Accounts reconciliation refers to comparing the financial numbers recorded internally with external sources to minimize discrepancies and gaps. It ensures the accuracy of the data. Reconciliation occurs after a specific period (monthly, quarterly, yearly, etc.) based on a company's needs and demands. 

There are no limits to the processes where accounts reconciliation is applicable. Some crucial types of reconciliation practiced by a company include:

Bank reconciliation:

Bank reconciliation allows businesses to compare their bank statements with internal financial transactions recorded in the books of accounts. It verifies the correctness of commerce in both records to ensure no mistake could potentially harm the company. It is a type of internal control that demonstrates data integrity. The company aims to find mismatches between the bank and official data that can be in the form of:

Dishonoured cheque not recorded in books or not presenting an issued cheque to the bank

Bank's transactions like penalties, bank charges, credit received not entered in the books of accounts

Errors in data entry by bank or company

A business must carry out accounts reconciliation to identify fraud, theft, and missed payments or calculation mistakes. Based on the volume of transactions, the company can conduct reconciliation monthly, weekly, quarterly, or annually.

Vendor reconciliation:

Vendor reconciliation allows businesses to verify the correctness of their accounts payable with the receivable of the supplier. It involves getting an invoice from the vendor and matching their transactions with the company's records. It ensures there are no mistakes in the amount charged by the vendor and the goods and services supplied by him. 

Customer reconciliation:

You can discover any theft, fraud, or manipulations in accounts receivables. Also known as accounts receivable reconciliation, it involves identifying material irregularities in the customer bills or balances. You can conduct it every month to correct any gaps before the preparation of financial statements. 

Inter-company reconciliation:

Inter-company reconciliation involves consolidation of the general ledger of the subsidiary by the parent company to eliminate any intercompany financial flow. It manages the intercompany transactions and identifies any unrecorded transactions in group accounts. An outsourced CFO can make accurate decisions based on these records.

Business-specific reconciliation:

Every business has different needs and requirements that form its accounts reconciliation. For example- an e-commerce company might require inventory reconciliation, including Cost of Good Sold balance.  

Credit card reconciliation:
It includes matching credit card receipts with credit card statements to discover errors. 

Balance sheet reconciliation:

It involves matching the closing balances of all the balance sheet accounts to ensure its accuracy. 

Cash reconciliation:

It verifies that cash in hand and bank matches the balance in the cash register.