Preparing bank account reconciliation statements is one of the most important aspects of bookkeeping. Whether you are managing your business books on your own, or you have taken advantage of bookkeeping services in Australia, it is important to reconcile your bank accounts. In today’s blog, we’ll discuss the purpose of bank account reconciliation.
Overview of Bank Reconciliation
Bank account reconciliation is the process of comparing entries of a company’s cash books with the data on its bank statements. Bank account reconciliation is a time-consuming process, making it error-prone. Hence, business owners can seek help from bookkeepers near their location and for this, they can search for the term ‘bookkeeper near me’.
Purpose of a Bank Reconciliation Statement
Basically, the bank account reconciliation statement summarises the bank reconciliation process’s results. It demonstrates the starting balance of the company’s bank account, withdrawals and the deposits that have been recorded by the bank, the withdrawals and the deposits that have been recorded by your company, and any reconciling items that have been recognised. All these tasks can be performed by the bookkeeper for small businesses.
The reconciling items are transactions you may notice in your company’s records but not on the bank statement, or vice versa. These may include deposits in transit, interest earned or paid, and bank fees. The bookkeeper can make required changes to the records once they identify reconciling items to make sure financial statements are accurate.
Benefits of Reconciling Bank Accounts
Take a look at the following benefits of reconciling your bank accounts:
With bank account reconciliation, you can identify the most common errors in accounting. These mistakes include addition or subtraction errors, made double payments, or missed payments. For instance, in your business books, you record an invoice as paid, but reconciliation reveals that you forgot to pay. Bank account reconciliation can help you find out such mistakes.
Prevent fraud or theft
As discussed above, the bank account reconciliation process involves the comparison between the data you recorded in your business books and the data recorded in bank statements. As a result, you may find transactions that your bank has, but in your records, there is no entry for that transaction. In this way, you can also come to know about transactions initiated by malicious entities who want to steal your money. However, the reconciliation process can prevent theft.
Verify cash flow
Generally, small business owners have lower amounts to work with, so it is important for them to be careful about their company’s cash flow position. Business owners must choose bookkeeping for small businesses because bookkeepers will reconcile their bank accounts frequently.
How often should you reconcile your bank accounts?
How frequently you should reconcile your bank accounts will depend on the complexity and size of the company’s operations. In general, it is suggested that businesses should reconcile on a weekly or monthly basis. It helps them find any discrepancies and make important adjustments to their records. Companies with complex accounting systems, need to frequently reconcile their bank accounts. It can help them know the company’s records are accurate and up-to-date.
How to Reconcile Bank Accounts?
The bank account reconciliation process involves:
- Collecting required documents: These include any receipts or invoices, bank statements, and the financial records of the company.
- Comparing the bank statement against the company’s records: Your bookkeeper will go through each transaction on your company’s records and compare it to the bank statement.
- Identify errors: While reconciling your bank accounts, if bookkeepers find any errors, they will try to resolve that issue.
- Manage the records of the company: After identifying the reason behind any discrepancies, bookkeepers will help you make some changes to the company’s records. It could include recording a transaction that was missed.
- Reconciling the bank account: After identifying all the issues and resolving them, reconcile the bank account.
If you want to reduce errors in your business books and prevent theft or fraud, you can seek help from a bookkeeper to reconcile your bank accounts. Moreover, you can get in touch with a Reliable Bookkeeping Services provider to get bank account reconciliation done.