Account reconciliation plays a key role in ensuring the financial integrity of the business venture. In case this process is not handled properly, there will be several mistakes in the balance sheet which will lead to the formation of incorrect financial records.
With the legislation of Sarbanes Oxley (SOX) in 2002 and the imposition of other rules and regulations, the validity of account reconciliation services has become significant. Earlier the things were taken very lightly. In case an external auditor found an error while reviewing a company's financial records, it would be corrected with an adjustment entry. The auditor wouldn't ask for a restatement or report the error.
But the implementation of SOX has made the proper maintenance of accounts a necessity. If an error is spotted by the auditor, the organization will be asked to disclose its accounts. If a mistake is found in the quarterly or annual SEC reports, then also the company would be asked for disclosure.
In order to avoid these situations, financial records should be maintained in an accurate and timely manner. This will also ensure proper evaluation of business performance and also fulfill the external reporting requirements. This can be achieved by automating the account reconciliation process. This will ensure the validity of the balance sheet and effective financial statements. Many business entrepreneurs think that using accounting software will ensure the correct reconciliation of accounts. But this is a misconception.
The process should be completed properly - It is essential that all the required accounts are reconciled properly as per the company policy. The reconciliation of accounts should have a title, description, and procedures for proper completion. Documentation verifying the account balance must be included along with the reconciliation.
Reconciliation of accounts must be correct - The accountant must have complete knowledge of the accounts, he is working on. In order to reconcile the cash account; general ledger and bank statements are required. The accounts with improper balances must be properly checked. The reconciliation of bank accounts must support the balance and should not be a copy of the ledger balance.
Account reconciliation services must be finished and reviewed at the right time - Deadlines should be set for completing the reconciliation process. A proper procedure should be followed for tracking the status of each individual reconciliation process. The risky account reconciliations must be dealt firstly. All the required adjustments must be made within the accounting period.
The accounting principles must be properly followed - Account reconciliation must be as per the accounting principles used in the region. Factors like historical cost, matching, and full disclosure must be taken into consideration. A rational approach should be followed doing the reconciliations. Company policies must be kept in mind while following the process.
The reconciliation process must be reviewed periodically - The company's account reconciliation policy must correctly reflect its position and should be reviewed periodically. Any improvements must be made accordingly. The utilization of standard templates must be encouraged for consistency and making reviewing an easy process.
Cogneesol has emerged as a leading bank account reconciliation service provider across the globe. To get more information, contact us at email@example.com or call us at +1 646 688 2821.