Bank reconciliations may sound a little boring, but it is like a failsafe to keep the right control over your receivable accounts. If done on a regular basis, bank reconciliations can easily protect you from all kinds of pitfalls, such as becoming a fraud victim or money overdrawing. In addition to this, if you notice some discrepancy in your receivable accounts between your balance book and your bank, then bank account reconciliation software could prove to be extremely helpful to you in this regard.
Read on to learn more about bank statement reconciliation, how it works, and the best way to manage it properly.
What is Bank Reconciliation?
Reconciling your bank statement actually means comparing it with your bookkeeping records for that particular time period and pointing out discrepancies. Once all these discrepancies are acknowledged, you can make a proper record of these discrepancies. In this way, you or your accountant can be convinced of the fact that no money has gone missing from your business.
In bank reconciliation, the cash balances on your balance sheet are matched with the corresponding amounts on your bank statement. The main purpose of the bank reconciliation process is to figure out the key differences between the internal transaction records and the bank statement and make necessary changes to the accounting records as required. In this way, bank reconciliation greatly helps in deciphering any discrepancies in the transaction records as well as spotting fraudulent transactions.
Key Steps to Reconcile a Bank Statement
It is a well-known fact that your bank statement, which you typically receive from the bank at the end of every month, itemizes the cash, as well as other deposits that have been made into your business’ checking account. In addition to this, your bank statement may include bank charges, such as account servicing fees.
So, after you receive your bank statement, you can consider following these steps in order to reconcile your bank statement.
- Compare the Deposits – You can start by matching the deposits in your bank statement with those in your business records. Also, compare the amount of each deposit, as recorded on the debit side of the bank column with the credit side of your statement. Make sure you keep marking the items that appear in both the records.
- Adjust The Bank Statements – You need to adjust the balance on your statements to the rectified balance. So, you can adjust your statements by adding deposits in transits, adding or deducting bank errors, and deducting outstanding checks.
- Adjust the Cash Account – After adjusting your bank statement, it is imperative that you adjust the cash balances in your business account. You can do this by takings your NSF checks, bank charges, and accounting errors into consideration.
- Compare Cash Balances – After you’ve adjusted the cash balances as per the balance books, as well as the bank, you need to compare the cash balances and make sure the adjusted amounts are the same. In case if they’re still not equal, then you may have to repeat this whole reconciliation process back again.
5 Reasons Why Bank Reconciliations Are Important
Even though bank reconciliations are quite tedious, the financial hygiene that they provide will pay off. This is why doing bank reconciliations is always a great idea. Here are 5 reasons to signify the importance of bank reconciliations.
- Bank Reconciliations allow you to track your business’ cash flow.
- It helps you to see your business as it really is.
- Bank reconciliations are immensely helpful in detecting any fraudulent activities.
- It enables you to detect all bank errors.
- You can stay on the top of accounts receivable of your business through bank reconciliations.
It is essential for you to know that in our country, bank reconciliations are usually done through efficient bank reconciliation software India, which are very easy to use, as well as error-free. In these softwares, the bank transactions are imported to be matched and categorized, in just one click of a button. There are many such online bank reconciliation software that can eventually make the bank reconciliation process very-much controllable and efficient.
With the many amazing benefits to offer, you must consider finding the best bank reconciliation software reconciling your account as per your business requirement. How often you need to reconcile your business account basically depends on the size of your business. You can either choose to reconcile your bank account on a monthly basis, or you can do it weekly, or even at the end of each business day. In case you’re facing any problems with reconciling your business account, you can visit Giddh.com and learn all about bank reconciliations.