Even with the most rigorous reconciliation process in place, RECONCILING ITEMS are INEVITABLE. And unless they are being caused by a recurring issue that could otherwise be fixed, the existence of reconciling items is not the measure of quality control, it’s how they are dealt with.
TIMING DIFFERENCES are one of the MOST COMMON type of reconciling items and are usually outside the control of accountants. Other types of reconciling items include (but are not limited to) ERP SYSTEM ERRORS, LATE ADJUSTMENTS, UNIDENTIFIED AMOUNTS and INCORRECT POSTINGS. Some of which are preventable and others that aren’t. What they all have in common is that they are open items requiring FURTHER FUTURE ACTION.
Reconciling items can usually be resolved without complication by the accountant performing the reconciliation. However others can be symptomatic of a broader issue or REPRESENT RISK to the business by way of misstatements in reporting records or substantial WRITE-OFFS. The key OBJECTIVE is TRANSPARENCY.
GOOD RECORD KEEPING processes aid in the understanding of why the reconciling item occurred and provides the information to enable proper decision making. This is particularly important where the reconciling item amount is material and requires visibility and input from senior management. In such cases, CLEAR DETAIL is essential as the decision makers are usually far removed from the day to day finance activities.
So what should reconciling item details look like? Applying BEST PRACTICE, records should include the accounting period to which it relates, the date the transaction occurred, the value of the item, a detailed description, the type of reconciling item, who is responsible for clearing it and when it should be cleared.
Any additional recommendations or other actions can also be included and the item should be backed up with the APPROPRIATE SUPPORTING DOCUMENTATION. The AGEING of reconciling items is an important part of the transparency required for management to understand the state of accounts and enforce company policy with regard to write-offs.
Finally, any clearing or adjustment journals posted to resolve the Reconciling Item requires a MANDATORY reason/details to be added for traceability.
How can RecWise help?
RecWise provides an intuitive and standardized form for recording Reconciling Items and is backed by a variety of detailed and summary reporting options.