Tips and tricks for reconciling accounts at year end
It’s yearend, and, on top of the holidays and everyone taking vacation, you need to close out the past year. The last thing you want to be doing while you’re well into the current year is closing out last year’s books. I’ve got a few tips and tricks to make the process smoother so you can stop worrying about your books and start thinking about your business.
Where to start?
First you must determine where to even start with this large task. Prioritizing your balance sheet is best done using a “risk-based approach” which is done by asking the question, “Where is the greatest risk of error?” Accounts that have higher risk or are considered more important like cash, accounts receivable, and accounts payable should be the first to be reconciled and, if they’re not already, should be reconciled quarterly or even monthly if possible.
When to move on?
It’s also important to not spend hours and hours trying to find a penny in one account’s reconciliation. Determine a dollar value that you will consider TSTI (too small to investigate) and stick to this across the board. This way you can move on once the account is considered reconciled with a small variance and focus your team members on other accounts and activities.
Monitor the reconciliation and close process.
Having an understanding of where you are in the process of closing out, who is holding up reconciling accounts, and what items are still open can help you better assign tasks and complete reconciliations timely and efficiently. There should be someone who is in charge of the process as a whole, and those on the team should be reporting to this individual. Through the monitoring process, the person in charge can ensure that the process is not being held up by one individual or department as well as look for areas of improvement on the process as a whole.
Don’t underestimate technology.
Through the creation of simple excel templates or software you can work to simplify or even automate some close out procedures. Properly understanding the reporting and features of software you currently have could make room for improvements or the automation of reconciliations. If you don’t know what your system can do, it’s a good time to reach out or look for consulting guidance from Blueprint Essential.
To wrap up, when closing a year out remember to figure out where you should be spending the most time and focusing your efforts, make sure you are not spending hours on amounts so trivial they have no meaningful impact, monitor the reconciliation process and determine what needs improvement and what is working for you, and remember to use the technology you have available.