Fixing Mistakes Without Breaking History
Reclasses, journal corrections, and when to leave the past alone.
Reclass vs. correction
A reclass moves an amount between accounts (e.g., from Office Supplies to Software). A correction changes the amount. Document both with a memo so a reviewer can follow the trail.
Never edit closed periods
If you find an error in a closed month, book a correcting entry in the current period and disclose it. Editing closed books destroys audit history and credibility.
Materiality
Not every mistake is worth fixing. A $4 miscategorization on $200k of monthly expense is noise. Set a materiality threshold and stick to it.
Key takeaways
- Reclasses move, corrections change amounts — document both.
- Never edit closed periods; correct in current.
- Set a materiality threshold to avoid busywork.