Ready for Year End? Part 1 – Balance Sheet Reconciliation

Preparation may not be the most exciting aspect of running your GovCon, but it is one of the critical ingredients for a prosperous 2024. CAVU has developed a three-part series to help prepare your firm with year-end planning and a successful launch into the new year. We begin with what you need to know about balance sheet reconciliations.

A Profitable 2024 Starts Here

For the savvy executive, preparation for year-end planning begins right now by confirming that all of your Balance Sheet accounts are reconciled. Yes, every single account. This process will not only make year-end reviews and audits go more smoothly but:

  • Act as a critical check and balance on the quality of your data.
  • Serve as a primary checklist for open items to resolve.
  • Provide critical inputs for tax planning and strategy heading into year end

Here is a breakdown of each area:

Check and Balance

Clients often declare that their books are completely up to date, but a careful examination of the backup reveals missing reconciliations. The underlying data does not match or is not recorded properly to the general ledger (GL). We commonly encounter this problem with an unbilled receivables schedule or no schedule to start with.

When one account is not reconciled, it may mean your expenses are not properly recorded. A routine example is a prepaid expense schedule that is maintained and estimated at the end of the year, but monthly amortization is not recorded to the GL. This could signify:

  • The prepaid schedule is not maintained, and something needs to be added. For example, a new payment hit prepaid expense in the GL and needs to be added to the schedule.
  • Entries are not recorded. Often an entry for expensing a prepaid item was never recorded (e.g., prepaid medical was not expensed and is missing from the income statement).

Open Item Checklist

Once complete, balance sheet reconciliations can act as an important checklist:

☐ Do you have stale checks on the bank reconciliation that need to be addressed?
☐ Are there unbilled items that need to be billed or have revenue recognized?
☐ Do you have accruals that need to be cleared out, or do you need to follow up with vendors that are late?
☐ Are any payments missing (loan payments, credit card, 401(k)? Balances should be tied to reconciliation schedules and statements.

Sometimes improper system setup and use are the culprits behind accounts that do not reconcile. If you are an Unanet user, refer to our blog for troubleshooting tips for four primary reconciliations:

  • Deferred Revenue to Trial Balance
  • Unbilled Receivables to Trial Balance
  • Project Cost Reports to Income Statement
  • Indirect Expense Report to Income Statement

More Key Areas for Monthly Reconciliations

Project Report to GL – Find valuable explanations and guidance for the process by referring to CAVU’s future blog, Do You Know If Your Project Costs are Complete?

Indirect Rate Report to GL – It is important to know if your indirect rates fully reflect the complete allocation of your indirect rates. You also must ensure that all direct costs are included in the indirect rate structure, along with unallowable costs as applicable.

Refer to CAVU’s blog, Do You Know If Your Indirect Rates are Complete? For helpful formulas to double-check your calculations.

One-Click Reconciliation Updates

CAVU has designed a one-click update process (see chart below) for month-end closing reconciliations based on ClickVue™ receiving data from Unanet to tackle common problems reported by our clients:

  • Helps alleviate incomplete reconciliations and more time spent in preparation than the review. Our process reduces reconciliation time while ensuring 100% preparation, so your accounting team can spend value-added time reviewing and actually putting the data to use.
  • Accelerates month-end closing with the automated reconciliation of all balance sheet accounts, with project reporting and indirect rate reporting contained in one file.
  • Compares detailed schedules to the GL so accounting departments can ensure that all data is complete at month end and supporting reports are reliable.
  • Uses a summary scorecard that visually highlights items requiring attention.
  • Allows clients to click the update button to refresh the screen as often as they like.
Balance Sheet Reconciliation
Click to Enlarge

CAVU’s GovCon finance and accounting experts can transform balance sheet reconciliation from a year-end chore to a vital step in setting up your 2024 strategy. Feel free to contact us to talk about it.