Accounting is contemplated as a decisive chore for every business organizations. Accounting does not simply sum-up its scope in recording and classification of monetary transactions. It is inevitable to make your accounts balanced, which are in use. It is essential that the periodic balance of all your accounts in existence must tally with the actual transactions incurred.
Account reconciliation has become an imperative aspect for every business organization and even along with sole proprietor businesses. To mark up business in this competitive market, it is essential that your accounts must reflect true and fair position of your business and even it facilitate the effective cash flows into the corporate. Reconciliation of accounts enhances the financial stability of the business.
Account reconciliation simply includes checking of all the financial transactions recorded by your record keeping department with the monthly statements prepared by any outer sources. Reconciliation is done to ensure that both the statements accord with each other with regard to transactions occurs in that period end their balances. The most important reconciliation which is done by every business enterprise is BANK RECONCILIATION.
Generally speaking, bank reconciliation is stated as a process of making comparison between your company’s cash prepared by your accounting department and the periodic statement which is prepared by the bank (bank statement) and insight the variances if any. It is important that your statement opening and ending balance must matched with your internal records along tally all the transactions (deposits and withdrawals) that happen in that specified period.
Bank reconciliation is not an effortless function as it seems. Some time is becomes frustrating both for small and large business enterprise. As the banking will include mammoth of transactions just within a week eventually month is far away. Matching all the transactions, as and when they emerged take into account sizably of time. But although time consuming, it will figure out the differences in both the statements and helps you to clear out them.
Once the reconciliation is done, a statement is prepared, stated as “Bank Reconciliation Statement” which displays a complete report of how those transactions has been matched. Bank reconciliation is vital for ensuring the correct flow of finances from and into your business corporate.
But other than this principle there are also other advantages of doing bank reconciliation regularly:
- It is a helping hand in matching your balances and all the transactions that occurred in that specific time period.
- Reconciliation detects any financial error or fraudulent activity in the financial statements.
- Enhance better control over the internal record system.
- It assists in keeping track record of all the inflow and outflows of cash in the business corporate.
- Beneficial in managing company’s cash flows.
- Reconciliation highlights any delay in payment or receipt.
- Regular access to bank charges, credits any bouncing charges and so on.
- Strengthens the control over company’s financial statement.
If your balances do not match:
There can be several ground if ending balance of your prepared cash flow does not match with the bank statement, few are listed below:
- Outstanding checks
- Deposits does not receive
- Bank credits/charges
- Any other errors in deposits or withdrawal
Timing of Bank Reconciliation
Bank reconciliation is generally done on the monthly basis by every business corporation. But it will be a wise decision, if you have handling a large or medium business, prefer to match the daily or weekly balances. Your regularly matched balanced will aid you a lot when you have to reconcile your bank account on monthly basis. If you have matched your daily or weekly balances earlier, you don’t need to tally again all the previous transactions. And the monthly reconciliation will be completed very smoothly.
Get Your bank reconcile without any hustle by giving Outsource Bookkeeping Firm authority to maintain your accounting process and to prepare your statements of daily, weekly or monthly basis. Bank reconciliation is a part of our Outsourcing Accounting services. You can choose the time period per your requirements. We are here to handle all your multiple transactions to match them and to make your bank reconcile effortlessly.