7 critical areas of your account reconciliation policy

Having a standard format for your account reconciliation policy can help streamline your processes and set clear expectations for your team. Here are the 7 areas we recommend: 

1. Purpose, scope, definitions, and roles 

  • Set guidelines and responsibilities for reconciling general ledger accounts, applying to all locations and balance sheet accounts 
  • Define reconciliations, roll forwards, reconciling items, and unidentified difference 
  • Describe applicable roles within the approval workflow and within the respective technology, if applicable 
  • Provide an overview of the policy to record transactions on a timely basis in accordance with respective accounting principles 
  • Indicate high-level expectations for reconciling accounts and approving reconciliations 

2. Risk ranking and frequencies 

  • Detail the approach for applying quantitative thresholds and qualitative factors to rank accounts as High/Medium/Low risk. These rankings will impact the required timing and frequency of reconciliations. 

3. Documentation

  • Describe the requirement associated with attaching supporting documentation to reconciliations and validate the balances and/or supporting items within the reconciliations
  • Include examples of the types of documentation that are acceptable and unacceptable

 4. Methodologies 

  • Provide instruction on how to complete the reconciliation process, including validating the account balance(s) with supporting items, designating the type of supporting item required to validate the balance, and the process for attaching supporting documentation

 5. Account assignments 

  • Indicate account assignment requirements for the approval workflow along with the leading practices associated with assigning users to accounts

 6. Monitoring 

  • Recommend account monitoring at the leadership level and the leading practices associated with monitoring compliance and enforcing governance

  7. Format 

  • Describe the standardized account reconciliation format and provide a high-level overview of reconciliation templates

For more ways to level up your close process, explore the close maturity continuum.

Categories: Financial close
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