What Is General Ledger Reconciliation: Types, Best Practices and Importance

In the intricate world of finance, accuracy is paramount, especially in the domain of general ledger reconciliation. A misstep in this critical process can lead to financial chaos, undermining the very foundation of an organization.

In fact, industry research indicates that businesses lose around1-5% of their revenue to errors in general ledger reconciliation. For a company, say, with $10 million in revenue, this equals $100,000–$500,000 loss each year simply due to incomplete, inaccurate, or missing transaction data.

With millions of dollars at risk due to overlooked discrepancies, it’s becomes significant to understand general ledger reconciliation in great detail – what it is, the general ledger reconciliation process, general ledger reconciliation example, common errors to be aware of and how automated general ledger reconciliation software solves them.

What Is a General Ledger Reconciliation?

General ledger reconciliation is the process of comparing a company’s general ledger accounts to supporting records, such as bank statements, invoices, receipts, or subsidiary ledgers,  to verify the accuracy and integrity of financial data. The objective is to ensure that recorded balances reflect actual transactions and to identify and correct discrepancies, errors, or fraudulent activity. By reconciling regularly, businesses maintain reliable financial reporting, strengthen internal controls, and comply with accounting standards.

Purpose of General Ledger Reconciliation?

General ledger reconciliation goes beyond being a mere accounting routine. It’s a safeguard that ensures financial data is accurate, reliable, and compliant, forming the foundation for trustworthy reporting and strategic decision-making.

• Ensures Accuracy

Confirms that general ledger balances align with real transactions and supporting documents.

• Strengthens Internal Control

Acts as a safeguard against errors, omissions, or fraud.

• Supports Financial Reporting

Provides confidence that financial statements are complete and reliable.

• Enables Better Decisions

Ensures leaders have accurate data for planning and analysis.

• Ensures Compliance

Meets audit requirements and accounting standards with a clear audit trail.

Understanding the Process of General Ledger Reconciliation

Now, let’s understand the process of general ledger reconciliation and explore its fundamental steps.

1. Gather necessary documents

Collect all relevant financial documents, including bank statements, invoices, receipts, and internal accounting records for the period being reconciled.

2. Review transactions

Carefully review the transactions recorded in the general ledger for the specified period. Ensure that all transactions are accurately recorded, categorized, and posted to the appropriate accounts.

3. Compare with external records

Compare the transactions recorded in the general ledger with corresponding entries in external records, such as bank statements or vendor invoices. Pay attention to details such as dates, amounts, descriptions, and account numbers.

4. Identify discrepancies

Identify any discrepancies or differences between the general ledger and external records. Common discrepancies may include outstanding checks, deposits in transit, unrecorded transactions, duplicate entries, or errors in recording.

5. Investigate discrepancies

Investigate the root causes of discrepancies by tracing transactions, verifying source documents, and communicating with relevant stakeholders. Determine whether discrepancies are due to timing differences, errors, or other factors.

6. Make adjustments

Make necessary adjustments to reconcile general ledger with external records. This may involve recording missing transactions, correcting errors, reversing duplicate entries, or updating account balances to reflect the correct amounts.

7. Document the reconciliation process

Document each step of the general ledger account reconciliation process, including findings, adjustments made, and resolutions reached. Maintain detailed records for audit trail purposes and future reference.

8. Verify accuracy

Verify the accuracy of the reconciled general ledger by reviewing the reconciled balances and ensuring that they match the corresponding balances in external records. Double-check calculations and adjustments for accuracy.

9. Obtain approval

Obtain approval or sign-off from authorized personnel, such as a finance manager or controller, to confirm the completion and accuracy of the general ledger reconciliation.

10. Perform regular reconciliations

Establish a schedule for regular reconciliations, such as monthly, quarterly, or annually, depending on the volume and complexity of transactions. Performing general ledger account reconciliations regularly helps prevent errors from accumulating and ensures the integrity of financial records.

Types of General Ledger Reconciliation

General ledger reconciliation takes many forms depending on how money flows in and out of the business. The most critical types include:

1. Bank Reconciliation

Bank reconciliation aligns the company’s general ledger cash accounts with external bank statements. The bank reconciliation process verifies that deposits, withdrawals, and fees are accurately recorded and helps detect timing differences, errors, or fraudulent activity. It provides assurance that cash balances reported to leadership are reliable.

2. Credit Card Reconciliation

Credit card reconciliation ensures that expenses charged to company cards match approved transactions and receipts. By comparing card statements against the general ledger, finance teams can catch duplicate charges, unapproved spending, and misclassified expenses, reducing risk of leakage and strengthening spend control.

3. Payment Reconciliation

Payment reconciliation connects customer payments—via ACH, wire, or checks—with open invoices in the general ledger. This step is critical to reducing unapplied cash, accelerating revenue recognition, and giving CFOs real-time visibility into collections performance.

4. Account Reconciliation

Account reconciliation validates balances across accounts such as accounts receivable, accounts payable, and accrued expenses. The account reconciliation process helps businesses ensure every figure in the general ledger ties back to supporting records. This process reduces reporting risk and builds confidence in period-end financials.

Though these are a few of the most common, businesses often perform many other types of reconciliation to maintain accurate, compliant, and audit-ready books.

To better understand how general ledger reconciliation works, let’s look at a simple numerical example.

Example of General Ledger Reconciliation

A company’s Cash Account in the general ledger shows a balance of $100,000 at the end of June. When the finance team compares it with the bank statement, the balance appears as $95,000. To resolve this $5,000 discrepancy, the reconciliation process identifies the following:

• Outstanding Checks ($3,000): Payments issued by the company that have not yet cleared the bank.
  
• Bank Fees ($500): Service charges recorded by the bank but not yet updated in the ledger.
  
• Customer Deposit in Transit ($1,500): A client payment recorded in the ledger but not reflected in the bank statement.

Reconciliation Calculation:

Bank Balance: $95,000

• Outstanding Checks: $3,000
  
• Customer Deposit in Transit – Bank Fees

= $1,500 – $500
= Adjusted Balance: $100,000

After adjustments, both the general ledger and the bank records align at $100,000, completing the reconciliation.

Reconciliation Item	Amount (USD)
Bank Balance	95,000
Less: Outstanding Checks	(3,000)
Add: Customer Deposit in Transit	1,500
Less: Bank Fees	(500
Adjusted Balance	100,000

Common Mistakes to Avoid in General Ledger Reconciliation Process

Accounting discrepancies in the general ledger can stem from various factors, affecting the accuracy of financial reports if overlooked.

Here are a few common mistakes to avoid:

1. Data entry errors

Mistakes in recording transactions, such as typing errors, transposition errors (e.g., entering numbers in the wrong order), or incorrect categorization of transactions, can lead to discrepancies between the general ledger and external records.

2. Timing differences

Timing differences between when transactions are recorded in the general ledger and when they appear in external records, such as bank statements or vendor invoices, can cause temporary discrepancies until the timing is aligned.

3. Missing transactions

Failure to record all relevant transactions in the general ledger, such as missed deposits, payments, or invoices, can result in understated or overstated account balances.

4. Duplicate entries

Accidentally recording the same transaction multiple times in the general ledger can lead to inflated account balances and distort financial reporting.

3. Bank errors

Errors or omissions made by financial institutions, such as bank errors in processing transactions or misstatements on bank statements, can result in discrepancies between the general ledger and bank records.

4. Reconciliation errors

Mistakes in the reconciliation process itself, such as overlooking transactions, miscalculating adjustments, or failing to investigate discrepancies thoroughly, can result in unresolved differences between the general ledger and external records.

5. Fraudulent activities

Deliberate manipulation of financial records, such as unauthorized transactions, fictitious entries, or misappropriation of funds, can lead to fraudulent activities and significant discrepancies in the general ledger.

6. System glitches

Technical glitches or system errors in accounting software or reconciliation tools can disrupt the reconciliation process and lead to inaccuracies in financial records if not promptly identified and addressed.

7. Errors due to Miscommunication

Lack of communication or coordination between different departments or individuals involved in the reconciliation process can result in misunderstandings, delays, or errors in recording and reconciling transactions.

8. Failure to reconcile regularly

Neglecting to perform regular reconciliations or delaying the reconciliation process can allow errors to accumulate over time, making it more challenging to identify and rectify discrepancies.

How Automated General Ledger Reconciliation Software Eliminates Errors

Manual reconciliation introduces delays, inaccuracies, and blind spots that finance leaders can’t afford. Automated general ledger reconciliation software replaces fragmented spreadsheets and reactive checks with real-time accuracy and audit-ready controls. Here’s how it addresses the core challenges:

1. Eliminates Manual Matching Errors

Auto-matches bank, credit card, and subledger entries to the general ledger, reducing human error and missed transactions.

2. Accelerates exception handling

Flags discrepancies instantly and routes them for resolution before they cascade into misstatements.

3. Strengthens fraud detection

AI-driven anomaly detection identifies unusual patterns, preventing unauthorized or duplicate postings.

4. Streamlines multi-source reconciliations

Consolidates bank, AR, AP, and intercompany reconciliations into a single platform with standardized rules.

5. Improves compliance & audit readiness

Maintains a complete audit trail with automated approvals, maker-checker workflows, and real-time status dashboards.

6. Frees finance teams for analysis

Removes repetitive tasks, allowing controllers and CFOs to focus on insights, forecasting, and decision support.

Manual vs Automated General Ledger Reconciliation

Aspect	Manual General Ledger Reconciliation	Automated General Ledger Reconciliation
Accuracy	Prone to human error, missed entries, and duplicates	AI-driven matching ensures precise, real-time accuracy
Speed	Time-intensive, often completed days after period end	Instant matching and exception handling in real time
Fraud Detection	Difficult to spot unusual patterns or unauthorized entries	Automated anomaly detection flags risks proactively
Scalability	Struggles with high transaction volumes across entities	Handles multi-entity, high-volume data seamlessly
Audit & Compliance	Limited visibility, fragmented documentation	Complete audit trail with built-in approvals and controls
Resource Utilization	Finance teams stuck in repetitive matching tasks	Frees teams to focus on analysis, insights, and decision-making

Unlock 30% Faster General Ledger Reconciliation With HighRadius 

General ledger reconciliation is the control tower of financial accuracy. Without it, businesses risk misstated earnings, hidden fraud, and audit exposure. Yet, legacy reconciliation tools and manual methods fail to keep pace with today’s finance demands. Fragmented spreadsheets, siloed systems, and late-cycle catchups slow down close cycles, compromise accuracy, and expose businesses to audit risks.

HighRadius General Ledger Reconciliation Software eliminates these bottlenecks with an agentic AI-powered platform built for speed, scale, and accuracy. By deploying 200+ autonomous finance AI agents, it transforms reconciliation into a proactive, error-free, and fully automated process. The result: finance teams gain end-to-end control, eliminate repetitive tasks, and deliver insights that drive smarter business decisions.

Here’s how HighRadius unlocks 30% faster reconciliations and 99% accuracy:

• AI-Powered Matching: Auto-matches GL balances with sub-ledgers, bank statements, AR/AP, and credit card data in real time.

• Anomaly Detection: Identifies outliers before they hit the trial balance, minimizing review cycles and preventing surprises.

• Journal Entry Automation: Generates, validates, and posts recurring entries with embedded approvals and audit trails.

• Unified Dashboard: Provides complete visibility into reconciliation status, exceptions, and ownership across entities.

• Compliance & Audit-Readiness: Automates SOX controls with built-in documentation, approvals, and substantiation.

FAQs

1. What is the difference between bank reconciliation and general ledger reconciliation?

Bank reconciliation is a subset of general ledger reconciliation. While general ledger reconciliation verifies all balances and transactions in the general ledger, bank reconciliation specifically compares cash transactions recorded in the books with those appearing on bank statements. In short, bank reconciliation focuses on one account, while general ledger reconciliation covers all accounts for accuracy and completeness.

2. How do you balance a general ledger account during reconciliation?

Balancing a general ledger account requires reviewing all posted transactions, classifying them as debits or credits, and verifying totals. During the general ledger reconciliation process, adjusting entries may be posted to correct errors or timing differences. Once adjustments are complete, the account should show matching debit and credit balances, ensuring accuracy for reporting.

3. How do you reconcile a general ledger in Excel?

General ledger reconciliation in Excel typically uses formulas like VLOOKUP, SUMIF, and COUNTIF. These help locate missing entries, flag mismatched amounts, and detect duplicates. Many businesses use a general ledger reconciliation template in Excel to standardize the process, reduce manual errors, and ensure consistent financial reporting.

4. What is general ledger reconciliation with an example?

General ledger reconciliation means comparing GL balances against external records. For example, if your GL shows a bank account balance of $100,000 but the bank statement shows $95,000, you investigate differences like outstanding checks or deposits in transit. After adjustments, both balances should match, providing accurate reporting.

5. Is there a general ledger reconciliation template?

Yes, many organizations use a general ledger reconciliation template, often in Excel. These templates provide structured fields for account details, balances, supporting documents, and reviewer approvals. Using a template standardizes reconciliation, reduces errors, and ensures compliance with audit requirements.