What is account reconciliation?
Account reconciliation is the process of verifying that the balances in your general ledger agree with the balances in supporting sources. Subledgers, bank statements, third-party confirmations, and internal schedules. Every account on your trial balance should be substantiated by independent evidence that the recorded amount is accurate, complete, and properly classified.
In practice, reconciliation takes three primary forms depending on the account type:
- Balance comparison. Match the GL balance against an external source (bank statement, loan confirmation, investment custodian statement). Used for cash, debt, and investment accounts where an authoritative third-party balance exists.
- Account analysis. Review every transaction posted to the account during the period, confirm that each entry is valid and properly supported, and tie the ending balance to underlying detail. Used for prepaid expenses, accruals, and intercompany accounts.
- Variance analysis. Compare the current period balance to a prior period, budget, or expectation. Investigate material variances and document the cause. Used for revenue, expense, and other P&L accounts where a transaction-level tick-and-tie is impractical.
A robust reconciliation program covers every material account, applies the right method to each account type, and produces a work paper that an auditor can review without asking follow-up questions.
Why automate reconciliation?
Manual reconciliation is the largest single bottleneck in the financial close. Across mid-market and enterprise organizations, approximately 60% of the total close cycle is consumed by preparing, reviewing, and certifying reconciliations. Teams spend days pulling exports from multiple systems, formatting spreadsheets, copying balances, and writing variance explanations. All before a reviewer even opens the file.
Automation changes the economics entirely. Auto-reconciliation rules clear 40-60% of accounts instantly. Every account where the GL balance matches the supporting source within a defined tolerance is marked as reconciled without human intervention. For the remaining accounts, Arvexi Cortex investigates each balance: it pulls the subledger detail, identifies the reconciling items, writes a narrative explanation, and assigns a confidence score. In pilot deployments, Cortex processes 199 work papers in 87 seconds.
The result is not just faster close cycles. Automated reconciliation shifts your team's effort from mechanical preparation to analytical review. Controllers spend their time investigating exceptions rather than building spreadsheets. Error rates drop because the system applies the same logic consistently across every account, every period.
Pre-implementation planning
Before you connect anything, invest one to two days in planning. The decisions you make here determine how clean your first automated close will be.
Identify account types and reconciliation methods
Walk through your chart of accounts and assign each account to one of the three reconciliation methods: balance comparison, account analysis, or variance analysis. Group accounts by type (cash, prepaids, accruals, intercompany, fixed assets, revenue, expense) and decide which reconciliation format applies to each group.
Define materiality thresholds
Set dollar thresholds for auto-reconciliation and variance investigation. A common starting point is to auto-reconcile any account where the balance comparison difference is less than $100 and the variance from prior period is less than 10%. These thresholds should align with your external auditor's materiality guidance and can be adjusted per entity or account group.
Assign preparers and reviewers
Map every account to a preparer (who completes the reconciliation) and a reviewer (who approves it). This mapping drives the workflow assignments in Arvexi and enforces segregation of duties. Consider backup assignments for coverage during vacations and month-end crunches.
Map your chart of accounts
Prepare a mapping between your ERP's account numbers and Arvexi's reconciliation structure. If you have multiple entities, document which entities share a common chart of accounts and which have unique structures. This mapping feeds the format configuration in Phase 2.
Phase 1: Connect your ERP
The Smart Import Wizard guides you through connecting your first data source. Arvexi ships six pre-built ERP templates that understand the export formats from SAP, Oracle, NetSuite, Dynamics 365, Sage Intacct, and QuickBooks. Select your ERP, and the system pre-configures the expected column layout, date formats, and currency handling.
For organizations using other ERPs or custom data warehouses, the wizard accepts CSV, XLSX, or fixed-width file uploads. The AI column matching engine analyzes your headers and maps them to Arvexi's internal schema automatically. It recognizes over 150 common header variations. "GL Acct", "Account Number", "Acct #", and "Chart of Accounts ID" all resolve to the same field without manual intervention.
For recurring imports, configure one of three automated delivery methods:
- SFTP drop. Schedule your ERP to export a trial balance to Arvexi's secure SFTP endpoint on a daily, weekly, or monthly cadence
- Webhook push. Trigger an import via API call from your ERP or integration middleware (Workato, Boomi, MuleSoft)
- Manual CSV upload. Drag and drop a file into the Smart Import Wizard for ad-hoc periods or initial testing
Once connected, every subsequent import follows the same validated format. The wizard remembers your column mappings, transformation rules, and validation checks so future imports require zero configuration.
Phase 2: Configure reconciliation formats
Reconciliation formats define what a complete reconciliation looks like for each account type. They specify the supporting detail required, the compliance questions to answer, and the auto-reconciliation rules that determine whether an account can be cleared without manual review.
Arvexi ships seven default formats designed for the most common account types:
- Bank reconciliation. Balance comparison against bank statement, outstanding checks and deposits in transit as reconciling items
- Accounts payable. Subledger-to-GL tie-out with aging analysis and vendor balance confirmation
- Accounts receivable. Subledger-to-GL tie-out with aging analysis and allowance for doubtful accounts review
- Prepaid expenses. Account analysis with amortization schedule validation and remaining balance reasonableness check
- General ledger. Account analysis with transaction-level review, supporting documentation, and balance roll-forward
- Variance analysis (monthly). Month-over-month comparison with investigation thresholds and narrative explanation requirements
- Variance analysis (quarterly). Quarter-over-quarter and budget-to-actual comparison with trend analysis
Each format includes configurable compliance questions (e.g., "Have all outstanding items greater than 60 days been investigated?") and auto-reconciliation rules. You can clone any default format and customize it. Add questions, change tolerance thresholds, require specific attachments, or adjust the review workflow.
For most organizations, three to five formats cover the initial rollout. Start with bank reconciliation, AP/AR, and a general variance format. Add specialized formats (intercompany, fixed assets, revenue recognition) as you expand coverage in subsequent periods.
Phase 3: Set up users and entities
Arvexi uses role-based access control to enforce security and segregation of duties across your reconciliation program. Every user is assigned a role that determines what they can see and do:
- Preparer. Completes reconciliations, attaches supporting detail, answers compliance questions, and submits for review
- Reviewer. Reviews submitted reconciliations, adds review notes, approves or returns for rework
- Controller. Full visibility across all entities, can certify periods, manage formats, and configure Cortex
- Auditor. Read-only access to all reconciliations, work papers, and audit trails via the auditor portal
Entity-level security
For multi-entity organizations, access is scoped at the entity level. A preparer assigned to Entity A cannot view reconciliations for Entity B unless explicitly granted cross-entity access. This is critical for shared service centers and outsourced accounting teams where different preparers handle different legal entities.
Preparer and reviewer profiles
Profiles link users to specific account groups within each entity. When you assign a preparer profile, every account in that group is automatically routed to the correct person at period open. Reviewer profiles ensure that the same person never both prepares and reviews a reconciliation. SOD enforcement is automatic, not manual.
Build profiles during implementation so that your first period import immediately assigns work to the right people. Controllers can adjust assignments at any time through the admin console.
Phase 4: Import your first period
With your ERP connected, formats configured, and users assigned, you are ready to import your first period. Export a GL trial balance from your ERP for the most recent closed period. typically the prior month.
Upload and column mapping
Drop the file into the Smart Import Wizard. The AI column matching engine analyzes every header and maps it to Arvexi's internal fields. You will see a confirmation screen showing each source column, its mapped target, and the AI's confidence level. High-confidence mappings (above 95%) are pre-approved. Low-confidence or ambiguous mappings are highlighted for manual confirmation.
Staging and validation
Before committing, the import stages all rows for review. The system runs validation checks: balances must balance (debits equal credits), account numbers must exist in your chart of accounts, and entity codes must match your configured entities. Any validation errors are flagged with specific row-level detail so you can correct the source file or adjust the mapping.
Approve and commit
Once validation passes, approve the import. Arvexi commits the GL data, opens reconciliation work papers for every account in the period, assigns preparers based on their profiles, and routes notifications. Your team can begin reconciling immediately.
Phase 5: Run Arvexi Cortex
Arvexi Cortex is the reconciliation engine at the heart of the platform. Cortex operates in two stages: auto-reconciliation first, then intelligent investigation for the accounts that cannot be cleared automatically.
Auto-reconciliation
Before Cortex engages, the system runs auto-reconciliation rules defined in your formats. Accounts where the GL balance matches the supporting source within tolerance. A zero-difference bank reconciliation, an AP subledger that ties to the penny, a prepaid balance that matches the amortization schedule. Are cleared instantly. In most portfolios, auto-reconciliation handles 40-60% of all accounts.
Configure the sweep
For the remaining accounts, configure the Cortex sweep mode:
- FULL. Cortex investigates every non-auto-reconciled account. Use this for your first period to establish a baseline.
- TOP_N. Cortex investigates the top N accounts ranked by dollar balance or variance magnitude. Use this to manage AI call budgets during ongoing close cycles.
- NARRATIVE_ONLY. Cortex generates variance explanations and trend commentary without performing full reconciliation. Use this for P&L accounts where detailed transaction matching is not required.
Set the maximum AI calls per sweep to control costs. A typical first sweep on 200 accounts with FULL mode completes in under two minutes.
What Cortex does
For each account in the sweep, Cortex pulls the subledger detail, compares it against the GL balance, identifies reconciling items, and writes a narrative explanation. It assigns each reconciliation a confidence score:
- GREEN (high confidence). The account is fully reconciled with supporting detail, no material exceptions
- AMBER (medium confidence). The account is partially reconciled or has immaterial differences that need preparer confirmation
- RED (low confidence). The account has material unexplained variances, missing supporting detail, or anomalies that require investigation
Phase 6: Review and approve
After Cortex completes its sweep, the Command Center presents a dashboard showing the confidence distribution across all accounts in the period. Controllers see at a glance how many accounts are GREEN, AMBER, and RED. And can drill into any account to review the work paper Cortex produced.
Approve GREEN accounts
GREEN accounts have complete reconciliations with high-confidence supporting detail. Reviewers can approve these in bulk or individually. Each approval is timestamped with the reviewer's identity, creating a complete audit trail.
Investigate AMBER and RED accounts
AMBER accounts typically need a quick preparer confirmation. Cortex identified the reconciling items but wants human validation of the explanation. RED accounts require substantive investigation: the preparer opens the work paper, reviews the findings, investigates the exception, and adds supporting documentation or journal entry corrections as needed.
Certify the period
Once all accounts are approved, the controller certifies the period. Certification locks the period from further changes, generates a period-close summary report, and archives all work papers. The auditor portal provides external auditors with read-only access to every reconciliation, supporting document, and approval timestamp for the certified period.
Going live
Your first automated period is complete. Now establish the production cadence that your team will follow for every subsequent close.
Scheduled imports
Configure your ERP to export the GL trial balance on a recurring schedule. Typically day one or day two of the new period. Use SFTP or webhook delivery so the import happens automatically without anyone logging in to upload a file.
Nightly Cortex sweeps
Schedule Cortex to run a sweep every night during the close window. As preparers update accounts and add supporting detail throughout the day, the nightly sweep re-evaluates confidence scores and clears accounts that now meet auto-reconciliation criteria. By day three or four of the close, most accounts are GREEN.
Calibration feedback loop
After each period, review Cortex's performance. Which accounts were flagged RED that turned out to be clean? Which GREEN accounts needed corrections? Use this feedback to calibrate confidence thresholds, adjust auto-reconciliation tolerances, and refine format-level rules. Cortex learns from your corrections. accuracy improves with every close cycle.
Within two to three close cycles, most organizations see auto-reconciliation rates climb above 70% and Cortex accuracy stabilize above 90%. The Intelligence module tracks these metrics over time so you can quantify the ROI of automation and demonstrate improvement to leadership and auditors.
Ready to see it in action? Book a demo to walk through the Smart Import Wizard, Cortex sweep, and Command Center with your own data.