What is account reconciliation?
Account reconciliation is a process of verifying that the amounts in the general ledger are correct. To verify accuracy, reconciliations use supporting documentation and data to substantiate the balance of the general ledger. Typically, it's performed by accountants at the end of each month. An example is a bank reconciliation, where a company's cash accounts are checked against bank statements.
The dangers and difficulties of manual reconciliation
The biggest danger of manual reconciliation is the risk of human error. To err is human, but having human errors can be very costly to a company, not only financially, but also for the brand and reputation of the business. Losing money and prestige due to human error is especially irritating because it’s easily avoided with the proper tools.
Manual reconciliations also take time and tie up accountant resources with tasks that can be performed better and faster with automation. Consider the time that is wasted when the task list lives in one place, the data source in another and the recorded financial information in yet a third. This is the common setup for a manual-reconciliation process.
The benefits of automated account reconciliation1. Saves time
Automation allows the accounting team to focus on bigger, more complex issues. It optimizes the value of your accountants’ time by offloading repetitive, manual tasks. It also allows them to focus on the accounts and numbers that matter most.
2. Improves consistency
Most closing tasks must be performed the same way every time. Computers are better than humans when it comes to repetitive, detailed-oriented work. Consistency and accuracy are essential for reconciliation.
3. Eliminates human lag time
Why train each new team member on the nuances of your reconciliation process? Especially if the process is handed over frequently, it’s more efficient to automate rather than to continually retrain. As more hands become involved, the inefficiencies of training and communication add up.
Automate the close in NetSuite with NetClose
NetClose streamlines the close process in NetSuite. As an embedded SuiteApp, it keeps all your information in your core financial system, where it should be. There’s no need to have third-party integration and have your account-reconciliation process in a separate location from your financial information.
NetClose pulls the GL information from NetSuite as you perform the reconciliation process, eliminating the need to find and input data because everything is in NetSuite.
NetClose supports a variety of automated reconciliations. From general yes or no criteria to complex saved searches, NetClose lets you chose the best way to reconcile your GL accounts.
General Auto-Reconciliation Rules
The general rules are yes and no options. The system will check for these criteria when the reconciliation is generated, and if one is true, the account will be set to auto reconciled.
- Always auto reconcile
- Often used for Income Statement accounts.
- GL balance has not changed and there is no activity
- Default to checked, this removes these accounts from needing human eyes.
- Balance is zero and there is no activity in the period
- Often defaulted to checked so time is not spent on accounts that are zero.
You can use saved searches in NetSuite to create subledgers. The system will then compare the dollar amount from the saved search to the GL amount, and if they tie, the system will set the status of the reconciliation to auto reconciled. This is helpful for AP, AR, Inventory and really any data in NetSuite that is transaction-based.
Automatically reconcile based on the rule group balance, rule group total activity or both. You would make your selection and then input your desired threshold. For accounts that aren’t large enough to be a concern, this auto removes them from your to-do list.
Watch a brief demo of NetClose for more detail on the capabilities of this product to make your close more efficient.
The account-reconciliation process can be very tedious and time-consuming if it’s done manually. Repetitive, detail-oriented reconciliations like these should be automated to increase efficiency, accuracy and consistency. Consider a software solution like NetClose to simplify and streamline your monthly close.