Reconciliation Meaning

Reconciliation is the accounting process used to ensure that two sets of records (usually the internal balance sheet and the bank's external statement) are in agreement. It is a critical task for any financial institution to ensure that no money has been lost, stolen, or incorrectly recorded.

In traditional finance, this process is famously manual, slow, and prone to human error.The process requires matching every individual debit and credit across systems to find a "Break"-perhaps a transaction that hasn't cleared yet or an unrecorded fee. Modern fintech companies use automated software that leverages APIs to match thousands of transactions per second, flagging only the discrepancies for human review.

This has reduced the time for bank reconciliations from weeks to minutes.The blockchain offers a "Triple-Entry Accounting" solution to this problem. Because the blockchain is a shared, immutable ledger that both the buyer and seller (and the auditor) can see, the reconciliation happens in real-time by default.

There is no need to "compare" records because there is only one record. This could eventually save the global financial system billions of dollars in back-office costs by eliminating the need for massive reconciliation departments.