Reconciliation

Reconciliation is an accounting method that involves comparing parts of the accounts against external documents in order to ensure accuracy and reliability. By reconciling various sources against the accounting figures, discrepancies can be uncovered and corrected, which is decisive for keeping the accounts correct.

Types of reconciliation

• Bank reconciliation: Compares the accounts against the bank statement in order to check that all bank transactions are correctly documented.
• Payroll reconciliation: Compares wages paid, withholding tax, employer's national insurance contributions and mandatory occupational pension (OTP) against the amounts reported in the a-melding, the Norwegian monthly payroll report.
• Ledger reconciliation: Compares the general ledger against the underlying customer and supplier sub-ledgers, that is trade receivables and trade payables, in order to make sure that the balances agree and that all receipts and payments have been correctly recorded.

When should reconciliation be done?

Reconciliation should be done on an ongoing basis in order to detect errors early, but at a minimum in connection with the VAT reporting or the year-end close. In Norway the general rule is six VAT periods a year, that is, every other month, while businesses with a turnover below NOK 1 million can apply to file a single annual VAT return. That way you secure correct figures throughout the year, and make sure the accounts are in order as the reporting deadlines approach.

If discrepancies are discovered late, they may have time to affect several reporting periods before anyone catches them, which makes the errors more time-consuming to correct. Regular reconciliation therefore means that any errors are discovered while they are still small and easy to trace back to the right source document.