For many local government finance departments, reconciling accounts receivable (AR) can feel like an ongoing challenge. With accuracy and transparency on the line, getting it right is more than just a year-end task—it’s a year-round responsibility that ensures your books are clean, your audits go smoothly, and your leadership team has the data they need to make informed decisions.
As year-end approaches, AR reconciliations take on added importance. Whether you’re new to government finance or helping train the next generation of staff, this blog outlines the critical steps, key best practices, and internal controls that can help you succeed.
Why AR Reconciliations Matter
AR reconciliations are more than just a financial housekeeping exercise—they’re foundational to organizational integrity, transparency, and compliance. When done properly, they:
- Prevent errors and detect discrepancies early
- Ensure financial statements accurately reflect the agency’s position
- Support clean audits and reduce risk of findings
- Build public trust and accountability
- Foster cross-departmental collaboration and efficiency
From an auditor’s perspective, AR reconciliation is not optional. It’s essential. Auditors look for clear evidence that agencies are regularly reviewing and resolving AR issues, maintaining proper documentation, and aligning subsidiary ledgers to the general ledger.
Your Year-End AR Reconciliation Checklist
Every agency has its own policies and systems, but most year-end AR reconciliations will include the following steps. Bookmark or print this list as your go-to guide:
- Review the AR Aging Report
- Identify overdue accounts and assess the likelihood of collection.
- Follow up on outstanding invoices before they age further.
- Evaluate Write-offs
- Determine which receivables are uncollectible and should be written off based on your policy.
- Ensure all approvals and documentation are in place.
- Reconcile the AR Ledger to the General Ledger (GL)
- Match subsidiary ledger totals to the GL balances.
- Investigate and resolve any discrepancies.
- Document the Reconciliation
- Record your process, findings, and any adjustments made.
- Maintain supporting documentation for audit readiness.
- Resolve Discrepancies
- Work across departments to understand billing or posting errors.
- Make timely adjustments to avoid audit issues.
- Ensure Proper Review and Approval
- Have a second set of eyes—typically a supervisor or finance director—review and sign off.
- Maintain an audit trail with clear accountability.
Best Practices to Strengthen Your Reconciliation Process
Implementing best practices isn’t just about year-end prep—it’s about creating a reliable process that works all year long.
Timely Reconciliations
Don’t wait until June or July. Perform AR reconciliations monthly or quarterly so that issues are caught early, and the year-end crunch becomes a simple review.
Actual Reconciliation (Not Just Review)
Reconciliation means comparing the details—not just glancing at summary totals. Be sure to align each balance in the subsidiary ledger to the GL and explain any variances.
Segregation of Duties
Separate the invoicing and reconciliation functions. This internal control protects against fraud and errors by ensuring no single person controls the full transaction lifecycle.
Leverage Technology
Use automation and integrated ERP systems to flag discrepancies, speed up reconciliations, and reduce manual entry. Real-time dashboards can give department heads better visibility into collections and outstanding balances.
Document Everything
Clear documentation supports training, transparency, and audit prep. Keep records of all reconciliations, discrepancy investigations, adjustments, and approvals.
Collaboration Is Key
AR reconciliations can’t be done in a vacuum. Effective AR management requires input from departments responsible for billing, collections, and customer communication. Establish a clear collections policy with defined procedures for aging receivables, escalation paths, and potential third-party collection efforts.
When everyone is aligned and communication is strong, reconciliation becomes a faster, smoother, and more accurate process.
Final Thoughts
Mastering AR reconciliations isn’t just about following a checklist—it’s about creating a culture of accuracy, transparency, and collaboration. For local governments, it’s a sign of fiscal responsibility and operational maturity.
By embracing these practices and integrating them into your routine, you’ll not only survive year-end—you’ll thrive through it.
Want to learn more? Join our Back to Basics webinar Thursday, July 31, 2025 – register: https://us02web.zoom.us/webinar/register/WN_BPpfd6_wQW26J3GZUbqRSA#/registration
