- Posted by Saurabh Bhardwaj
- On October 22, 2021
- 0 Comments
- accounting, accounting firms, accounting firms usa, accounting in US, accounting outsourcing, bookkeeping outsourcing, outsource bookkeeping agency, payroll outsourcing accounting services, virtual bookkeeping firm
A document that mainly compares the cash balance on one’s balance sheet to a similar amount on its bank statement is termed a bank reconciliation statement. The reconciliation of two accounts mainly helps in identifying if there are any accounting changes are needed. On the flip side, you need to know that bank reconciliations happen at regular events, which assures that company’s cash records are not only accurate but also help in detecting fraud and any cash manipulations.
Things to know about bank reconciliation:
When one reconciles their bank statement or bank records, they can easily compare it with their bookkeeping records for the given period and also learn about the discrepancy. If one has a history of those discrepancies, their professional can be sure there’s no money missing from their business. Bank reconciliations tend to go beyond one’s bank accounts as even credit cards, PayPal accounts, or other accounts with the company’s transactions which must be reconciled.
Who does bank reconciliation?
One should be prepared to reconcile their bank statements at regular intervals if one does their bookkeeping themselves, but if one works with a bookkeeping professional, they will handle it for them. If one uses the accrual method of accounting, then only they need the accrual method of accounting as it confirms that all uncleared bank transactions one recorded actually. At times, people keep a check to ensure that all uncleared bank transactions you recorded actually went through in a large organization with full-time bookkeepers.
Reasons to comply with bank reconciliation matters:
To check if the business really works- one wants to know they reflect reality when they look at books. One could end up spending money they don’t really have or hold on to the money they could be investing in their business if their bank account, credit card statements, and bookkeeping don’t match up. It can help one to catch up with any bank service fees or interest income to ensure that the company’s cash balance is nothing but honest.
Keep track of the cash flow- a part of managing any business is managing cash flow and reconciling bank statements allow one to see the relationship between when money enters their business and when it enters their bank account. One can also plan how to use the cash more efficiently.
Detecting frauds– one can stop scams while reconciling their bank statements, but it will let one know when it’s happened. For example, one could pay a vendor, but at the same time, they could tamper with it, and one wouldn’t know until the bank charges their account. While one reconciles their bank statement, the discrepancy will show up without a doubt.
One needs first to find the bank transactions that are responsible for their books and their bank account being out of sync while they do a bank reconciliation. One needs to keep track of all the balances. It is ideal to have a routine and decide how they will reconcile frequently.