Who it's for: anyone who prepares or reviews balance sheet reconciliations in a SaaS or tech finance team, from finance assistant to financial controller.
What you'll get: what a good reconciliation contains, a risk-based schedule for which accounts to reconcile and how often, a standard template, worked examples, where AI helps and a one-slide pitch to raise the standard.
Reading time: about 11 minutes. Shorter than explaining an unreconciled suspense account to an auditor.
Why reconciliations are the backbone of the close
The P&L gets the attention, but most P&L errors show up first on the balance sheet. A missed accrual, a duplicated invoice or revenue booked in the wrong month all leave a balance that doesn't make sense. Reconciliations are how you find them before anyone else does.
A reconciliation proves that the balance on an account is right, explains what's in it, and shows the evidence. Done well, it's also the quickest thing to hand an auditor.
Key terms
- Balance sheet reconciliation: comparing an account's ledger balance with independent evidence (a statement, a schedule, a report) and explaining any difference.
- Reconciling item: a known, explained difference between the ledger and the evidence, such as a payment in transit.
- Unreconciled difference: a difference nobody can explain yet. The goal is zero.
- Substantiation: proving what makes up a balance, line by line, rather than just agreeing a total.
- Preparer and reviewer: the person who does the reconciliation, and a different person who checks and signs it off.
- Roll-forward: opening balance + additions − reductions = closing balance, agreed to the ledger.
What "good" looks like
A good reconciliation answers six questions on one page, whatever the account:
| Question | What it shows |
|---|---|
| What's the ledger balance? | The balance at period end, from a trial balance run after the last journal |
| What does the evidence say? | The independent figure: bank statement, sub-ledger, schedule, third-party statement |
| What's the difference, and why? | Each reconciling item listed, dated and explained |
| Is anything old? | Reconciling items aged, with anything over 60 or 90 days flagged |
| Who's fixing what? | Each action with an owner and a date |
| Who prepared and reviewed it, and when? | Two different names and dates |
The evidence matters most. "Agreed to schedule" means nothing if the schedule isn't attached, or if the schedule itself was built from the ledger. Good evidence comes from outside the account being reconciled.
Which accounts, and how often
Not every account needs the same effort. Many teams rank accounts by risk and set the frequency to match. Write the policy down, so the choice is a decision rather than an omission.
| Risk | Typical SaaS accounts | Common frequency | Typical evidence |
|---|---|---|---|
| High | Bank, trade debtors, deferred revenue, accruals, VAT, PAYE/NI, suspense | Monthly | Bank statements, aged debtors, deferred revenue schedule, VAT workings, payroll reports |
| Medium | Prepayments, trade creditors, payment processor clearing, intercompany, capitalised commissions | Monthly | Prepayments schedule, supplier statements, payout reports, counterparty confirmations |
| Lower | Fixed assets, deposits, share capital, share-based payment reserve, corporation tax | Quarterly, or monthly if there's activity | Fixed asset register, deposit agreements, Companies House records, tax computations |
Two rules stop risk-based scheduling from becoming an excuse: any account with unexpected movement gets reconciled that month, and every account is reconciled at year-end.
Step by step: the monthly reconciliation process
| Task | What "done" looks like | |
|---|---|---|
| ☐ | Keep a reconciliation register listing every balance sheet account | Each account has an owner, a reviewer, a frequency and a due day |
| ☐ | Run the trial balance after the final journals | Reconciliations use the same balances that will be reported |
| ☐ | Get independent evidence for each account | Statement or report saved alongside the reconciliation |
| ☐ | Prepare the reconciliation using the standard template | Ledger, evidence, reconciling items, ageing, actions |
| ☐ | Post correcting journals for errors found | Errors fixed in this period, not carried as reconciling items |
| ☐ | Review and sign off | Reviewer checks evidence, challenges old items, signs and dates |
| ☐ | Update the register | Status of every account visible: done, in review, overdue |
AI shortcut: give an approved AI tool the trial balance and last month's reconciliation register, and ask it to list every balance sheet account that moved by more than 10% or £5,000 (set your own thresholds), and any account with a balance but no reconciliation. That's your priority list for review. A person checks every flag.
Worked example 1: accruals reconciliation
MonthEndClub Co Ltd, a fictional UK SaaS company, has an accruals balance in the ledger of £64,300 at 31 October. The accruals schedule lists:
| Accrual | Basis | £ |
|---|---|---|
| Cloud hosting, October | Usage dashboard | 18,500 |
| Audit fee | Engagement letter, 7/12 of £36,000 | 21,000 |
| Contractors, October | Approved timesheets | 12,800 |
| Legal fees | Email estimate from law firm | 4,500 |
| Bonus and employer NI | Bonus model | 6,000 |
| Total per schedule | 62,800 |
Difference: £64,300 − £62,800 = £1,500. Investigation shows September's £1,500 accrual for a marketing agency wasn't reversed, and the agency's invoice was posted in October as normal, so the cost is counted twice.
Correcting journal:
| Account | Dr | Cr |
|---|---|---|
| Accruals | £1,500 | |
| Marketing costs (P&L) | £1,500 |
After the journal, the ledger is £62,800 and agrees to the schedule. The reconciliation records the error, the fix and an action: set accruals to auto-reverse in the accounting system.
Worked example 2: VAT control account
MonthEndClub Co Ltd files quarterly VAT returns. The quarter to 30 September return showed £41,200 payable, due by 7 November. October's VAT activity is output tax £15,600 and input tax £6,900. The ledger VAT control account shows a £49,900 liability at 31 October.
| VAT control reconciliation, 31 October | £ |
|---|---|
| Return for quarter to 30 September, not yet paid | 41,200 |
| Add: October output tax | 15,600 |
| Less: October input tax | (6,900) |
| Expected balance (liability) | 49,900 |
| Ledger balance | 49,900 |
| Difference | nil |
Evidence: the submitted return from HMRC's online service, and the VAT report from the accounting system for October. Next month, the £41,200 should clear when the payment goes out.
If you report under US GAAP (ASC 606)
Reconciliation practice is the same under US GAAP. The main difference is around revenue accounts: ASC 606 uses "contract liabilities" and "contract assets" language, and US-listed groups often have formal SOX controls that set exact rules for reconciliation evidence, sign-off and timing. If you're part of a US group, follow its reconciliation policy.
Common mistakes and audit watch-outs
- Evidence built from the ledger. A schedule exported from the same account isn't independent evidence.
- Old reconciling items rolled forward forever. Anything over 90 days gets fixed or escalated.
- Plugs. A balancing figure labelled "difference" or "rounding" isn't a reconciliation.
- Reconciling before the last journals. Rerun against the final trial balance.
- Sign-off without review. Reviewers tick and initial; auditors check whether they actually challenged anything. Leave review notes.
- Suspense accounts as storage. Suspense is a holding pen for days, not months.
- AI-prepared reconciliations nobody reviews. AI can match the wrong items or miss that its source file was incomplete. Reviewer sign-off still applies.
Tools that can help
Most accounting systems, including Xero, QuickBooks, Sage and NetSuite, reconcile bank accounts well, and many teams run other reconciliations in Excel or Google Sheets with a standard template. Dedicated close and reconciliation software adds registers, sign-off trails and auto-matching for larger teams. An approved AI assistant helps with first-pass matching and flagging. None of these replace a reviewer who asks "why?".
Take it to your boss: one slide
Raising the standard of our balance sheet reconciliations
The problem: reconciliations vary by preparer, some lack evidence, and old items carry forward month after month.
Three changes
- A register and one template: every account listed with owner, reviewer, frequency and due day.
- A 90-day rule: reconciling items older than 90 days are fixed or escalated to the controller.
- AI-assisted prioritisation: unusual movements and missing reconciliations flagged each month, then reviewed by a person.
| Risk | Control |
|---|---|
| Misstated balances | Monthly reconciliation of high-risk accounts with independent evidence |
| Stale errors | Ageing of reconciling items and the 90-day rule |
| Weak review | Separate reviewer; review notes kept |
| AI errors or data leaks | Approved tools only; every AI match reviewed |
How we'll measure it: % of reconciliations done and reviewed by the due day, value of items older than 90 days, and audit adjustments relating to balance sheet accounts.
Rates, thresholds and rules in this guide
Figures were checked against the pages below in October 2026. They change regularly (often each April or at Budget time), and we can't guarantee they're still current or right for your situation. Always check the official page before relying on them.
- Sending a VAT Return: when to do a VAT Return (GOV.UK): the VAT return and payment deadline of one calendar month and 7 days after the period ends
Key takeaways
- A good reconciliation shows the ledger balance, independent evidence, explained differences, ageing, actions and two sign-offs.
- Rank accounts by risk and set frequency to match, in writing.
- Fix errors with journals in the period; don't carry them as reconciling items.
- Age reconciling items and act on anything over 90 days.
- AI is useful for prioritising and first-pass matching; a person reviews and signs off.
FAQs
What counts as independent evidence?
Something produced outside the account: a bank or supplier statement, a sub-ledger, a payroll report, a contract or an external confirmation. A spreadsheet built from the ledger itself isn't enough on its own.
Do zero-balance accounts need reconciling?
If an account had activity in the period, a quick check that it really should be zero is worthwhile. Accounts with no balance and no movement can usually just be noted on the register.
Can AI do our reconciliations?
It can do much of the matching and draft the explanations, especially for high-volume accounts. The evidence still has to be real, the reviewer still has to challenge it, and data only goes into approved tools.
How much detail does the reviewer need to check?
Typically: that the ledger balance is right, the evidence is independent and attached, reconciling items make sense and are recent, and actions are owned. Reviewers often sample-check a few items back to source.
Related guides
- Bank Reconciliations Done Properly
- Keeping Audit-Ready Working Papers Every Month
- Accruals and Prepayments: A Practical Guide with Examples
- Journal Review and Approval: Simple Controls That Work
More in Reconciliations and Controls guides.
From the Club
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This guide is general information about common practice. It isn't tailored to any business, and standards, tax rules and figures change. Check your own circumstances, the latest rules and, where needed, a qualified professional before acting.
Last reviewed: October 2026.