What is an AR reconciliation?

Answer 1

Assuming "AR" refers to "Accounts Receivable" (an accounting/finance term) it can mean several things. Prinicipally, AR reconciliation has to do with double-checking that the current Accounts Receivable (the invoices that a business has put on their "books" for items and services that have been sold to customers but not yet paid for) actually match up against payments that have been received.

In modern businesses, this frequently involves matching up the physical copies of payments or check ledgers from the business's financial institution with the records that the business has kept in their financial management software system.

For example, if you see a check that has been deposited into the bank from a given customer for a specific amount (possibly even with an invoice number reference on it) but the financial software still shows that invoice as "unpaid"...then you have found a discrepancy and you "reconcile" it by updating the financial software to reflect that the invoice has, indeed, been paid.

Conversely, if you find an invoice in the financial software that has been designated as "paid" but you are UNABLE to find a corresponding financial transaction in your banking ledger where the money was deposited, then you would "reconcile" the two by changing the status of the invoice in the financial system to "unpaid".