Basically, bank reconciliation is the process of matching the cash balance that shows in the company’s business books against the actual cash in the bank. With the increasing use of entities to receive and make payments, it is valid to think about bank account reconciliation. Today’s blog will shed light on the importance of preparing a bank account reconciliation statement.
What is a Bank Reconciliation Statement?
A Bank accountant reconciliation statement is a statement that every company must prepare on a specific date to match the bank balance shown in its business book with the balance indicated by the bank’s passbook. The statement shows the reasons for the discrepancies between the two. A company can prepare this statement at any time during the financial period.
Reconciling bank statements with cash book balances will help you know the possible causes that result in discrepancies or accounting errors. Once you know the possible cause of the difference between passbook balance and cash book balance, you can make corrections in your business books to ensure accuracy. Apart from ensuring correct cash records, the bank account reconciliation process is also helpful in tracking the occurrence of any kind of fraud.
Why Do You Need to Prepare a Bank Reconciliation Statement?
The purpose of reconciling bank accounts is to spot any errors or discrepancies in recording financial transactions. It means the business will have an updated view of its exact bank balance on a particular date. It can help you detect any unusual payments that might indicate fraud. There are various reasons to reconcile your bank accounts. The following are a few reasons why you should prepare a bank reconciliation statement:
• Detect Accounting Errors
Bank account reconciliation can help you detect accounting errors, such as double or missed payments. With bank account reconciliation, you can track the cheques that have been bounced, stolen, altered, or cached without your knowledge.
• Risk Management
One of the most important benefits of bank account reconciliation is that it can help you detect fraudulent activities and minimise the risk of transactions that could result in penalties and late fees. You can opt for bookkeeping for small businesses where you will get various bookkeeping services from experienced bookkeepers.
• Confirming Receivables
Bank account reconciliation enables you to confirm all your receipts. As a result, you can avoid the embarrassment of chasing payments that have been already received, and you will detect any entries for receipts you didn’t deposit. In this way, you can find any errors and your bookkeeper will help you resolve those errors before they affect your business finances.
• Cash Control
Another crucial reason to reconcile your bank accounts is that it can improve internal control over your company’s cash. You can seek help from a bookkeeper in Melbourne to do your bank account reconciliation. It reduces the risk of anyone using the cash of the company improperly.
• Improve Accuracy in Your Balance Sheet
As a business owner, you must know that the cash that is recorded in your company’s balance sheet is accurate. The purpose of bank account reconciliation is to ensure the deductions and additions on the bank statement are compared with the items that are recorded in your company’s general ledger.
How often you should reconcile your bank account?
Producing regular bank reconciliations can greatly improve the accuracy of your financial management, while also reducing the likelihood of errors or irregularities. To achieve this, it is recommended to prepare a bank reconciliation statement every time you receive a statement from the bank. For large businesses, this might be daily, while for most organisations, it is typically done at the end of each week. Moreover, if you have an accurate financial record, it will be easy for a tax return accountant to prepare and file tax returns for you on your behalf.
Conclusion
Bank account reconciliation matches the cash balance on the bank statements of a company with the cash balances on its books. If any discrepancies are found, a bookkeeper can help you resolve those issues. Therefore, you can reach a Reliable Bookkeeping Services provider to receive bookkeeping solutions for your company.