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This is Why There’s No Such Thing as ‘Good Enough’ Account Reconciliation

February 3, 2016 Mitchell Buchanan  
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If account reconciliations were a game, Marc Ursick would be the guy who always plays to win.

A CPA and consultant, Ursick published an article in the Journal of Accountancy this past November that tried to achieve the seemingly impossible: make account reconciliation sound like a fun challenge rather than a complex chore.

While all of his tips were solid — prioritizing the balance sheet, defining a standard operation and so on – they specially stood out because he used sports analogies with each one. Some were about golf, others about football, but this one in particular stood out:

In bowling, it’s unlikely that every roll will be a strike. Similarly, not every reconciliation will be able to be reconciled to the penny. A common “quick win” improvement is to set tolerances and materiality thresholds across the organization. Rather than wasting time attempting to reconcile low dollar values, team members should work on other accounts or activities. Common thresholds that organizations set include unreconciled differences and required adjustments. 

While perfection may be unattainable, however, many finance departments have to do whatever they can to ensure account reconciliation is as accurate as possible. As Ursick might put it, no one wants to see their reputation go trailing into the gutters.

Utopia, Here We Come?

What doesn’t help matters is the largely manual way it’s done in many month-end close processes todayas AccountingWeb and others have noted. This is not a new issue. In fact, consultants at Deloitte posted a great presentation on SlideShare a few years ago that highlighted the benefits of automating account reconciliation as part of financial close management. Their recommendation? Build a four-pronged strategy based not only on technology but people, process and governance.

“By implementing the appropriate tools and adopting a comprehensive approach and framework, you can transform your financial close and reconciliation management processes to realize clear and substantial cost reduction and risk management benefits,” the authors conclude.

Yet, Deloitte sounds entirely different than Ursick, referring to the concept of a “utopian close.” That may sound out-of-reach for many firms, just as they might not want to think of their account reconciliation process as less than perfect. Maybe, as finance teams start using the right tools and optimizing their approach, we can all agree that the best goal is to make your month-end close the best it can possibly be.

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