Bank Reconciliation: Reasons to Reconcile Bank Statements

As a business owner, it is important to keep track of your cash balance and make sure the accuracy of several ongoing transactions. This is where the bank reconciliation process holds importance in finance. However, being a business owner, you might not have enough time to reconcile your bank statements daily so you can take help from a bookkeeper. Reconciling bank statements is a time-consuming task, but it is the best way to detect errors, verify cash flow, and prevent fraud.

What is a Bank Reconciliation Process?

In business, reconciliation is an important process in which a company matches the transactions recorded in their general ledger with bank statements. Through the reconciliation process, possible errors in bookkeeping or transactions can be reduced. The reconciliation process can be performed on daily basis to remove the possibility of fraud.

Most businesses reconcile bank statements monthly that can pile up issues in book balance and bank balance.This is the reason many bookkeepers of Melbourne reconcile bank statements on daily basis. If you manage bookkeeping tasks on your own, then you will be responsible to reconcile your bank statements, but if you have a bookkeeper in your company, then the bookkeeper will reconcile your bank statements on your own. A bookkeeper can identify and resolve certain issues that may become a big problem if those issues don’t get resolved earlier. Either your bookkeeper or an accountant will be responsible to reconcile your bank statements.

Bookkeeping is a part of accounting, so it must be done accurately so that small business accountants can perform their tasks without any complications. Whether it is accounting or bookkeeping, both must be done properly to avoid tax issues.

Importance of Reconciling Bank Statements

With the help of the reconciliation process, any type of discrepancies can be identified and removed before they become problems. A periodic reconciliation process can help to identify cash manipulations to reduce damage to the company. Moreover, reconciling bank accounts is important to safeguard the organisation from losing money. Apart from bookkeeping services, accounting services are also important for businesses. Thus, it is important to perform bookkeeping and accounting tasks accurately to avoid complications in business finance. For this reason, one task is reconciliation that is important to perform to avoid business finance issues.

·        Detect Possible Errors

The reconciliation process helps in identifying possible errors that can commonly occur. These mistakes include subtraction and addition errors, double payments and missed payments. If these mistakes remain undetected, then those mistakes can become a problem.

·        Detect Fraud

You may not be able to prevent your employees from making fraud or stealing your business money once, however, you can prevent losing money in future. The reconciliation process helps you in identifying fraudulent transactions. It is suggested to hire a Melbourne bookkeeper to perform the reconciliation process to prevent fraud.

·        Verify Cash Flow

Managing cash flow is as important as managing a business. Reconciling your bank statements will help you see when money flows in your business and when it flows in your bank account, and plan how you receive and spend it as per your requirements. Bookkeepers can help you keep an eye on business cash flow, and you can also come to know the financial status of your business.

·        Avoid Surprises

When your bookkeeper reconciles your bank statements regularly or monthly, then you could avoid further problems. If your payments were lost in the email, then you can reissue the cheque. If your bank account, credit card statements, and bookkeeping don’t match, then it could lead to spending more money. It is important to reconcile your bank statements to avoid uninvited surprises.

·        Keep Financial Reports Accurate

The reconciliation process is effective in getting a view of the finance of your business. Frequent reconciliation of bank statements will allow you to track cash flow properly so you can make wise financial decisions. Many times, business owners get confused when to reconcile bank statements, it is suggested to reconcile bank statements daily or once a month so that you can have a current business finance status.

With the help of the reconciliation process, you will be sure that the cash balance of the business is what you thought it is. If your book balance doesn’t match your bank balance, then accountants or bookkeepers team needs to sit together and analyse both records to remove inconsistencies. Once you have recorded all the transactions, then the reconciliation process can be performed, but it must be done accurately. Reconciliation of bank statements is a part of small business bookkeeping services.

Wrapping Up

Business records must be accurate so that the reconciliation process can be performed in a better way. As a business owner, if you don’t have time to reconcile your bank statements each month, it would be better to hire a bookkeeper for your business that will perform the reconciliation process on your behalf. Moreover, bookkeeping for small businesses is important to get organised business books. You can contact Reliable Bookkeeping Services to get your business books updated.