TrailMix: High-Level Month End Reconciliation Strategy

Part 1 of 3

In the fast-paced world of accounting, month-end reporting is a critical process that ensures the accuracy and integrity of financial statements. In this first installment of our three-part series on operational strategies for accounting month-end reporting, we delve into the high-level reconciliation strategies that can streamline your processes and improve efficiency. We explore the essential steps and best practices that form the foundation of an effective month-end close, from initial preparation to final review. Whether you're an experienced professional or new to the field, this outline will provide valuable structure to enhance your month-end reconciliation strategy.

You’ll notice throughout this series we reference terms and processes associated with Solifi’s Portfolio Management system. If you use a different lease accounting portfolio software, the terms/nomenclature may be different, but the reconciliation concepts should still apply.

Once you set up your strategy efficiently, month-end will be just another day. The key to a smooth month-end is the organization and efficiency of your daily operations.

High level month-end reconciliation strategy:

1. Make sure your “Cut Off Procedures” are completed in Portfolio Management
   1. Are your payments all posted and does cash tie out?
   2. Are all your deals booked for the month?
   3. Are all your deals disposed for the month?
2. Run all your reports using the same “Sort and Select” criteria that match your financial statement layout, and save these reports using the same month-over-month naming convention.
   1. Reports will be easy to locate and read.
   2. Evaluation will be easier for audiences.
   3. Filename example: “06302024 Net Investment reconciliation”
3. Make sure your prior month reconciliation still balances and reconciles to your general ledger and that no one made any adjustments.
4. Using your prior month reconciliation spreadsheet, “Save As” with your new month date.
   1. Example: “07312024 Net Investment reconciliation PRE ME”
   2. This step sets up your current month Net Investment reconciliation.
5. Highlight all your YTD balances, in all your monthly reports, to use in your reconciliation spreadsheet:
   1. New Contract Report shows New Contracts by Lease Type. You will highlight the “YTD Gross Contract” field.
   2. Book Gain Loss Report shows Dispositions by Lease Type. You will highlight the “Remaining Rent Receivable” field.
   3. Finance and Interest Income Report by Lease Type. You will highlight the “Unearned Finance” field.
   4. Amortization of IDC Report by Lease Type. You will highlight the “Unearned IDC” field.
   5. Capture your contract restructures during the month using “Contract Change” history report and accounting journals. It is important for operations to communicate to accounting on all financial modifications during the month as this affects the reconciliation process.
6. Plug in all your YTD balances in your Net Investment reconciliation spreadsheet from your Reports. Summing all the updated YTD balances should tie to the Net Investment Balance on the Net Investment Trial Balance Report.
7. Compare all your general ledger balances that encompass your Net Investment Trial Balance, using a separate line item on your reconciliation spreadsheet.
8. The difference between Item 6 and Item 7 is where you begin your research to tie out month-end if there are discrepancies.
9. Once you have completed your pre-month-end reconciliation and you have done your pre-month-end backup of your database, you can now run month-end.
10. Once month-end has been run, you are ready to update your pre-month-end reconciliation spreadsheet and rename your spreadsheet POST ME, with your updated numbers created at month-end. Renaming your spreadsheet POST ME by doing a “Save As” ensures your data is intact from PRE-ME to ME.
    1. The only balances in your POST ME reconciliation spreadsheet that will have changed are your YTD income numbers which are updated by the month-end process:
       1. Finance and Interest Income
       2. Residual Income
       3. IDC expense
       4. Blended Income
    2. Once your current month-end Net Investment has been reconciled, you can rename it with the words PRE ME and use your “new” month-end date, i.e., 08312024.