Bank Reconciliation | Bookeepers Columbia SC
What is a Bank Reconciliation?
It is reconciling the records in your books with the most recent bank statement issued by a financial institution. It involves checking whether the bank credited the cash deposited. Alternately, it determines whether the bank debited the checks issued. Conducting this activity serves as a control in fund management.
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Who Needs Bank Reconciliation?
Businesses with Several Check and Remittance Transactions
Funds that go through checks and remittances may have a free period or clearing time. Things can get awry in case checks bounce or remittances fail. You may need to reconcile your books with bank accounts to clear things out.
Businesses with Lots of Bank Accounts
Your money goes to different bank accounts. With such spreading out of funds, you would want to make sure that everything is accounted for. A bookkeeper can help you with that.
Why Should a Bank Reconciliation Be Conducted?
Bank reconciliation should be done more than as a formality. You should look at it as a detective procedure and a monitoring tool. Here is a breakdown detailing why you should get bank reconciliation done.
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Catch Fraudsters Red-Handed
You should catch fraud before it's too late, and it has been going on for too long. Bank reconciliation uncovers signs of fraud so you can act on them immediately. Through the reconciling items, you can determine whether your people have been conniving behind your back.
Modified and unauthorized checks will show up as more money leaving your checking account. Unauthorized transfers and withdrawals once you discover unrecorded bank transactions. You can also find out whether there are missing deposits due to your custodian.
Better Fund Management
Reconciling your accounts can lead you to evaluate your cash flows, accounts management, and accounting procedures you currently have in place. Through the bank reconciliation statement, you would know how much is the actual available cash, bounced checks, failed electronic payments, and outstanding checks.
Having insight into your funds can lead you to make better management decisions. You can avoid incurring bank fees due to insufficient funds. You would not have to use lines of credit because you know you don't need to. Payees can be followed up.
All of your transactions must enter your accounting system accurately. Of course, human errors happen every once in a while. After reconciling your books with the bank statement, you can identify and check duplicates, recording mistakes, unrecorded bank fees, and other unrecorded transactions.
Furthermore, you can catch any bank errors. It would be inconvenient to call out mistakes on the banker’s side if left unattended for too long. After reconciling procedures, your bookkeeper can help you with phoning the bank and reversing balance errors.
How Often Should Bank Reconciliation Be Done?
Ideally, bank reconciliation should be a monthly affair. The frequency may increase if you handle more remittances, bank accounts, fraud risks, and a higher volume of business transactions.
Then again, you can conduct bank reconciliation less frequently and have them quarterly and semi-annually. You may think this is more practical and reasonable. Although you have the option, this arrangement is less than ideal, and the benefits decrease.
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