How Does Auto-Reconcile Work?

The Auto-Reconcile option in Reconciliation Manager (RCM) is designed to recognize matching transactions within two sets of transactions selected for reconciliation.

Note: The two sets of transactions to be considered for matching are displayed in the top and bottom sections of the Reconciliation Manager window. The transactions may be drawn from the same account, or from different accounts, as determined by Reconciliation Accounts (RCA).

Auto-Reconcile uses the match criteria you set in Reconciliation Profile (RCP) to determine how to recognize matching transactions within each set. The matching can occur in one of three ways:

  • matching on criteria other than amount.
  • matching on amount and other criteria.
  • consolidated matching on amount and other criteria.

Matching on Criteria Other than Amount

If the matching criteria set on the Reconciliation Profile, or determined in a rule set, does not include the transaction amount as one of the matching criteria and the Consolidate Amounts option is not set, the matching is based solely on the selected criteria. The amount of each transaction is ignored. As a result, this method matches transactions in the following ways:

  • one to one, that is, matching a single transaction in each set (Reconciliation Account).
  • one to many, that is, matching a single transaction in one set to many transactions in the other set.
  • many to many, that is, matching several transactions in one set to several transactions in the other set.

Using this method, the total of the reconciled transactions in each set are unlikely to balance, so manual intervention may be required before the matching can be posted.

Matching on Amount and Other Criteria

If the matching criteria set on the Reconciliation Profile, or determined in a rule set, includes an amount field as one of the matching criteria, the matching is carried out on a one to one basis only where the amount of each transaction must match exactly before the two transactions can be reconciled.

The Consolidate Amounts option must not be set if you want to use this matching method.

A tolerance amount or percentage can be set on the Reconciliation Profile. This allows two transactions to be reconciled if the two transaction amounts are within this tolerance. In this case, the larger of the transactions is split into two transactions. One split transaction contains the exact amount required to match and is reconciled automatically. The second split transaction, for the smaller amount, remains unreconciled on the account.

Using this method only two transactions can ever be reconciled together, one in each set.

Note: Auto-Reconcile ignores duplicate transactions on a Reconciliation Account, except if the Consolidate Amounts flag is set. This is because it cannot decide which of the duplicate transactions it should match. Instead it indicates the duplicate transactions to allow you to manually reconcile them.

Consolidated Matching on Amount and Other Criteria

The auto reconcile consolidated matching method allows several transactions in each reconciliation set to be matched together, providing they meet the matching criteria, and ensures the matching totals balance. For example, it allows a single payment transaction on the Reconciliation Account, to be matched against several invoices for smaller amounts.

The Consolidate Amounts option must be set if you want to use this matching method.

The matching criteria must include at least one matching field and must not include an amount field. This is because the amount field is included automatically. The matching criteria is used to identify the set of transactions available for matching in each section of the window. The values of these transactions in each set are then consolidated and the total of each set is used to drive the automatic reconciliation process. The smaller of these totals is the total amount that will be reconciled.

Auto-Reconcile processes the transactions in each set in order of transaction date, selecting the oldest transaction first. It reconciles the transactions in each set until the smaller total set has been fully reconciled. Any partially reconciled transaction in the larger value set is split to allow an exact reconciliation and the remainder of the split transactions is left unreconciled.

This is best explained using an example:

Matching Criteria: Department (Ledger Analysis 1)

Before Auto-Reconciliation

Transaction Set 1 (Top section of window)

Table 1.
Transaction Details Processing Details          
Dept Tx Date Tx Value Dr/Cr Alloc Ind Considered for Rec? Consolidated Total
100 20/05/02 200.00 Debit   Yes 200.00
100 25/05/02 150.00 Debit   Yes 350.00
100 26/05/02 100.00 Debit   Yes 450.00
110 26/05/02 100.00 Debit   No (wrong dept)  

Transaction Set 2 (Bottom section of window)

Table 2.
Transaction Details Processing Details          
Dept Tx Date Tx Value Dr/Cr Alloc Ind Considered for Rec? Consolidated Total
100 02/05/02 100.00 Credit   Yes 100.00
100 06/05/02 50.00 Credit   Yes 150.00
100 07/05/02 60.00 Credit   Yes 210.00
100 10/05/02 80.00 Credit   Yes 290.00
100 11/05/02 50.00 Credit   Yes 340.00
110 14/05/02 40.00 Credit   No (wrong dept)  
             

After Auto-Reconciliation

Transaction Set 1

Table 3.
Transaction Details Processing Details          
Dept Tx Date Tx Value Dr/Cr Alloc Ind Processing Consolidated Total
100 20/05/02 200.00 Debit R Fully Reconciled 200.00
100 25/05/02 140.00 Debit R Original tx split and reconciled 340.00
100 25/05/02 10.00 Debit   New split tx - unreconciled  
100 26/05/02 100.00 Debit   Not reconciled  
100 26/05/02 100.00 Debit   Yes 340.00
             

Transaction Set 2

Table 4.
Transaction Details Processing Details          
Dept Tx Date Tx Value Dr/Cr Alloc Ind Processing Consolidated Total
100 02/05/02 100.00 Credit R Fully Reconciled 100.00
100 06/05/02 50.00 Credit R Fully Reconciled 150.00
100 07/05/02 60.00 Credit R Fully Reconciled 210.00
100 10/05/02 80.00 Credit R Fully Reconciled 290.00
100 11/05/02 50.00 Credit R Fully Reconciled 340.00
110 14/05/02 40.00 Credit