Why Reconcile General Ledger (GL) Accounts At All?
The financial statements of your business provide the basis for key decisions by internal and external stakeholders . GL account reconciliation is essential to ensure that GL accounts (and the resulting financial statements) are accurate at month end / period end. During the financial close process, incorrect, missing or unauthorized entries need to be identified and corrected. Accruals and adjustments are posted. SAP balances and transactions are validated against financial statements and external system data.
Besides your stakeholder requirements for accurate, complete and validated financial statements, there are also increasing regulatory requirements, particularly for listed companies.
How To Reconcile GL Accounts in SAP?
Standard SAP unfortunately has no functionality to reconcile GL (General Ledger) accounts. Businesses that run SAP are therefore forced to find another way. Accountants download SAP data to Excel or other non SAP tools and perform a lot of spreadsheet and manual reconciliation to get the job done. Such highly manual or non SAP processes are not ideal.
BEST is a SAP certified add-on module that allows automated GL reconciliation, directly inside SAP.
- GL Reconciliation reports are automatically available in SAP itself, while drill-down to the SAP transactions from the reconciliation reporting allows easy investigation of discrepancies.
- Notes, supporting attachments and GL reconciliation approvals are processed directly in SAP – with full SAP audit trails by user, date and time.
- Existing SAP users are simply allocated additional reconciliation transactions, controlled within the normal SAP Authorisations framework.
- Duplicating and interfacing key data to non SAP systems is definitely not required, as the GL transactions and balances inside SAP are reconciled and reported.
- Historic reconciliations are stored in SAP, providing query resolution and audit evidence as required in the future.
- Automated approvals are processed by the system for low risk accounts in cases where no transactions are posted during the period, or other configurable criteria are met.
- The system matches and automatically clears open items that meet matching criteria. Importantly, automatic clearing for inter company and other transactions across company codes and GL accounts is possible.
- The Reconciliation Hub allows planning and tracking the reconciliations to be done during the financial close.
Case Study: See How A Large Listed Business Reconciles GL Accounts In SAP
Dis-Chem has high volumes of transactions posted across many company codes each month. Watch the short video or view the presentation from a recent conference where they shared their journey of automating their GL reconciliations and open item clearing in SAP.
Key GL accounts To Reconcile In SAP
Typically, most are balance sheet reconciliations, but the same functionality can also be used to reconcile income statement accounts. Below are brief descriptions of what I’ve seen from our BEST SAP customers as the most important GL reconciliations.
There are two parts to the BEST bank reconciliation in SAP:
- Ensuring that the Main Bank GL account always reconciles to the actual Bank Statement (Accurate & Complete).
- Ensuring the Bank Sub Accounts are cleared regularly and do not contain long outstanding items.
This article describes the detailed bank reconciliation functionality
Within SAP intercompany transactions may be handled in a myriad of different ways. For example, between Vendors, Customers, GL accounts (with various account assignments), Trading Partners, Segments and more. Mapping and matching transactions in these various entities is complex and not made any easier by large volumes. Many businesses consider intercompany reconciliations to be the most difficult part of the period end close. BEST has met this challenge by allowing all manner of SAP entities to be mapped against each other and automatically reconciled.
Fixed Asset Reconciliations
SAP provides standard transactions to perform this GL to Asset Sub Ledger reconciliation. In addition to this however, most business still insist on a review that is performed each month to validate that the GL and Sub Ledger agree, as well as reviewing posting values according to various categories. To assist businesses with their Fixed Asset Reconciliations in SAP, BEST has a unique Fixed Asset Reconciliation process.
Over or understated accruals can materially affect the balance sheet, most commonly liabilities. What should you be trying to achieve with your month end accrual reconciliations in SAP? And how can the BEST GL Reconciliations module help to facilitate this?
Vendor & Customer Sub-Ledger Reconciliations
In SAP, it is quite difficult for the vendor / customer “sub-ledger” (i.e. postings made against a vendor) not to balance exactly to the vendor / customer control or general ledger accounts. Some decades ago we would see this at some SAP sites, but more recently the SAP master data and configuration options are almost always set correctly to ensure that the control accounts cannot be posted to except via the “sub-ledger”. Nonetheless BEST does have a specific check to find any entries posted to either only the vendor / customer control GL accounts or to only the “sub-ledger”.
Besides the specific check above, the vendor and customer control GL accounts can also be reviewed and approved through the normal GL reconciliation process as required.
Vendor Statement Reconciliations
The real need in terms of vendor reconciliation is to match and validate the SAP vendor line items and balances against vendor statements. This is generally a primary function of the Accounts Payable department. It can involve many thousands (or millions) of lines and hundreds or thousands of vendor reconciliations each month. As statements could be sent via email in a unique PDF or Excel format per vendor, or in may other ways, one of the key requirements is to be able to read and match all these formats. SAP has a vast array of functionality in the Materials Management (MM) and Financial (FI) modules involving payments, discounts, down payments, special postings such as withholding tax, held and parked items, GR/IR accounts and more. BEST therefore has a dedicated module for Vendor Statement Reconciliations.
Customer Payment Clearing
Customer payments need to be timeously and accurately cleared against the invoices and other transactions on a customer’s account to ensure correct customer balances, as well as reduce open items on the customer account. The BEST Debtor’s Remit module allows the customer remittance advice to be uploaded into SAP, then it automatically matches and clears the customer account line items and the related payment.
Clearing Open Items
Open items should be cleared, else too many open lines can make GL accounts difficult to work with and in some cases balances are incorrect. Standard SAP does have functionality to automate open item clearing, but unfortunately it has limitations. Open items cannot be automatically cleared across different company codes, different types of GL accounts (e.g. customer to vendor) or even across different GL accounts. This means that users need to do manual clearing, which often leads to high volumes of uncleared items. BEST’s GL Clearing functionality overcomes these limitations to allow automated clearing of these open items.
Would you like to see how to reconcile GL accounts directly in SAP?
If you use SAP, and are currently reconciling manually outside of SAP, please contact us demonstrate in SAP how GL accounts can be reconciled automatically.