Companies across industries reconcile bank accounts to ensure the financial accuracy of the company. By comparing records of business books with bank accounts, any errors that need to be addressed can be resolved on time. With advances in technology, performing bank reconciliation has become an easy and error-free process. We’ll cover the importance of reconciling bank accounts and the steps to do it.
What is a Bank Reconciliation?
Bank account reconciliation is the process of comparing financial statements in the business books to bank statements. While it can be performed by anyone with vast knowledge regarding this but due to lack of time, it is advisable to seek help from bookkeeper services.
A bank statement shows a list of all financial transactions that occurred in a business’s bank account over a specific time period. At the same time, your business also maintains its own financial records. By comparing your cash balance on your balance sheet to the amount on a bank statement, you can ensure that transactions match with each other. With bank account reconciliation, you can spot any fraudulent activities and resolve mistakes quickly. Companies can perform bank account reconciliation on their own, or they can seek help from a Melbourne bookkeeper.
What are the 4 Steps in the Bank Reconciliation?
Here is the step-by-step process to reconcile your bank account:
1. Compare Deposits
Consider checking deposits on both your general ledger and your bank statement. If there are any discrepancies, then the bookkeeper in Melbourne will help you resolve those issues to ensure financial accuracy.
2. Make Adjustments – Bank Statement
For any financial transactions that have yet to be declared in your bank statement, don’t forget to consider them. These may include bank errors, deposits in transit, and outstanding checks. While bank errors are a rare case, it is a possibility. These types of errors could be when entering the wrong amount.
3. Make Adjustments – Cash Account
Within your business account, you may require to make adjustments. If you require to add interest, then do it. Or, you may need to remove any overdraft fees or bank fees. wa gb
4. Compare Balances
After making the required adjustments to both the bank statement and the cash account, make sure to match the account balances. If the balance is not the same, then your bank account reconciliation isn’t over yet. You need to go back and check it again. Now, you have an idea that this process is quite time-consuming, thus you can opt for Melbourne bookkeeping services.
What is the Main Purpose of Bank Reconciliation?
A bank account reconciliation is important for every business that wants to stay on top of its business finances.
Identify Fraudulent Activities
While bank account reconciliation may not stop fraudulent activities from happening, it may at least inform you when it happens.
Business Financial Status
Reconciliation is helpful in determining the financial status of the company. For instance, if your accounting records are not the same as your bank statement balance, you may end up paying more than necessary. It can help you spot any possible interest income or bank service fees that you might not be aware of.
Track Cash Flow
It is important to track the cash flow of the company. Through the reconciliation process, you can see flow of the money in and out of the company. As a result, you can plan your payments and spend money wisely.
Spotting Bank Errors
While it is a rare case, banks can sometimes make errors. If there are discrepancies between your general ledger and bank records, then reconciliation can help you.
Accurate Tax Reporting
The balance of your bank statement and your business records must be accurate for an accurate tax return. As a business owner, if you find it difficult to manage everything on your own, then it is advisable to seek help from a professional bookkeeper.
If you want to ensure that bank statements and business records show no discrepancies, then bank account reconciliation is essential. If you want an expert bookkeeper to manage it on your behalf, then you can seek help from a Reliable Bookkeeping Services provider.