Reconciliation is the compliance job. Filing is the easy part.

Compliance calendars create the impression that the deadline is the hard part. It rarely is. Filing on time is a scheduling problem, and scheduling problems are solvable with a calendar and a reminder. What is not solvable that way is the question that arrives afterwards: why does the figure in your return differ from the figure someone else reported about you?

Almost every uncomfortable compliance conversation traces back to a reconciliation that was never performed, or was performed once and never repeated.

Three records that have to agree

For most compliance obligations there are three separate records of the same transaction, maintained by three different parties with three different incentives:

• Your books — what your accounting system says happened.
• The counterparty's record — what your customer, vendor, bank or employee reported, often on a timetable you do not control.
• The return — what was actually submitted, which may have been prepared from a working file rather than directly from the ledger.

When these three agree, a query is answered by producing the reconciliation. When they do not, the query becomes a project: reconstructing a period that closed months ago, from people who have moved on, using files that were working copies rather than records.

Differences are cheap early and expensive late

A mismatch found in the month it arose is a correction. The same mismatch found two years later is an investigation.

This is the whole argument for doing reconciliation on a monthly rhythm rather than when something forces it. The cost of resolving a difference rises steeply with age, and not linearly: the person who raised the document is still available, the counterparty still has the correspondence, and the underlying contract or delivery note is still in the file. All three of those decay.

There is also a compounding effect that is easy to miss. An unresolved difference does not sit still. It gets carried forward, netted against a later difference, or quietly absorbed into a balance that nobody examines, at which point the original transaction is no longer recoverable at all.

Prepare the return from the ledger, not from a working file

A common and entirely understandable shortcut is to prepare a return from a spreadsheet assembled for the purpose. It is faster, the format matches what is needed, and the ledger often is not ready in time. The problem is that the spreadsheet then becomes the authoritative record of what was filed, while the ledger remains the authoritative record of what happened — and nothing reconciles the two.

Six months later, the ledger has been adjusted for things the spreadsheet never knew about, and the return can no longer be traced to the books at all. The filing was on time and the arithmetic was correct, and it still cannot be defended.

The discipline that prevents this is unglamorous: the return is prepared from the ledger, any differences between them are listed and explained at the time of filing, and that list is retained with the return. The list is usually short. It is the existence of the list, not its length, that makes the position defensible.

What to keep, and for how long

Retention periods are set by statute and change; the practical point is about form rather than duration. Records that are easy to defend share some characteristics:

• The working is retained alongside the submission, not only the submission itself.
• The reconciliation between books and return is kept as a document, not as a memory of having done it.
• Amendments and revisions are retained with the reason recorded, so a later reader can see why a figure changed.
• Correspondence that explains an unusual treatment is filed with the period it relates to, not in a mailbox.

None of this requires a system. It requires deciding, once, where the file lives and what goes into it, and then not deviating.

When a query does arrive

The first instinct when a notice or query arrives is usually to answer quickly. The better first move is to establish what is actually being asked and reconcile the position before responding, because a fast answer built on the same unreconciled data that produced the query tends to generate a second query.

It is also the point at which the distinction between preparation and representation matters. Assembling the reconciliation, the working papers and the supporting documents is preparatory work. Formal representation and any prescribed certification are restricted activities, performed and signed by an independently engaged licensed professional. Knowing which is which before the deadline, rather than during it, avoids a scramble at the worst moment.

The underlying point

Compliance is often treated as an administrative function bolted to the side of the business, judged entirely on whether deadlines were met. Judged that way, a business can be fully compliant on paper and still be carrying years of unexamined difference.

The more useful test is whether any figure the business has reported can be traced back to a transaction, on demand, without a reconstruction project. If it can, the deadlines take care of themselves.