What is a bank reconciliation? How to do it and why we need bank reconciliation?

All owners of business want to keep their business safe and secure but, keeping all records handwritten is a way to lengthy proses for any person. Not keeping the records might bring problems in your business even small mistakes in finance might affect the interest of your business. 

All owners of business want to keep their business safe and secure but, keeping all records handwritten is a way to lengthy proses for any person. Not keeping the records might bring problems in your business even small mistakes in finance might affect the interest of your business. 

However, a small care can take your business in leading businesses and can alleviate the risks. That’s the place where bank reconciliation comes.  

Bank Reconciliation:

It is a process of matching the cash information of any person’s account with the records of the bank statements. I t should be done after each month. It includes the information of cash balance; cash withdraw and all the transactions of the month.  

For better look after of a business a person should do bank reconciliation every day, it could help you to identify the mistakes in the beginning, and make it easier for you to correct them in forthwith.  

For better look after of a business a person should do bank reconciliation every day, it could help you to identify the mistakes in the beginning, and make it easier for you to correct them in forthwith.  

How to do bank reconciliation:

In order to reconcile your bank accounts, set your account’s records with the bank statement side by side. It includes your transactions, withdraws and your balance details. Verify each transaction individually, making sure the amounts match perfectly, and write down any contrasting thing that need your attention. 

The process of reconciling could be formal or informal, and some person mould a bank reconciliation statement to document so, that they can reconcile their accounts daily. If you don’t complete the process monthly, you can perform it daily, quarterly, or for any other period you choose. 

Where to gather information:

Your accounting system should contain all of the internal transaction data you need, or you might keep your records in a check register. Your bank can provide online access to your account, allowing you to view and download transactions regularly for comparison. Some online accounting programs partially automate the process, although you still need to oversee the process. 

What if something doesn’t match?

It’s normal to see minor differences due to timing, including items that haven’t yet cleared the bank, but you should be able to easily explain those differences. When you can easily account for discrepancies, there’s probably no need to worry. For more details on the process of balancing accounts, along with sample templates you can use online or on paper, see how to balance a bank account.

Why we need bank reconciliation:

In any business, money is the variable that is constant. Money goes up and down in daily routine and to check your account details should be the first priority for a person. 

Fraud Detections:

 

Bank reconciliation is very useful to detect fraud cases. If a cheque is being stolen or misplaced then bank reconciliation could help you to keep checking its record and bounce it to avoid fraud cases. 

Also, if there are any unusual transactions from your account and you are unaware of it then you can have a daily checking system from your online bank account and eschew the risks.

Identify errors:

Bank reconciliation is the safest way to identify the errors and correct them which helps in low numbering of errors. These errors could be wrong data entry, entering incorrect digits, unidentified transactions or details of bounced cheques and so on. 

Spending money:

Believe it or not, reviewing your bank statements will tell you a lot about your spending habits. Whether it’s looking at how much money you spend on shipping products to customers or the occasional coffee-and-donut run for the office, it all adds up. 

Reconciling your bank account will give you access to detailed income and expense reports so that you can keep an eye on these types of expenses before they get out of hand. In the long run, having this information will allow you to make better business decisions that can have a positive impact on your bottom line. 

Improve business operation:

The world is advancing and so the businesses are. Businesses now need technical support and advanced system to organize and control their financial-related things. Financial software is the best tool for the effective management of your finances, which ultimately help you in flourishing your business smoothly and effectively.

Bank reconciliation could help you to maintain the easiness of your business. If you didn’t check your records on the daily basis then, there could be differences in the amount you think you have in your account and the actual amount in account which can cause serious problems for your business. 

Also, if you are noticing continuously errors you can improve the operations of your business before it’s too late. It could help you to change your strategies immediately without further any delay.  That can save your time and work. Time is money. 

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