Balance sheet reconciliation workflows

Every balance sheet account should be reconciled: its general ledger balance compared with independent support, and every difference explained. Bank reconciliations are the best-known kind, but the same discipline applies to receivables, payables, prepayments, accruals, fixed assets, payroll liabilities, tax balances, intercompany and suspense accounts.

What counts as support depends on the account, but it must come from outside the GL account itself: - Bank and loans — the bank statement or lender confirmation. - Receivables and payables — the sub-ledger aged listing (itself reconciled to the GL) and, for key balances, supplier statements. - Prepayments — an amortisation schedule showing each item's cost, period and unexpired amount. - Accruals — a listing of each accrual with its basis: purchase order, contract, goods received report or the invoice received after period end. - Fixed assets — the asset register. - Clearing and suspense accounts — should be zero; any balance is itself a reconciling item to clear.

A GL detail report is not support for the GL balance: agreeing an account to itself proves nothing.

The reconciliation template. Account, period, GL balance, supporting balance, a list of reconciling items (each with a description, amount, date, owner and expected clearance), and the unreconciled difference, which must be zero or below a set threshold and still explained. Items fall into three groups: genuine timing items that clear next period (cheques not yet presented); errors that need a correcting entry now (a charge not booked); and items that need investigation or escalation (anything stale or unexplained).

Age the items. A timing difference that's three months old isn't a timing difference. Many policies flag items over 30, 60 or 90 days for escalation.

Sign-off. The preparer signs and dates the reconciliation with the evidence attached; a reviewer who didn't prepare it checks the support, challenges old and unexplained items, and signs after the preparer. Reviewers should look out for: support that is the GL itself, a prior month's reconciliation rolled forward without new evidence, a balancing figure labelled "timing" that recurs, and sign-offs dated after the deadline. Higher-risk accounts are reconciled monthly; low-risk, low-activity accounts may be done quarterly under a documented policy.