It is a general practice for businesses to create their balance sheet at the end of the financial year as it denotes the state of finances for that period.
[2] ii) A procedure for confirming the reliability of a company's accounting records by regularly comparing [balances of transactions].
Accounting software is one of a number of tools that organizations use to carry out this process thus eliminating errors and therefore making accurate decisions based on the financial information.
[4] To ensure the reliability of the financial records, reconciliations must, therefore, be performed for all balance sheet accounts on a regular and ongoing basis.
[9] In the United States, the passage in 2002 of the Sarbanes–Oxley Act (SOX) has emphasized the need for balance sheet account reconciliation to be included within a company's own procedures, not relying only on external auditors.
[10] The legislation was enacted “to protect shareholders and general public from accounting errors and fraudulent practices in the enterprise, as well as improve the accuracy of corporate disclosures.”[11] SOX and other similar acts across the world have increased stress on organisations to comply.
By using available information technology, organizations can more easily automate their reconciliation and for each financial close cycle less manual labour would be required.