Your balance sheet gives you insight into where your business stands financially. But, you won’t get an accurate picture of your company’s finances if you don’t keep up with balance sheet reconciliation. Here is a checklist to review what needs to be done.
Before you can look over your balance sheet and reconcile it, gather the proper documentation. Pull information for the current period (e.g., from the past month). This includes things like:
Bank statements
Receipts
Current account balances
Other accounting and financial records
When cross-checking information on your balance sheet with financial documentation, be on the lookout for discrepancies. This includes things like misclassified transactions (e.g., asset instead of liability), transposition errors, and missing information. If you catch an error on your balance sheet, take note of it.
If you wind up finding any discrepancies while comparing your documentation to your balance sheet, make the necessary adjustments.
As you know, your balance sheet consists of your business’s assets, liabilities, and equity. For your balance sheet to balance, your total assets must equal your total liabilities and total equity.
Accounts payable represents the amounts the company owes to its suppliers for products and services that you've ordered. Reconciling this account is essential to make sure that you're paying vendors on time and are not jeopardizing your vendor relationships through frequent late payments.
Payroll liabilities can get fairly complicated, especially when the business pays some employees hourly and pays others a salary. The balance sheet reconciliation process for this account is to make sure that payroll expenses (including overtime, bonuses and commissions) are recorded for the correct period.
If notes payable, debts and loans are not recorded properly, then the company's financial position, as stated on the balance sheet, will be incorrect. Reconciling these transactions requires matching the loan documents to the line item shown on the balance sheet.
Confirms that the amount owed in total matches the amount owed as a sum of the individual received purchase order records. Make sure that any other transactions have not been accidentally booked to this GL Account.
Process integrity checks help you determine that all records are accounted for in your financials. The goals of these types of checks are to confirm the completeness and find missing records. These types of checks will vary greatly between different organizations.
Analytical reviews of your financial data help you to determine reasonableness in your GL account balances. Large fluctuations in balances should be subject to a more detailed review.