Balance Reconciliation, Reconciliation Letter and Acknowledgment of Debt
A reconciliation letter may be used for the parties to compare their accounting balances as of a given date. A reconciliation that is signed or confirmed electronically may carry evidentiary value according to its content, the authority of the signatory, any reservation and its scope. However, not every reconciliation document is an unconditional and unreserved acknowledgment of debt.
In reconciliation disputes:
- The date and period the reconciliation covers
- Whether the balance is a receivable or a debt
- Whether specific invoices or transactions were left outside the scope
- Signature, stamp, electronic signature and authority to represent
- Whether the document was prepared by an accounting employee, financial adviser, manager or authorized representative
- The scope of the statement “consistent with our records”
- Whether there is a reservation, objection or explanation
- The source of an e-mail reply or corporate system approval
- Payments, returns, offsetting entries or corrections made after the reconciliation
- Consistency of the reconciliation with the underlying contract and delivery documents
- Whether the document is an acknowledgment of debt, a beginning of proof or another means of proof
are assessed. A unilateral reconciliation letter that has received no reply and a reconciliation confirmed in an authorized manner by the other party do not have the same legal value. Whether the reconciliation accepts only the accounting records or also the legal ground and amount of the debt must be determined from the specific text.
Our Approach in a Reconciliation Review
We examine whether the document contains only an account confirmation, an acknowledgment of debt, or a payment and settlement undertaking. The period, currency, signature, authority to represent and reservation wording are assessed together and compared with the counter-records and later correspondence.
Check before you sign
- Are the period, company and account covered by the document correct?
- Have returns, discounts, advances and offsetting entries not yet been posted?
- Is the delivery of checks and notes shown as if they had been collected?
- Does the text contain interest, waiver, release or a new payment undertaking?
- Is the signatory authorized to represent the company to this extent?
Review in an electronic approval
The account from which the e-mail was sent matters, but so do the person’s authority, the integrity of the content, the attachments, the method of approval and earlier practice. The use of a corporate e-mail address does not by itself show that there is unlimited authority to represent.
Make the dispute visible
If you believe the account is wrong, list the entries and the supporting documents that make a difference. Merely correcting the accounting record within the company does not mean that an objection has been notified to the other party.