This news was a surprise: the guy had always struck me as more than competent. But the numbers had got so bad that the FD was thinking of producing the accounts on Excel spreadsheets and dumping the shiny ERP suite altogether. Around the same time, I was working with a different company on some strategic issues. It was running a similar ERP system. But there was one major difference: theirs was working. I wondered how it was that one system was ticking along perfectly well and another simply refused to fly.

The answer came out of the blue when a Real Finance reader (and fellow turnaround professional) called me up. Were there any back copies, he asked, containing my articles Manners maketh the audit (March 2003) and Kill your auditor (October 2002)? As I re-read those columns before sending them off, the answer to my friend's failing ERP system started to become clear. The company he was working for had forgotten about double entry. They were trying to make a computerised accounts system work, but the first thing they should have done was make their double-entry work.

Every first-year accountancy student knows that debits can be assets or costs; and credits can be liabilities or income, depending onsheet or the profit and loss account. In contrast with much of Western philosophy, double entry bookkeeping doesn't divide the world into good and evil. Debits and credits are neither good nor bad; each is yin to the other's yang. Every company's debits and credits add up to nil, forming a virtuous circle. This 500?year-old system is neat, accurate, flexible and incredibly secure.

The key is the proper reconciliation of control accounts. Companies that perform regular bank, stock, purchase ledger and sales ledger reconciliations can be pretty certain that their accounts are in good shape. As long, of course, as the reconciliations actually work. Even if you let one of the major reconciliations slip, but keep performing the others, you should be able to see that you're doing your double entry correctly.

If, on the other hand, you fail to keep more than one of your key reconciliations up to date – or if you fail to reconcile properly – then you can no longer say with certainty that your debits and credits are self can bookkeeping circle is incomplete. As Oscar Wilde might have written: "To lose control of one reconciliation may be regarded as a misfor?tune; but to lose control of two looks like carelessness."

That said, in the real world, work isn't always completed on time and we have to make judgement calls on what to get done "now" and what to leave. Of course, no Real Finance reader would ever dream of failing to do less than their professional duty and let the reconciliations slip down the priority list. But most of the time when I see broken finance departments in troubled companies, I find the bank reconciliation is a mess, or the stock reconciliation has undefined items sent off to a suspense account, or supplier statements are carefully filed (OK, not always carefully) and never checked to see if what we think we owe the creditors is what they think we owe them.

One I've seen with surprising regularity over the years has been a failure to reconcile intra-group trading and intra-group financing properly. Why should you treat intra-company dealings with any less care than external suppliers? Any company with a group structure –and with any sort of trading or cash transactions – should make certain that checks and controls are performed often and with rigour.

And, it turns out, this was the problem with the broken ERP system: it wasn't being treated as a double-entry system. Instead, the company was relying on the comput?erisation of posting. So the reconciliations were not being performed as rigorously as they should have been. Finance professionals sometimes talk – at least among themselves, never in front of other directors – as if there were still two clerks stood up at ledgers comparing their hand?written books, forbidden from going home until the last penny had been found. For the sake of decent accounting, long may those conversations continue.

The digital reality is that big ERP systems post continuously from, for instance, the accounts receivable file to the general ledger – and then there is a batch control system every day, week or month (depending on the volume of transactions).

That's fine in theory. But problems arise if you lose a handle on the control account, quickly resulting in a build-up of errors. And those control accounts help to keep the magic of double-entry bookkeeping alive and well in the 21st century. It's a lesson none of us should forget.