More broadly, a general ledger is a record of all financial transactions for a business, organized by date and by account. The ledger contains information on every transaction that the business has made, including sales, purchases, payments, and receipts. The purpose of the general ledger is to provide a complete record of all financial activity for a business.
This information can be used to generate financial reports, such as balance sheets and income statements. But in a fintech niche, where online banking is one-click responsive, general ledger solutions are software products that receive, store and load such data in real-time with thousands of transactions per second.
What are the processes of a General Ledger?
The general ledger is the main record-keeping system for a business. As far as businesses collect and calculate different information about business operations, this software does multi-asset ledgering. Those may be the company’s financial transactions, including income, expenses, assets, liabilities, and equity.
There are four main processes in General Ledger: account reconciliation, journal entry, posting, and trial balance.
- Account reconciliation is the process of ensuring that all accounts in the general ledger are accurate and up-to-date. This includes reviewing bank statements and comparing them to the records in the ledger solution. Any discrepancies must be resolved before the financial statements can be prepared.
- Journal entry is the process of recording transactions in the general ledger layer. This includes recording both debits and credits for each transaction. Journal entries must be made in chronological order so that they can be easily reviewed later on.
- Posting is the process of transferring journal entries from the ledger to other financial records such as ledgers or journals. This ensures that all transactions are properly accounted for in all records. Posting must be done carefully so that no mistakes are made during transferral.
- A trial balance is a report that lists all of the account balances in the ledger layer at a specific point in time. This report is used to check the accuracy of the ledger and to prepare financial statements.
What are the key functions of the general ledger solution?
The primary function is tracking and managing income and expenses. Report generation is also a vital option for internal communication and data exchange with financial regulators. The way data is stored and organized within the GL is a crucial point too. It may be either a data lake or a data storage with different possibilities for further data transformation, analysis, and visualization.
When one processes different transitions from various partners and providers, the business needs a more sophisticated way of payment management. Once the transactions are all recorded, all commissions and fees calculated, the functionality for reconciliation plays a key role in making the ends meet. When we talk about thousands of transactions per day, even a percent or two of the lost or mismanaged entries may cause a significant net loss.
What are the advantages of a General Ledger?
A General Ledger can give you a clear picture of your business finances. It can help you track your income and expenses, and see where your money is going, providing a helicopter view of your financial data. This can help make decisions, such as where to cut costs or how to invest your money. A General Ledger can also help you prepare for tax season. By tracking your income and expenses, you can make sure that you are paying the correct amount of taxes. It may save you time and money in the long run. Find out how the general ledger solutions make your business growth a sure thing.