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What is Account Reconciliation Process?

Banking CIO Outlook | Monday, January 04, 2021

Companies will face issues such as overspending, undetected acts of fraud, or be in a position where they cannot pay employees and suppliers for goods without a proper account reconciliation process in place.

FREMONT, CA: Account reconciliation cross-references a company’s financial records against an external source like a bank or a financial institution to ensure that they match. This is critical and a major factor for any good business. Companies will face issues such as overspending, overlook acts of fraud or be in a position where they cannot pay employees and suppliers for goods without a proper account reconciliation process in place.

The reconciliation process is also vital for accountants if they want to create informed statements at the end of the financial year, as a company’s balance sheet is a reflection of its value and worth. Without a complete set of account reconciliation processes to ensure precise record-keeping of a company’s finances, it is not feasible to produce a usable financial statement. Wrong account information can be a risk for a business, and even more so for publicly listed companies as regulators will penalize them if external auditors find discrepancies.

Today, many account reconciliation software providers assist businesses of any size in generating invoices, managing expenditure, and providing different reports that enable companies to track their financial health and give a complete picture of their performance.

Many ledger reconciliation software have programs that provide different features and tools customized to fit various businesses’ needs. It is important to remember factors such as price, accessibility, and tools before choosing software to help with its reconciliation process.

Most software providers operate on a SaaS business model, meaning the application is cloud-based and can be accessed remotely with ease. A monthly subscription fee is applicable to the provider’s monthly recurring revenues and enables customers to access the program’s latest iteration.

The larger or more complex a business is, the more advanced the account reconciliation software package it will need. Many free software applications are available for small businesses that provide a suite of necessary reconciliation tools, along with add-on features.

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