Mostly everyone in business is aware of the importance of bookkeeping for small business and at the same time, it is also essential for every business owner to reconcile bank statements each month to run a business successfully. In today’s blog, we will discuss the importance of reconciling bank statements for every business. Let’s get started:
Meaning and Purpose of Bank Reconciliation
Generally, reconciliation of bank statements means cross-checking your bookkeeping. Most often, a bookkeeper compares your business accounts against your bank account statements to ensure that everything is running smoothly and accurately. When there is no problem or difference in statements, then it is considered that your bank statement has been reconciled.
Basically, financial statements indicate how much money an organisation should have, a bank statement implies how much money an organisation has because it is an accurate picture of all the finished transactions over a time period that has an impact on the company’s account.
This process needs to be done regularly or monthly to find out any issues before they become huge bugs. If there is no reconciliation process performed, then an organisation would face problems like bounced cheques or other financial problems. These issues can affect cash flow, which in turn can affect the growth of the business. The following are some reasons to perform a bank reconciliation process:
- Identify and solve errors
Bookkeepers Melbourne can help you identify bookkeeping mistakes (if any) and resolve them. Bookkeepers can help you identify mistakes such as double payments, missed payments, addition/subtraction mistakes, any fraudulent transactions etc.
- Spot wrongful payments
Rechecking expenses is the best method to identify suspicious activity or wrongful payments.
- Check how the business is doing
Keeping an eye on a set of numbers daily can help you know the financial status of your business.
- Prepare yourself for filing taxes
For filing taxes, it is mandatory to reconcile records of business income and expenses accurately to avoid any type of penalty.
- Keep track of profitability
It is also important to keep an eye on business profit to know how much you are earning.
How often should reconciliation of bank statements be performed?
It is necessary to reconcile bank statements on a daily basis to reduce financial irregularities or any possibilities of fraud. Mostly, companies reconcile their bank statements once a month. Most of the time, monthly reconciliation can lead to several anomalies in your book balance and bank balance.
Importance of Bookkeeping in Small Businesses
Proper bookkeeping matters a lot in reconciliation, so it is important to perform bookkeeping tasks properly. In this business world, bookkeeping helps in keeping the financial records that further help in accounting. Different financial transactions include sales, purchases, payments, and receipts. Businesses can take help from a bookkeeper to manage bookkeeping tasks. Poor accounting and bookkeeping is the primary reason why businesses fail to succeed.
- Bookkeeping is essential for every business to budget accurately. If you have organised expenses and income, then it would be easy to recheck your financial resources and costs. By making a budget plan, you can have an idea of your possible future expenses. Bookkeepers can help you keep your business books accurate and updated.
- Businesses need to file their taxes at the end of the tax year. However, a bookkeeper can help you prepare for tax season and save you from penalties.
- Stress regarding managing everything at the last minute can lead to missed deadlines however, a business of any size can’t afford this type of mistake. Thus, properly managed business books can save you time.
- Every organisation wants to grow, but if financial records are not properly managed, then it will be difficult for businesses to achieve their goals. This is where bookkeeping helps because with managed business books, you can focus on your goals and achieve them.
- Bookkeeping helps you make a business plan and for this, you need a balance sheet. In addition to this, you need loss and profit to know if the organisation is on the right path financially from where you can start making a business plan.
- One of the most important things that need to consider is that your business procedures and policy must meet the regulations set by the government. In this matter, bookkeeping helps you to keep your business records as per the required government laws.
In this day and age, it is important for every business to reconcile bank statements on daily basis and hire a bookkeeper for their business to stay on top. By hiring a bookkeeper for your business, you can keep your business books organised and will help you during tax season. If you are looking for bookkeeping in Melbourne, then you can reach the Reliable Bookkeeping Services provider.