The reconciliation meaning is the method in which there will be a comparison of two records, and there will be a check whether the two records are the same or different in terms of finance. Regarding the HR department terms, the reconciliation definition is a process in which the department of payroll of either a small-scale business or a large-scale business will properly evaluate the salaries mentioned in the paper and the salary paid to the employees of the organization.
The salary mentioned in the paper is not altogether paid to the employees working in the organization. But there is always some deduction and pay cut due to some insurances, taxes, etc. So, proper documents should be available regarding the company’s finances, i.e., the amount of salary paid to the employees, the amount of salary mentioned in the paper, the amount of salary that has been deducted, and the reason behind the deduction. Otherwise, there can be huge trouble in the business in the future. This is one of the most important processes taking place in the organization as it determines the financial status of a company.
There are two types of reconciliations. Here is the details of these types:
In personal reconciliation many people compare their debit card receipts, written cheques and credit card receipts with their respective banks. This type of reconciliation helps to know whether the money has been debited or not.
Businesses must reconcile their accounts to avoid errors in their balance sheet, any kinds of frauds and bad impression on auditors. These kinds of reconciliation generally happens once in a month generally after the books of previous year closes.
There are number of causes of disagreements in reconciliation. Some of them are:
A deposit or a payment made in your accounting software may not appear in the bank statement. This issue is quiet significant when paper cheques are used as a mode of payment and receipt.
An incorrect amount may result in error or calculation problem may also result in reconciliation problem. If reconciliation is not done regulary it may result in manual errors.
No matter how much expert or sharp is your financial team there are still chances of missing transaction which may result in differences.
Fraud is the major reason to reconcile the statements. Many fraud cases may come up after reviewing each and every single detail closely.
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