When auditing reconciliations covering specific periods of time - most often your monthly accounts - you should be on the lookout for any discrepancies, particularly those that don't have an obvious explanation.
Standard processes such as payments pending or still being processed will explain the majority of differences between your bank accounts and internal ledgers, for example, and your reconciliation statements should identify and justify them.
However, closer attention is required when you discover signs of more serious issues in your audits, especially if they don't appear to have been adequately explained in previous reconciliations. Missed or failed payments, for instance, could lead to serious problems in your cash flow or lines of credit if they're not spotted and addressed promptly.
It's vital to focus on detail at this stage of an audit. Small discrepancies might not appear to be a major concern on first glance, but they could be symptomatic of wider problems such as flaws in your invoicing or data entry procedures.
Draw conclusions based on data, not assumptions
A common pitfall to avoid when planning and executing a reconciliation audit is going into the task with preconceived ideas or assumptions about what you'll find. You may have been through this process many times before and usually had similar outcomes, but that doesn't necessarily mean the same thing will happen again on this occasion.
Be sure to adopt a data-driven approach and take your lead from what the numbers stored in your software solutions - whether it's an Excel spreadsheet or an integrated ERP system - are telling you.
If you're particularly keen to avoid drawing conclusions that aren't backed up by the data, consider asking another member of the finance team to look at the same information and see if their thoughts align with your own.
Make the most of technology
As noted in the previous step, it's essential to make the most of the tools at your disposal and to turn the power of technology to your advantage. It's also important to acknowledge that particular tech applications - much like human workers - have distinct strengths and weaknesses, and will only deliver real value if they're used in the right way.
Spreadsheets can be useful for the most basic record-keeping, for example, but they're also reliant on human users and can only work with the data they're given. This presents some clear risks, such as the possibility of human errors in data entry having unintended consequences in other areas of your accounts and financial affairs. Even the smallest oversight - such as a decimal point or a zero being put in the wrong place - can have serious repercussions.
It's for this reason that you might want to consider incorporating automation into your account reconciliation and auditing practices. Software specifically designed for this task can collect and manage your ledger, bank account and reconciliation statement data, examine the figures in detail and pick out any inconsistencies.
This can be done at greater speed and with higher levels of accuracy than individual employees are capable of, leaving the people on your team free to focus on tasks that make better use of their uniquely human expertise.
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