To run a business effectively, you need to have financial control over the company’s accounts and ensure that they are accurately updated. When you have full control over your finance, means you’ll have an idea of how it works. For this reason, various techniques can be used to identify possible errors and resolve those errors. A good example of a tested technique you can use is bank account reconciliation.
Definition of Bank Reconciliation
Basically, bank account reconciliation is the process of comparing two bank balances – the one is the company’s own business books and the one on its bank statement – and it is done to make sure there is no error in the balance. It helps business owners to know that the money spent that is shown in the business account is the same as what the bank statement shows. If you don’t have time to match each transaction of your business’s records with a bank statement, you can hire a bookkeeper near your area by searching for a ‘bookkeeper near me’.
How often should you reconcile your bank account?
It completely depends on the company’s size. Big companies use to reconcile bank accounts on daily basis. It has been believed that the more frequently bank account reconciliation is done, the greater the chance it has of removing any errors. Some companies don’t reconcile their bank accounts daily because they perform this task on monthly basis. However, it can increase the chances of serious errors, based on the business’s size. Many business owners choose bookkeeping services in Australia to make everything done easily.
Benefits of Bank Account Reconciliation
By reconciling bank accounts, you can have various benefits for your business. Here is the list of reasons why you should reconcile your bank accounts:
Prevents fraudulent activities
As mentioned above, when you compare records of your business’s records with your bank statements, you can identify anything that doesn’t match. It will help you identify transactions that you forgot to record in your business records. In addition to this, it could help you spot a transaction that has been used by an unauthorised person to steal money from your account. By hiring a bookkeeper for a small business, you can be sure that there will be no discrepancies in the records.
Helps avoid mistake
Irrespective of how carefully you manage your bookkeeping and accounting, there is always a risk of human errors. Common mistakes include double payments, simple arithmetic errors, and missed payments. With a bank account reconciliation statement, you can identify and resolve mistakes quickly, regardless of the reason behind them.
Helps you keep the finances of your business in check
Keeping track of the balances of your business using bank account reconciliation statements means that you won’t spend money you don’t have. On the other side, if you overspend without realising it, can cause you to have a negative impact on your credit score. Additionally, many banks impose overdraft fees, which means they can help you save money.
Helps you track receivables
If your clients use cheques to make payments, then there are higher chances for those to be misplaced or forgotten. Therefore, you can get help from a bookkeeper to reconcile your bank accounts so you can notice if your accounts record payments from a client but your bank account doesn’t. At the end of the year, during tax season, you need to have accurate records so a tax return accountant can lodge tax returns accurately.
Helps you understand the performance of your company
Once you have information about your company’s finances, you will have a clear idea of the performance of your company and as a result, you can make the right decisions for your company for your business’s growth. With accurate information regarding your business finances, you can better invest money on projects from where you can get more profit. Therefore, it is suggested to reconcile your bank accounts to reduce human errors and keep track of your company’s finances.
Every company, whether it’s small or large, needs to reconcile their bank accounts. You can have all of the above-mentioned benefits with bank account reconciliation. If you need help, then you can contact Reliable Bookkeeping Services provider.