Reconcile debits & credits using Solver [Advanced Excel]

Here is a tricky problem often faced by accountants and finance professionals: Let’s say you have 5 customers. Each of them need to pay you some money. Instead of paying the total amount in one go, they paid you in 30 small transactions. The total amount of these transactions matches how much they need to pay you. But you don’t know which customer paid which amounts. How would you reconcile the books?

If you match the transactions manually, it can take an eternity – after all there are more than 931 zillion combinations (5^30).

This is where solver can be handy. Solver can find optimal solution for problems like this before you finish your first cup of coffee.

Reconcile debits & credits using solver model – Tutorial

Step 1. Set up your solver model

In a blank sheet, list credits along a column and debits on the top in few columns, as shown below:

In the blank grid, Solver will fill 0 or 1 indicating whether credit in that row is matched with debit in that column or not.

This area is (C6:G35 in my workbook) is known as variable cell range in Solver model.

There are 2 rules to be followed when matching debits to credits:

• A credit can be matched with only one debit – ie sum of any row in C6:G35 range can be 1, at most.
• Total reconciled amount should be less than or equal to total credits – ie sum of any column in C6:G35 should be less than values in C5:G5 (debits).

To facilitate these rules, also known as constraints in solver parlance, let’s use column H & row 36.

• Write =SUM(C6:G6) in H6 and fill down the formula.
• Write =SUMPRODUCT($B$6:$B$35,C$6:C$35) in C36 and drag sideways to fill the formula in rest of the columns.

Our solver model should look like this:

Step 2: Set up optimization cell

To do its work, solver needs an optimization cell. Our goal is to maximize the amount of reconciled amount. So, in a blank cell write =SUM(C6:G36). This will be our optimization cell.

Step 3: Launch solver

Select the optimization cell (in my workbook, this is J6) and go to Data > Solver. (If you do not have solver, enable it using these instructions.)

Set up solver model as:

1. Objective is to to maximize J6.
2. Variable cells are C6:G35
3. Constraints
   • C6:G35 should be binary (o or 1)
   • C36:G36 should be <= C5:G5
   • H6:H35 should be <= 1
4. Solver method is Simplex LP (our problem is linear)

When you are ready, Click Solve. Solver should take few minutes to find the solution.

Step 4: Examine the result

Once solver finds an answer, it will show Solver Results dialog. Click ok (you may also look at the sensitivity report). This loads the solver solution in to variable cell range.

Analyze the numbers and enjoy.

What if Solver solution is not optimum?

Occasionally, Solver fails to find optimum solution for linear problems with integer constraints. In such cases, try again by adjusting constraints & precision.

Download example workbook

Please click here to download the example workbook. Play with the solver model to learn more.

Other ways to reconcile data

If you deal with reconciliation problems, check out below examples to learn more:

• Match transactions using formulas
• Matching transactions using VBA macros
• Compare 2 lists using Excel conditional formatting
• Introduction to VLOOKUP formula – the easiest way to reconcile data
• Use SUMPRODUCT to consolidate revenues

How do you reconcile data?

Solver is a powerful way to reconcile data. It does take some time to set up the model and configure solver, but once your model is ready, Solver does all the heavy lifting.

What about you? What methods do you use to reconcile data? Please share your thoughts and tips in the comment section.