If you are reconciling your bank accounts most frequently, then it may help you prepare for the tax season, but annual bank account reconciliation is just the beginning. To grow your business at a responsible rate, you need to know the cash flow of your company, catch fraud, and understand the fees type that you are paying.

What is a Bank Reconciliation?

Reconciling bank accounts means making comparisons between records of business books and bank statements. Even if you have a bank feed with accounting services, you are required to reconcile your bank feed with your bank statements.

What is the Main Purpose of Bank Reconciliation?

Your financial records are useful only if they are up-to-date and accurate. You’d be surprised if there are any discrepancies in the numbers entered in your business books that may cost you big. However, bank reconciliation can save you thousands of dollars if reconcile bank accounts most often. The following are some benefits that you can get by reconciling your bank accounts:

  • Tracking Company’s Cash Flow

By reconciling your accounts every month, week, or daily, you can obtain a precise depiction of the cash inflows and outflows. This enables you to determine whether you are truly profitable, or if it was just an assumption. Additionally, you can incorporate the reconciliation of your credit card receivables into this procedure to ensure that all anticipated transactions have been processed.

  • Management of Accounts Receivables

One of the most common reconciliation discrepancies could be a cheque that didn’t clear due to insufficient funds/balance. Checking accounts receivables will allow you to identify these types of problems so you can rebill the client or vendor or write off the discrepancy as a bad credit.

  • Confirming Payable Transactions have been Posted

When you compare the statement balance to your records mentioned in your business books, then it will let you confirm that transactions have been posted to your account. It will be a huge mistake if you forget that you have an outstanding cheque and as a result, you could overspend on an account when it posts.

  • Identifying Systematic Issues

When you hire a bookkeeper for your company, then they will be able to identify discrepancies or individual errors, and they can identify structural issues.

Once you have accurate and up-to-date records, your tax return accountant can successfully prepare and lodge income tax to help you avoid paying penalties unnecessarily.

How to Do Bank Reconciliation Easily?

When you reconcile bank accounts, you need to follow a few steps. You are required to get proper documents, compare your transactions and balances, and correct any errors.

  • The first step is to get the business and bank records that you want to reconcile.
  • Make sure to check the opening balance on your bank statement matches your own accounting records’ opening balance. You may think to skip this step, but it is recommended not to skip this step.
  • It is important to review your transactions with your starting balance verified. Compare your business’s accounts to the bank statements. Some bank account reconciliation examples include deposits, sales, refunds, payroll expenses, bank fees, purchased supplies, and interest charges. It is advisable to take your time to compare everything to ensure accuracy.
  • In case you notice any transactions in your business account that are not appearing in the bank statement, it is advisable to include them. Such transactions could comprise cash-in-transit, deposits awaiting clearance, uncashed cheques, or any errors made by the bank.
  • Likewise, it is probable that you will need to make some modifications to your business’s cash account. Such adjustments may encompass bank fees and other charges, accrued interest, not-sufficient funds (NSF) cheques, and mistakes. Just like when reviewing the bank statement, it is crucial to review any suspected errors to identify their root cause and ensure that you are correcting the appropriate account.

The blog outlines the importance of reconciling bank accounts and what issues can be resolved with this process. If you don’t want to get into trouble because of wrong data entry in your system, you can seek help from a Reliable Bookkeeping Services provider for your business.

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