To manage the cash balance of your business, you have to make and utilize a bank reconciliation. This process involves reconciling or comparing the amounts that you have on your bank statement with the amounts you have on your own books.
Why is a bank reconciliation important?
Reconciling these cash records is crucial for your business. Here are some of the important benefits you get out of this process:
- You will know where the money is going.
- You can identify possible fraud that may be happening within your company.
- You will know the current financial standing of your business.
Bank reconciliation is a long and tedious process. You will have to check every amount to make sure that you do not miss any possible mistake. To help you out, here are some tips and tricks you can use when making a bank reconciliation:
- Get a hold of the necessary documents.
To be able to verify the accuracy of the items on your statements, you will need documents to support them. For instance, you need to have the receipt for the purchase that was made for a certain amount on a particular date. This amount was paid through a bank withdrawal. You have to be sure that the withdrawal on that date matches the amount that is on the receipt.
- Start from the previous balance.
This will help you become organized in the process. Starting from the previous balance will help you locate any error that might have been committed when the amounts were posted in the current period. It will even be better if you start checking the previous balance of months prior.
- Take advantage of accounting software.
Such software allows automation of data entry. This makes posting entries easier. As such, there will be less stress on your part. You will also be able to save time when you go through the process of bank reconciliation.
- Locate the discrepancies in the amounts.
If you find discrepancies with the amount in the bank statement and the amount in your records, find out the difference between these two amounts. Afterwards, locate the amount in your records. This may be the result of double posting or posting the same amount twice, or a typo error when placing the decimal point, among others.
- It is not always your company’s fault.
Although it is a rare occurrence, the bank may also commit a mistake in posting balances on your account. This may happen when you have several deposit accounts from the same bank. If you see any amount that you are unable to explain, you might want to discuss it with the bank.
Bank reconciliation is a tedious task. Let Jeffrey Fleurinor CPA help you with it. We offer accounting and tax services in Georgia. For more details, please contact 404-884-9220.