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How to Reconcile Accruals: A Step-by-Step Month-End Process
Accrual reconciliation is the difference between books that close on time and books that need restatement. Here's the seven-step process used by clean-close finance teams, the discrepancies you'll find, and how to keep them from coming back.
Reconciling accruals means verifying that every accrual on the balance sheet matches an underlying obligation, every reversal cleared properly, and the period's expense reflects actual consumption. The standard process: pull the prior-period accrual schedule, verify reversals posted, identify new period-end accruals, post the new entries, and confirm the balance sheet ties to supporting detail.
Done monthly, the reconciliation takes 30–90 minutes per category for most mid-market businesses. Done quarterly or worse, it becomes a multi-day project.
Key Takeaways
- Accrual reconciliation verifies that balance sheet accrual accounts match underlying obligations and that reversals cleared properly.
- The standard process has 7 steps: pull prior schedule, verify reversals, identify new accruals, calculate amounts, post entries, reconcile balances, document.
- Monthly cadence is materially less work than quarterly. Quarterly catches up three months of drift at once.
- The most common discrepancy: an accrual that didn't reverse properly, causing a duplicate expense in the next period.
- Manual processes work for simple operations. Multi-category accruals across many entities benefit from automation.
What Accrual Reconciliation Means
Reconciliation in this context is verifying three things: every accrual recorded matches a real obligation, every prior accrual reversed when it should have, and the resulting balance sheet balance matches your supporting documentation. When all three are true, the books are clean. When any one fails, you have an issue to research.
Accrual reconciliation is the period-close process of verifying balance sheet accrual accounts against underlying support, ensuring the expense recorded matches actual consumption and the reversal pattern produces clean future periods.
The 7-Step Process
Step 1 — Pull the prior-period accrual schedule
Start with last period's accrual schedule — the list of items accrued, amounts, and accounts used. If you don't have one, that's the first thing to build. A simple spreadsheet works: vendor/category, amount, accrual account, expense account, basis for estimate.
Step 2 — Verify the prior accruals reversed
Open the GL detail for each accrual account. Confirm the prior-period accrual entry has a corresponding reversal entry on day one of the current period. If the reversal didn't post, fix it before doing anything else — you'll otherwise build new accruals on top of stale balances.
Step 3 — Identify new accruals for this period
Walk through the standard categories: utilities, hosting, contractors, professional fees, interest, payroll, benefits, vacation, bonuses. For each, ask: did consumption happen this period that hasn't been invoiced? If yes, accrual is needed.
Step 4 — Calculate the new amounts
For fixed contracts, use the contract amount. For variable items (utilities, hosting), use historical run rate or actual usage data. For payroll, calculate days-worked-but-unpaid times daily rate, plus the employer burden. Document the calculation with each entry.
Step 5 — Post the new accrual entries
Debit the appropriate expense accounts; credit the accrual liability accounts. Total debits equal total credits. Date the entries on the last day of the period.
Step 6 — Reconcile the balance sheet to support
Each accrual account's ending balance should equal the sum of items on your accrual schedule. If it doesn't, trace the difference. The most common cause: a reversal that didn't post properly, leaving stale balance.
Step 7 — Document and file
Save the period's accrual schedule with supporting calculations, the journal entries posted, and any notes on judgment calls. This is what auditors will ask for, and what makes next month's reconciliation faster.
Monthly vs. Quarterly Cadence
| Monthly close | Quarterly close | |
|---|---|---|
| Time per close | 1–3 hours per category | 3–8 hours per category (more drift to research) |
| Error visibility | Caught early; small variances | Compounded; harder to trace |
| Investor reporting | Monthly financials available | Quarterly only |
| Risk profile | Issues caught quickly | Three months of issues at once |
Monthly is the right cadence for any business above seed stage. The total annual time investment is roughly the same, but the work is distributed and errors stay small.
Common Discrepancies and How to Resolve Them
- Stale accrual balance: Last period's accrual didn't reverse. Post the missing reversal before any new entries.
- Duplicate expense: Reversal posted but invoice was also booked normally. Identify which posting is wrong; correct.
- Missing reversal: Reversal entry was created but not posted (saved as draft, posted to wrong period). Find and post.
- Mismatched amount: Accrued $4,000 but actual invoice was $4,500. Book the $500 difference as an additional expense in the period the invoice arrives — no need to amend the prior accrual.
- Wrong account: Accrual was credited to the wrong liability account. Reclassify; document the correction.
Tools That Help
Three tiers of approach by company size:
- Spreadsheet + manual journal entries. Workable for businesses with under 20 active accruals. The accrual schedule lives in Google Sheets or Excel; entries are posted manually each period.
- QuickBooks Online recurring transactions. Useful for fixed-amount accruals with stable vendors. Doesn't handle variable amounts or contract modifications well.
- Connected automation (Accruer). The accrual schedule moves into the tool; entries post automatically each period; reversals happen on schedule; the reconciliation workflow is built in.
Common Mistakes
Skipping the verification of prior reversals
Without confirming reversals posted, you build new accruals on stale balances. Always start there.
Re-using last period's accrual amounts unchanged
Run rates change. New vendors, terminations, contract renewals. Recalculate from current data.
Not documenting the basis for estimates
Auditors ask. "We've always done it this way" is not a defensible answer. Save the calculation.
Letting the reconciliation slide for a quarter
The work compounds; errors stack; the close becomes a multi-day project. Monthly is the only sustainable cadence.
Reconciling balances without tying to support
A balance can be "right" in total and wrong in composition. Tie each accrual to its underlying support, not just the total.
Cut accrual reconciliation time by 80%
Accruer manages the accrual schedule, posts entries to QuickBooks Online automatically, handles reversals on schedule, and produces audit-ready documentation. Most teams reduce monthly accrual work from a full day to under an hour.
Book a demoFAQ
How often should accruals be reconciled?
Monthly. Quarterly closes compound errors and make the work harder, not easier.
What's the difference between accrual reconciliation and bank reconciliation?
Bank rec verifies cash accounts against bank statements. Accrual rec verifies balance sheet accrual accounts against underlying obligations. Different process, different evidence.
How long should accrual reconciliation take?
30–90 minutes per category for a mid-market business with 5–10 active accrual categories. Total: 3–8 hours per close. Automation reduces this to under an hour.
What documentation do auditors ask for?
The accrual schedule, supporting calculations, the journal entries posted, and evidence of reversals in the following period.
Can QuickBooks Online reconcile accruals automatically?
No. QBO can run reports against accrual accounts but doesn't automate the reconciliation workflow. The work is manual unless you connect a dedicated tool.
Where to Go Next
Related Resources
Sources & References
- AICPA, Audit and Accounting Guides — Period-End Close Procedures.
- FinOptimal Managed Accounting practice — close-cycle data, 2024–2026.
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