Blog Post
Cash vs. Position Reconciliation: What’s the Difference?
In the world of accounting, particularly for investment firms, hedge funds, and corporate treasuries, reconciliation isn't just about balancing the checkbook. It involves two distinct but connected processes: Cash Reconciliation and Position Reconciliation. Understanding the difference is critical for maintaining accurate books and ensuring regulatory compliance.
What is Cash Reconciliation?
Cash Reconciliation focuses on money. It is the process of verifying that the cash balance in your internal ledger matches the cash balance held at your bank or custodian.
Key Activities:
- Matching deposits and withdrawals.
- Identifying bank fees and interest.
- Ensuring currency balances (USD, EUR, GBP) align.
What is Position Reconciliation?
Position Reconciliation (or Asset Reconciliation) focuses on holdings. It verifies that the quantity of assets you think you own matches what the custodian says you own.
Key Activities:
- Quantity Match: Do we both show 1,000 shares of Apple (AAPL)?
- Security ID Match: Are we talking about the same ISIN/CUSIP?
- Break Resolution: Did a corporate action (like a stock split) happen that one side missed?
Why You Need Both
You can have a perfect cash match but a broken position match, and vice versa.
Example: You buy 100 shares of Stock X for $10,000.
- If the cash leaves your account but the shares don't arrive, your Cash Rec is fine (money is gone), but your Position Rec breaks (shares missing).
- If you record the trade but the money never leaves the bank (failed settlement), your Position Rec might show the shares, but your Cash Rec will show extra money.
Automating the Two-Way Match
Performing these checks manually in Excel is risky, especially with high daily trading volumes.
Reconwizz offers a unified platform that handles both. Our system ingests standard file formats (like MT940 for cash and MT535 for positions) to perform a comprehensive "two-way" reconciliation automatically.