How are accounts reconciled during the month-end close?

Month-end account reconciliation is a structured sequence of procedures that ensures the general ledger reflects actual business activity and supports reliable financial reporting. The process begins with collecting source documents and subledger balances, then matching those details to the general ledger. Common reconciliations cover cash, accounts receivable, accounts payable, payroll, inventory, fixed assets, and intercompany balances. Effective reconciliation ties each ledger balance to supporting workpapers, bank confirmations, invoices, and system reports so that any discrepancies can be traced to a verifiable cause.

Reconciliation workflow

Practitioners typically follow a repeatable workflow: assemble supporting evidence, compare subledger totals to the general ledger, identify and investigate variances, prepare adjusting journal entries when appropriate, and obtain supervisory review and sign-off. Guidance from the Committee of Sponsoring Organizations of the Treadway Commission emphasizes documentation, timely investigation, and segregation of duties as core internal control elements that make reconciliations reliable. The American Institute of Certified Public Accountants supplies practice aids that stress consistent formats and aging analyses for reconciling items to facilitate both internal review and external audit scrutiny. Research by Michael G. Alles at Rutgers University highlights that continuous monitoring and near-real-time reconciliation technologies can reduce the time between transaction origination and exception resolution, improving accuracy and accelerating close cycles.

Causes of unreconciled items vary. Timing differences such as deposits in transit or outstanding checks commonly create temporary gaps. Transaction posting errors, duplicated invoices, or omitted entries indicate process or system weaknesses. Intercompany mismatches often stem from differing cutoffs across subsidiaries or inconsistent currency translations in multinational operations. Human factors also matter: staff shortages, end-of-period work pressure, and limited cross-training increase the likelihood that anomalies are missed or resolved incorrectly.

Controls, automation, and consequences

Internal controls combine preventive and detective measures. Standardized reconciliation templates, mandatory attachments of supporting documents, electronic workflows that require reviewer approval, and periodic independent reviews all reduce risk. Automation tools that link subledgers to the general ledger and flag exceptions improve efficiency and reduce manual error. Studies of continuous auditing and automated reconciliation by academic and professional bodies indicate material reductions in audit adjustments and faster close cycles when organizations adopt integrated reconciliation technology.

When reconciliations are incomplete or inaccurate, consequences extend beyond bookkeeping. Financial statements can become misstated, triggering audit adjustments, delayed filings, regulatory sanctions, and reputational damage. For companies operating across territories, unresolved intercompany differences can complicate cash management and tax reporting in a way that affects operational decisions. Culturally, organizations that normalize rushed closes may experience higher staff turnover and reduced institutional knowledge, while those that invest in training and process improvement see more resilient month-end outcomes.

Consistent discipline, supported by documented policies, robust controls, and appropriate technology, transforms reconciliation from a monthly burden into a control activity that safeguards financial integrity and supports timely management decision making.