks time from any location and device in real time, it integrates into QuickBooks and can also be used for job costing, project tracking and other accounting aspects.
BlackLine: A unified, cloud-based accounting and finance tool, it's especially suitable for midsize and large enterprises that have more complex needs.
While technology and integration make account reconciliation much easier, both Malina and Hervochon advise first fully exploring the tools that are native to your accounting platform.
“Any time we start exchanging data between one system and another, there's a chance that something won't work right," Malina says.
“The cloud has a great level of integration and automation for leveraging data," Hervochon says. “[But] sometimes having too many tools creates a greater level of complexity."
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