How to Create a End-of-Month Reconciliation for Insurance
A systematic procedure for reconciling all balance sheet accounts, reviewing profit and loss variances, and preparing the monthly financial close pack.
Purpose
To ensure the integrity and accuracy of the general ledger at the end of each month by reconciling key accounts, investigating variances, and producing reliable financial statements for management decision-making.
Scope
Covers all balance sheet account reconciliations, intercompany eliminations, accruals and prepayment adjustments, profit and loss variance analysis, and preparation of the monthly management reporting pack.
Prerequisites
- All transactions for the month have been entered and posted to the general ledger
- Bank statements, supplier statements, and sub-ledger reports are available
- Prior-month reconciliations and outstanding items listing are on hand
Aligns with ASIC regulatory requirements, General Insurance Code of Practice, and AFSL obligations. Includes audit trail provisions.
Step-by-Step Procedure
Complete Month-End Cut-Off Procedures
Ensure all transactions are captured in the correct period by enforcing the month-end cut-off for invoices, receipts, and journal entries.
- 1.1Confirm all supplier invoices received before cut-off have been posted
- 1.2Accrue for goods or services received but not yet invoiced
- 1.3Post any prepayment amortisation entries for the month
- 1.4Close sub-ledgers and prevent further postings to the closed period
Reconcile Bank Accounts
Match all transactions on the bank statement to the general ledger cash account and investigate any unmatched items.
- 2.1Download the bank statement for the month
- 2.2Perform an auto-match of cleared transactions in the accounting software
- 2.3Investigate and resolve unmatched items including timing differences
- 2.4Document the reconciling items and closing cash balance
Reconcile Accounts Receivable
Agree the accounts receivable sub-ledger to the general ledger control account and review the aged debtor listing.
- 3.1Run the aged debtors report as at month end
- 3.2Agree the sub-ledger total to the general ledger control account
- 3.3Investigate any discrepancies between the sub-ledger and control account
- 3.4Review the provision for doubtful debts and adjust if necessary
Reconcile Accounts Payable
Agree the accounts payable sub-ledger to the general ledger control account and review the aged creditor listing.
- 4.1Run the aged creditors report as at month end
- 4.2Agree the sub-ledger total to the general ledger control account
- 4.3Reconcile supplier statements to individual creditor balances
- 4.4Ensure all disputed items are documented and followed up
Reconcile Remaining Balance Sheet Accounts
Reconcile all other balance sheet accounts including fixed assets, payroll liabilities, GST, intercompany accounts, and provisions.
- 5.1Reconcile the fixed asset register to the general ledger and post depreciation
- 5.2Reconcile payroll liabilities including PAYG, superannuation, and leave provisions
- 5.3Reconcile the GST control accounts to the BAS workpaper
- 5.4Reconcile intercompany accounts and agree balances with counterparties
Perform Profit and Loss Variance Analysis
Compare actual results to budget and prior period, investigate material variances, and document explanations.
- 6.1Generate the profit and loss statement with budget and prior-period comparatives
- 6.2Identify all variances exceeding the materiality threshold
- 6.3Obtain explanations from cost-centre managers for material variances
- 6.4Document variance explanations in the monthly commentary
- Set a materiality threshold as a dollar amount and a percentage to catch both large and proportionally significant variances
Prepare the Monthly Financial Reporting Pack
Compile the monthly management reporting pack including the profit and loss statement, balance sheet, cash flow summary, and key commentary.
- 7.1Generate final versions of the profit and loss and balance sheet
- 7.2Prepare the cash flow summary and working capital analysis
- 7.3Include the variance analysis commentary and key business highlights
- 7.4Distribute the pack to the management team by the agreed deadline
Archive Reconciliations and Close the Period
File all reconciliation workpapers, lock the accounting period, and carry forward any outstanding items to the next month.
- 8.1Save all reconciliation workpapers in the designated folder for the period
- 8.2Lock the accounting period to prevent further postings
- 8.3Update the outstanding items tracker for carry-forward items
- 8.4Conduct a brief debrief to identify process improvements for next month
Quality Checkpoints
Common Mistakes to Avoid
Expected Outcomes
Monthly financial close is completed within five business days of month end.
100% of balance sheet accounts are reconciled and signed off each month.
Fewer than two post-close adjustments are required per month, indicating a clean close.
Frequently Asked Questions
What is the materiality threshold for variance analysis?
The materiality threshold is typically defined in the finance policy and may be set as a dollar amount (e.g., $5,000) and a percentage (e.g., 10% of budget). Variances exceeding either threshold require a documented explanation.
Who is responsible for providing variance explanations?
Cost-centre managers are responsible for providing explanations for variances in their areas. The finance team collates these explanations into the monthly reporting pack.
What is the standard timeline for the monthly close?
The monthly close should be completed within five business days of the end of the month. A detailed close calendar is published at the start of each financial year with specific deadlines for each task.
How do I handle a reconciling item that has been outstanding for several months?
Escalate long-outstanding reconciling items to the Finance Manager for investigation. Items older than 90 days should be reviewed for write-off or reclassification as appropriate.
Want this customised for YOUR business?
We'll tailor every step to your exact operations, tools, and team structure.