While your organization may perform monthly bank reconciliations, how often are you performing reconciliations for accounts receivable, accounts payable and other general ledger accounts?

Reconciling is a very important aspect of accounting which can help keep your accounts up-to-date and balanced and make the year-end process easier. Since the majority of nonprofits require yearly audits, and since auditors request reconciliations of accounts for their testing, the time-savings from performing monthly reconciliations and identifying issues increases.

What does reconcile mean?

In accounting, reconcile means comparing two sets of documents to make sure they match. Typically, you have the organization’s general ledger and compare it to a financial account statement.

What types of reconciliation should I perform and how can they benefit my organization?

  • Bank Reconciliation(s) – The majority of nonprofit organizations can perform this reconciliation using their accounting software. Performing monthly bank reconciliations helps to:
    • Properly record transactions
    • Catch mistakes
    • Find and prevent fraud
    • Amend older checks/withdrawals and find which should be voided before year-end and which need to be researched and possibly reissued
    • Adjust older deposits/income and reverse some before year-end to avoid double counting revenue
    • Resolve “suspense” items so they are and not carried over from month-to-month
  • Accounts Receivable/Payable Reconciliations – These reconciliations are very easy and help determine if the control accounts used in your nonprofit’s accounting software match actual invoices. Basically, does the general ledger control account for accounts receivable/payable match the aging report for each? These monthly reconciliations help to:
    • Correctly record transactions
    • Catch mistakes
    • Find and prevent fraud
    • Change invoices that are not getting included in the control account
  • Asset and Liability Account Reconciliations – There are a variety of reconciliations that can, and should, be done on other asset and liability accounts on a monthly basis (i.e. fixed assets, inventory, investments, accrued expenses, payroll, etc.). For example, fixed assets or inventory will be reconciled using a related accounting software module and/or report. Other accounts, such as investments, will use broker statements while payroll expenses use monthly and/or quarterly payroll reports from your payroll provider.

What should my nonprofit do with reconciliations?

  • Review – For internal control purposes, it is important to have a person in your nonprofit, who did not perform the reconciliation, review.
  • Approve – Ask a reviewer to approve the reconciliation.
  • File – Maintain the reconciliations for future purposes and/or needs and most specifically, for year-end procedures and audit fieldwork.

NFP Partners wants to help you! Please contact your consultant if you would like to discuss and implement a reconciliation guide or get examples and help with a reconciliation schedule and plan! Also, for more articles on how to avoid financial pitfalls, click here.


Nicci Hardman,
Nonprofit Accounting Consultant