Subledger Reconciliation Best Practices

By:  Chris Zeiler, Dynamics GP Practice Lead

Managing the accounting cycle in enterprise software can be a very repetitive and tedious task. However, the closure and reconciliation of the financial module is one of the most important tasks to ensure that your organization has accurate and timely financial statements. Below I’ve outlined some best practices and tips for completing the subledger reconciliation process. For the purposes of this article I will focus primarily on the Accounts Payable subledger, however the same principles can be applied to the other subledgers (i.e. Receivables, Inventory, Cash Management, Fixed Assets etc.)

• Limit your control accounts
  • When possible, you should limit your control accounts to as few accounts as possible. When possible use a single control account for a subledger. For AP this would be the Accounts Payable account

• Restrict posting directly to control accounts
  • When possible Your subledger transactions should be the only source of transactions that hit the control account directly. To guard against errant transactions hitting your control account uncheck the ‘Allow Account Entry’ option on the Account Maintenance window.
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• Setup Month End subledger report options for balances 

When reconciling the subledger you should have a saved report option with the appropriate runtime options. For payables, this is the Historical Aged Trial Balance report. Always use the GL Posting Date and enter the period end date for the accounting period you are reconciling.

• Always make corrections in the module of origin
  Mistakes happen. If transactions in the payables module are posted to the incorrect period, or have an incorrect amount, ALWAYS correct the transactions in the subledger. This is typically handled by voiding the original transaction and entering a new transaction. Handling exceptions in this manner will ensure that your audit trail is clean and save you considerable time in the reconciliation process.  Also, make sure you disallow any voiding or correcting of subsidiary transactions in the General Ledger Setup window. This will prevent any users from correcting subsidiary journal entries at the GL level.

• Soft close fiscal periods after period closure
• Make sure your soft close fiscal periods once the reconciliation process is complete to keep prior periods in balance. If transactions are posted to prior periods after closing it can cause both the current period and previous periods to be out of balance.

• If you have a variance, find it the easy way…
• If you do happen to find a variance between your sub-ledger and the general ledger make sure you start your investigation using the correct tool. You can generate a reconciliation excel workbook using the Reconcile to GL window (Microsoft Dynamics GP | Tools | Routines | Financial | Reconcile to GL). Simply enter the reconciliation period, the control accounts, and the sub-ledger to reconcile and it will create a report for you that matches all subsidiary transactions to their respective journal entry. It will also suggest any transactions that are not matched or are potentially matched and should be reviewed.

Implementing these practices will not only increase the pace of your month end close process but will also safeguard against problematic transactions that can occur in the future.

To learn more on "Subledger Reconciliation Best Practices" in Microsoft Dynamics GP, contact ACE Microtechnology.  #GP #Microsoft #MSDYN365