Record to report / R2R – Reconciliations

Intercompany

We shared a critical requirement for a reconciliation, i.e. the date. Any reconciliation has to be on a certain date. http://faoblog.com/processes-record-report-r2r-reconciliations-intercompany-4/

Now what would an ideal date be? There can be multiple options, based on the financial policies, spread of business, quantum of business etc.

  • Last day of a financial year – This is one critical date and the reconciliations need to cover the balances on this date for sure
  • Quarter end – For most companies, a quarter end is an important cut off
  • Month end – For larger businesses, a month end is also crucial. It is interesting to note that some companies do not treat the last date of the month as a month end, but define their own calendar, ending on a Friday. Their months can be 4 weeks, 4 weeks and 5 weeks in each quarter.
  • Fortnightly – for larger business, this constitutes an important cut off
  • Weekly – a number of business will reconcile item at the end of each week, which really helps in the long run, as they can trouble shoot things faster.

Now, you may question that these look more like periods.. These are periods, but then the balance picked up for comparing is as of the end of the day (EOD) as of the last day of that period. So, a reconciliation is as on a date and not for a period. You call these as reconciliation frequency for a better representation. If you recall your accounting days, the same applies to a Balance Sheet as well.

Now, what are some activities which are done for Intercompany Reconciliations….  Next post….

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