Accounts receivable reconciliation involves comparing documentation with accounting records to identify and correct discrepancies. It is typically done monthly or quarterly and can help identify errors in payment recording. Regular reconciliation can save time and resources and make audits easier.
Accounts receivable reconciliation is a type of accounting task that requires careful comparison of paper documentation related to accounts receivable transactions with the actual entries made in the accounting records. This approach helps to identify any discrepancies that may be present and correct them as part of a general reconciliation of accounting records. The frequency with which this type of activity is performed will vary from business to business, but it is generally performed on a monthly or at least quarterly basis.
Like any type of accounting reconciliation, the accounts receivable reconciliation is intended to locate any issues that may be causing the data shown in the accounting records to not balance with other documentation. This often means going back to all documents relevant to accounts receivable during the time period considered. For example, reconciliation may involve comparing bank deposits or accounts receivable for specific dates to ensure that the amount deposited is the same as the amount recorded on customer invoices. At the same time, the process will also require making sure that the payments on those invoices match the amounts shown in the customer’s account under Accounts Receivable.
In many cases, an accounts receivable reconciliation helps identify common errors that can occur when recording payments received from customers or even preparing bank deposits for those accounts receivable. By carefully comparing the supporting documentation, it is possible to determine if the numbers were transposed or if a payment was not posted to the correct outstanding invoice. Many of the problems identified during this type of reconciliation can be corrected with little effort, resulting in accounts receivable that are completely accurate and fully reconciled.
Choosing to conduct an accounts receivable reconciliation on a regular basis can greatly benefit a business, as some businesses choose to perform a daily or weekly reconciliation. Even with a small business, taking the time to perform the reconciliation roughly every month will save a lot of time and resources, while also allowing you to identify any questionable accounting processes that may be taking place. Assuming that reconciliation occurs multiple times each calendar year, it is often easier to note any discrepancies, investigate them, and ultimately reconcile them with relatively few issues. Performing an accounts receivable reconciliation just before an audit is often a good idea, as the process involves error-free books, which will help keep the audit simple and easy to manage.
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