Many kinds of account reconciliation exist, including bank, credit card, and document reviews. Account reconciliation aims to verify that all transactions have been recorded in the correct accounts. In addition, the process can reveal whether or not transactions need to be shifted or eliminated. In this article, we’ll cover three different types of account reconciliation. Read on to learn more! Here are the types of account reconciliation. How is one done?
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Document Review
The document review process for account reconciliation involves reviewing existing documents and transactions. It is often carried out with the help of accounting software. For example, a company may review its rental expenses and find that they are double-charged. If an error is discovered, the process should prompt adjustments. The goal of document review is to make the process as consistent and comprehensive as possible. If it is not, it could lead to inaccuracies and potential fraud.
A vital component of an account reconciliation process is the review of all documents to verify that the amount spent matches the amount reported. Often, account reconciliation software | FinLync is used to automate this process. Document review software can also help identify whether there are material differences and identify them. For example, if a tenant overcharges their rent, the landlord can make up the difference and recover it. The analytics review method, on the other hand, gauges past account activity and estimates the amount that will reflect in the account.
Bank Reconciliation
Bank reconciliation is comparing an account’s current balance with its total balance. It ensures that every transaction made through the bank goes through the same processes as it does in the business’s accounting books. The process also helps business owners plan more effectively and maximize their working capital. In addition, by monitoring business expenditures, bank reconciliation can help them avoid making duplicate payments, which can cost them money. To prevent errors during bank reconciliation, keep track of all bank transactions and save money wherever possible.
When comparing a bank statement with your G/L, you must look for any outstanding checks that need to be recorded. You must also account for any interest income or service fees. Unaccounted deposits need to be added to the G/L and journalized. The bank reconciliation process ends with a journal entry that increases the cash account balance by $5 to reflect the interest income. It decreases it by $30 to reflect the bank service fee.
Credit Card Reconciliation
Whether you use an Excel spreadsheet or an accounting software program, you’ll need a method for conducting credit card reconciliation. Either way, you’ll need to store credit card receipts separately from other documents. Then, when entering transactions into the spreadsheet, you should mark them as “cleared” or “uncleared” by date. Then, when reconciling your account, you should enter the Difference value. You can also use automation software to alert you to credit card reconciliation issues.
Once you have selected all your credit cards, you can create a report for your financial institution. Select individual credit cards or all your cards and click “Run Report.” You can enter the data manually using a desktop version of the reconciliation software. Most financial institutions report transaction data based on system defaults or the last 30 days. When you’re finished, export the data to XML or CSV.
Analytics Review
There are several forms of account reconciliation. Document review is the most common and preferred method by auditors. The process involves comparing account data and documentation to historical precedent. By comparing activity against historical records, an account can be analyzed for discrepancies and potential fraud. Another type of account reconciliation is called an analytics review. It compares historical activity with actual activity to determine the amount of outstanding debt and identify potential fraud. Both types of account reconciliation require a detailed process that is consistent and scalable.
The process of analytics review includes estimating the amount of money stored in accounts. By monitoring account balances regularly, reconciliation can help spot risks to a company’s financial health. It can also highlight fraud that can impede operating cash flow. By using analytics review, companies can identify the causes of any discrepancies and address them quickly. However, specific challenges should be considered before implementing an analytics review.
