What is reconciliation?

In accounting, reconciliation is checking that two records of the same thing agree, and explaining every difference. The classic case is a bank statement against the ledger. Wikipedia puts the purpose simply: "Reconciliation is used to ensure that the money leaving an account matches the actual money spent". It adds that "Account reconciliation is an important internal control in the financial reporting process".

Three-way matching

The reconciliation most buyers meet first is three-way matching of purchase order, goods receipt and supplier invoice. BILL, which sells payables software, describes the purpose: "By verifying that the purchase order, order receipt, and supplier's invoice match, you know that an invoice is valid and correct before paying it".

The reconciliations timber needs

Timber adds pairs that cross from operations into money. Scale tickets sit against contract volumes, delivered loads against hauling invoices, and shipped tallies against invoices raised. Accrued rates and levies sit against what is actually invoiced, and inventory records against physical counts.

The first few are usually reconciled every pay cycle, because contractors and landowners are paid from them. In our view, the gaps sit where no payment forces the comparison, such as accruals and inventory.

What a difference means

Each difference falls into one of three groups. It is matched once explained, explained but not yet fixed, or an exception someone must chase. A ticket with no contract, an invoice for a load never received, an accrual rate that no longer matches the invoice: each explains part of a gap, and each has an owner.

The money involved can be real. From Quarri's own work with a forestry operation: one reconciliation cycle surfaced an over-accrual credit of $80k+.

What it isn't

Reconciliation isn't an audit, though auditors rely on it. Nor is it a one-off clean-up. It works when it runs every period, so differences are small and recent enough to explain.

What to check

List the pairs of records that drive your money. For each, ask when it was last reconciled and how many differences were explained rather than written off.

Quarri for finance and strategy teams is built for the people who close the month, explain the margin and answer the board.

Quarri is an AI-native data platform for the timber supply chain. It connects buying, production, sales and inventory for forest management, sawmill, wood products and pulp, paper and packaging operators.