What is balance sheet reconciliation?
Balance sheet reconciliation is the process of checking that each balance sheet account is accurate, complete, and supported by appropriate evidence. The general ledger balance is compared with subledgers, statements, schedules or other supporting records. Any difference must be explained, corrected or recorded as a reconciling item before the account is approved.
Also known as: balance sheet account reconciliation or account reconciliation.
Balance sheet reconciliation is an important control during the month-end and year-end close. It helps finance teams identify missing entries, duplicate postings, ageing items, unexplained movements and other issues before they affect financial reporting or an audit.
What does the balance sheet reconciliation process include?
The exact process depends on the account, but a controlled reconciliation normally includes:
- Confirming the general ledger balance for the period.
- Gathering supporting data for the account.
- Comparing the balance with the relevant subledger, statement or schedule.
- Investigating differences and recording reconciling items.
- Attaching evidence and explanations.
- Submitting the reconciliation for review and approval.
- Tracking unresolved items through to completion.
Example: A fixed asset account can be compared with the asset register and supporting SAP reports. If the balances agree and the required evidence is attached, the reconciliation can proceed for approval. If they do not agree, the preparer records and investigates the reconciling item.
Other examples include comparing a month-end bank account balance with the supporting bank statement, or comparing intercompany balances with the corresponding balances recorded by other entities in the group.
Why is balance sheet reconciliation important?
Balance sheet reconciliation gives finance teams evidence that reported balances can be relied upon. Without it, errors can remain hidden across reporting periods, supporting documents may be difficult to locate and account ownership can become unclear.
A consistent process supports:
- More accurate financial statements
- Earlier identification of errors and unusual items
- Clear accountability for each account
- Traceable preparation and approval
- Better visibility of overdue reconciliations
- Stronger supporting evidence for internal and external audit
How is balance sheet reconciliation managed in SAP?
SAP holds the general ledger balances and transaction details needed for the reconciliation. The surrounding work may still be managed through spreadsheets, shared drives and email, however. This can separate the reconciliation, evidence and approval history from the underlying SAP data.
Keeping the process within SAP makes it easier to use existing users, authorisations and controls. Finance teams can also drill down from the reconciliation to the relevant SAP transactions without maintaining a separate copy of the data.
Can balance sheet reconciliation be automated?
Parts of balance sheet reconciliation can be automated, but automation does not remove the need for financial judgement. Rules can identify accounts or items that require review, route reconciliations for approval, carry forward relevant information, and report on progress. Finance professionals still need to assess unusual balances, explain differences and decide whether corrective action is required.
The BEST Balance Sheet Recons module supports balance sheet reconciliation directly within SAP. It helps teams identify risky accounts and items for review, manage preparation and approval workflows, retain supporting documents and maintain an audit trail. It does not perform transaction matching in the same way as the BEST Open Item Clearing module because the processes serve different purposes.
Bacardi implemented BEST across 30 countries and now completes more than 4,500 reconciliations each month. The business increased the number of reconciliations completed by 40% using the same resources. Read the Bacardi balance sheet reconciliation case study.
Frequently asked questions
How often should balance sheet accounts be reconciled?
Most organisations reconcile material balance sheet accounts at least monthly. Higher-risk or higher-volume accounts may need more frequent review, while some lower-risk accounts may follow a different schedule based on the organisation’s control policy.
What is a reconciling item?
A reconciling item is a difference between the general ledger balance and the supporting record. It should be documented with its cause, value, owner and expected resolution date.
Is balance sheet reconciliation the same as transaction matching?
No. Transaction matching compares individual entries using defined criteria. Balance sheet reconciliation assesses whether the overall account balance is accurate, supported and approved. Transaction matching may support a reconciliation, but it is not the complete process.