[Whitepaper] Why Is Financial Reconciliation So Difficult?

I feel that the word reconciliation can mean many things. In a personal sense, it’s to repair or restore a relationship. In accounting, it’s more of consistency and accuracy. In both situations, I think the words “harmony” or “alignment” best illustrate what reconciliation truly is.

I am probably indicating my age with my first example of reconciliation. My first bank account came with a small printed account ‘book’ which appeared very much like a checkbook. It wasn’t a checking account but I
think the bank wanted to have the document appear more grown up and to also instill good practices for its future customers. This booklet showed my balances and transactions, and it was on me to ensure that the transactions matched to what I believe occurred. Looking back, I think it was an excellent habit to establish. My financial institution was essentially suggesting that I, to a small degree, monitor and audit the transactions that they posted in my account.

And this behavior of validating or reconciling two sets of data carries on into other financial transactions sometimes as second nature. When I receive my restaurant bill, I review the line items in a quick scan to see what I am being billed for, is what I actually ate. Or in the grocery store, to double check the bill but not to determine if it made its way to my grocery bag but to validate that the price I am paying is the price I expected to pay.

This reconciliation behavior is different from balancing. The difference lies in the line item details. Balancing simply compares totals where reconciliation dives deeper into the set of records to compare individual items
and not just the totals. This accounting process is to confirm that the entries between the two sets of records are matching in content and values.

Download the full whitepaper below!

{{cta('b83ecaf1-78bd-4c01-ad98-210c11eda110')}}