Can Balance Sheet Reconciliations be Performed in SAP?

Can balance sheet reconciliations be performed in SAP? This is a common question among SAP finance users. Standard SAP does not provide a complete process for preparing, approving and reporting on balance sheet reconciliations.

However, BEST provides automated balance sheet reconciliations within SAP. BEST Balance Sheet Recons supports reconciliation preparation, approval workflows, complete audit histories and reporting across balance sheet accounts without requiring finance data to be moved into a separate external system.

Before considering how the software works, it is important to understand why organisations need an effective balance sheet reconciliation process.

Why Are Balance Sheet Reconciliations Important?

Regular and accurate balance sheet reconciliations do more than help detect fraud and other financial irregularities. They are an important financial control that helps protect the accuracy and reliability of an organisation’s financial records.

Missing or poorly completed reconciliations can lead to inaccurate balance sheet figures and unidentified write-offs. Effective balance sheet reconciliations provide the foundation for an efficient and accurate month-end close, resulting in more reliable financial information.

This information supports important organisational decisions and helps satisfy internal and external reporting requirements.

Balance Sheet Reconciliation Best Practices

When considering the balance sheet account reconciliation process from a best-practice perspective, the following areas are particularly important:

• Completeness
  • Ensure that every relevant account identified by the organisation is reconciled, including newly created accounts.
  • Provide instructions and procedures explaining how each balance sheet reconciliation should be completed.
  • Include or attach relevant supporting documentation to validate the account balance.
• Accuracy
  • Ensure that those preparing and reviewing reconciliations understand the account and the nature of the transactions it contains. This helps them determine which supporting documentation is relevant.
  • Complete balance sheet reconciliations regularly and keep them current.
  • Provide meaningful analysis of the account rather than simply listing line items or balances carried forward.
  • Identify and highlight anomalies within the account.
• Standardisation
  • Apply a consistent balance sheet reconciliation process across the entire organisation so that the same standards and controls are maintained across all departments and business units.
• Review
  • Complete reviews on time and adhere to defined review deadlines.
  • Track approval statuses to measure completion of the reconciliation process.
  • Categorise balance sheet reconciliations according to risk so that attention can be focused appropriately.
  • Monitor anomalies and other relevant metrics, including ageing and tolerances.
• Auditability
  • Ensure that the complete balance sheet reconciliation process, from preparation through to review, is auditable.
  • Make completed SAP balance sheet reconciliations and their supporting evidence readily available for audit review.
• Continuous improvement
  • Review the balance sheet reconciliation process regularly to identify improvements and potential bottlenecks that affect quality or timeliness.
  • Use standard balance sheet reconciliation templates to improve consistency and make reconciliations easier to review.

Understanding balance sheet reconciliation best practices is one thing, but implementing them consistently across an organisation can be much more difficult. Balance sheet reconciliation software is increasingly important for organisations seeking to achieve a fast and accurate month-end close while maintaining consistent controls.

BEST Balance Sheet Recons is designed for SAP finance users, finance systems managers, financial accountants, general ledger accountants, SAP FI specialists and business process owners. The module provides functionality specifically designed to support best-practice balance sheet reconciliations within SAP.

The following functionality demonstrates how BEST supports these best-practice requirements:

• Completeness
  • SAP GL accounts can be marked as relevant for reconciliation, allowing finance teams to see which accounts must be reconciled at any time. Both balance sheet and income statement accounts can be included.
  • Attachments and reconciliation instructions can be stored against the GL master record in SAP, providing important information to reconciliation preparers and reviewers.
  • Attachments, long-text explanations and reason codes can be stored against individual reconciliation line items to provide additional context.
• Accuracy
  • Supporting reports can be attached at reconciliation header level to validate the GL balance. For example, bank statements can be attached to bank account reconciliations.
  • Reports generated in SAP can be attached directly from the spool list without needing to be printed.
  • Control reports can track the completion of reconciliations and show their progress through the approval process.
  • Reconciliations that miss reporting deadlines can be identified for follow-up.
  • Reporting metrics such as categorisation and ageing support meaningful account analysis and help identify items requiring attention.
  • Tolerances can be used to flag transaction-level or balance-level anomalies automatically.
• Standardisation
  • Balance sheet reconciliation software allows a common process to be implemented across all business units using the same SAP system.
  • All reconciliations follow the same defined rules and can be reviewed within SAP across the organisation.
• Review
  • Customisable approval strategies help ensure that reconciliations receive the appropriate level of approval according to their risk.
  • Complete audit trails are maintained for all approvals and rejections, strengthening accountability among preparers and reviewers.
  • Reporting deadlines and approval timings can be monitored to identify delays and bottlenecks at different approval levels.
  • Reconciliations can be approved automatically according to defined risk and transaction criteria.
  • Supporting documentation can be attached to the approval for subsequent review.
  • Senior management and internal audit teams can perform additional ad hoc reviews.
• Auditability
  • A complete audit history is maintained for attachments, reason codes, long-text explanations, approvals and other actions associated with each reconciliation.
  • Historic and current balance sheet reconciliations remain available within SAP.
  • Ad hoc reviews and automatic approvals are retained for subsequent reporting and audit purposes.
• Continuous improvement
  • Comprehensive control reports and audit trails support exception reporting, helping finance teams identify reconciliation anomalies and approval bottlenecks.
  • GL master data can be managed to ensure that all relevant accounts, both old and new, are included in the reconciliation process.

BEST Balance Sheet Recons is an SAP-certified add-on module that operates within SAP.

Find out more about automated balance sheet reconciliations in SAP, or contact BEST to arrange a demonstration.