What is reconciliation?

Introduction to reconciliation

Reconciliation is the process of comparing two sets of financial records—such as internal books and external statements—to ensure they align accurately. In practical terms, it involves verifying that every transaction reflected in one source (e.g., your organization’s accounting system) matches the data in another source (e.g., a bank statement or vendor invoice).

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Why is reconciliation important?

Reconciliation is fundamental to maintaining the integrity of financial information and providing stakeholders with confidence in the organization’s financial health. Below are some of the key motivations for performing reconciliation.

Accuracy of financial statements

By spotting and correcting inconsistencies, reconciliation ensures that your balance sheet, income statement, and other reports are accurate.

Detection of errors and fraud

Regular reconciliation helps catch inadvertent mistakes (like duplicate entries) and malicious activity (such as unauthorized transactions) before they become bigger issues.

Regulatory compliance

Financial audits and various regulations require companies to maintain clean, verifiable records. Reconciliation is an essential control that supports compliance with these standards.

Decision-making confidence

Stakeholders—executives, investors, lenders—depend on reliable financial data. An organized and regular reconciliation process instills greater trust and clarity for strategic planning and daily operations.

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Common reconciliation types

• Bank reconciliation: Bank reconciliation involves matching internal cash records to bank statements to confirm that all deposits, withdrawals, and fees are accounted for.
• Accounts receivable reconciliation: Ensuring that customer payments, invoices, and credits match the amounts recorded in the accounts receivable (AR) ledger.
• Accounts payable reconciliation: Confirming the accuracy of vendor invoices, payments, and credits against the accounts payable (AP) ledger.
• Intercompany reconciliation: Balancing accounts and transactions between different entities or subsidiaries within the same group.
• Credit card and expense reconciliation: Aligning corporate credit card bills and employee expense reports with the general ledger.

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Key steps in the reconciliation process

Reconciliation processes generally follow a number of key steps, regardless of the financial records being reviewed.

1. Gather and compare statements: Collect internal records (ledgers, transaction listings) and external records (bank statements, supplier invoices, etc.).
2. Identify discrepancies: Look for mismatched amounts, missing entries, and timing differences (e.g., outstanding checks).
3. Investigate and resolve: Determine whether the discrepancy is due to a legitimate timing difference, an error in recording, or potential fraud.
4. Document and adjust: Make the necessary journal entries and maintain clear documentation for audit trails.
5. Review and approve: Have a second person review, especially for high-value accounts, to ensure objectivity and adherence to internal controls.

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Reconciliation best practices

By systematically comparing and aligning records, teams can prevent costly errors, detect fraud early, comply with regulations, and maintain the trust of stakeholders. Whether it’s bank statements, customer invoices, or intercompany transactions, reconciling them promptly and accurately is essential for a strong financial control environment.

• Regular schedule: Conduct reconciliations routinely—daily, weekly, or monthly—depending on transaction volume and organizational needs.
• Clear policies and procedures: Standardize how reconciliations should be done, who is responsible, and how often.
• Use of technology: Automate repetitive tasks and leverage integrated accounting systems to reduce manual errors.
• Segregation of duties: Separate the roles of those who record transactions from those who reconcile or approve them.
• Thorough documentation: Keep a record of all reconciliations, adjustments made, and supporting evidence to assist in audits and future reviews.

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How Atlar can help with your bank reconciliation

Reconciliation is more than a routine accounting task—it’s a cornerstone of sound financial management. Thanks to native integrations with ERP systems like Oracle NetSuite and Microsoft Dynamics 365 Business Central, plus pre-built connections to over 60 banks, Atlar enables its customers to greatly simplify reconciliation.

Atlar customers can automatically import bank statements from any bank directly to their ERP system, removing the need for manual imports. This can be done with any bank connected to Atlar, enabling customers to reliably sync financial data between their banks and their ERP.

Customers can also simplify payment runs by automatically paying vendor bills from their ERP directly in Atlar—with all transaction data fed back into your ERP system, streamlining reconciliation. This lets customers avoid having to manually enter payments in one or more online banking portals. To learn more, explore our accounts payable feature page or get in touch with our team.