avstemming

Avstemming, or reconciliation, is the process of comparing two sets of records to ensure they match and to identify and correct differences. The goal is to produce accurate financial information and to support reliable internal controls.

Common areas include bank reconciliation, where the cash balance in the general ledger is matched with the bank statement to catch timing differences, missing entries, or errors. Accounts receivable and accounts payable reconciliations compare customer invoices, payments, and supplier statements with the ledger. Intercompany reconciliation aligns balances between entities in a corporate group. Inventory reconciliation compares physical counts with system records to detect shrinkage, miscounts, or data errors. In addition, data reconciliation across IT systems ensures consistency of information across modules and platforms.

The typical process involves collecting source records, performing a line‑by‑line comparison, identifying discrepancies, investigating root causes, and making necessary adjustments. An audit trail is created to document findings and corrections, and reconciliations are reviewed and approved by appropriate personnel.

Timing and frequency vary by organization and account risk. Reconciliation is often performed on a monthly basis as part of the financial close, with more frequent checks for high‑risk or cash accounts. Automated reconciliation tools within ERP systems are increasingly used to speed up matching and flag discrepancies, though manual review remains important for complex items.

Challenges include timing differences, unposted transactions, data quality issues, and handling multi‑currency or multi‑system environments. Effective avstemming enhances accuracy, supports financial reporting, and strengthens internal controls.