Bank reconciliation and its importance

  Bank reconciliation is a process of control between the accounting records of your If you have an SME, it is important that your accounts are square. A good financial control will allow you to monitor the activities and movements to ensure that everything fits the strategic plan you have drawn. Bank reconciliation is one […]

 

Bank reconciliation is a process of control between the accounting records of your If you have an SME, it is important that your accounts are square. A good financial control will allow you to monitor the activities and movements to ensure that everything fits the strategic plan you have drawn. Bank reconciliation is one of the most important economic control tools in a company and the movements of your bank account. Keeping a control like this will help you discover and correct errors in your accounting.

Bank reconciliation is a very important process for any company, no matter how large, medium or small. But what is that of bank reconciliation? Let’s start with the most basic: to reconcile means to make compatible two or more things.

So, when we talk about bank reconciliation, we mean to put in tune the accounts of our company with those of our bank.

AQ Bookkeeping is a business that offers excellent services at an affordable price for all businesses needing back reconciliation services to recover total control of their business and knowing where the business is heading.

What types of bank reconciliation are there?

Individual reconciliation.

Starting from the balance of the accounting books of the company, you must find the differences with the bank balance to make the necessary accounting adjustments and update the balance of the bank book, whose validity depends on the monthly transactions being verified in the bank statement.

Joint conciliation

A document is made with all the information about the seats that do not correspond to make the corrections, which will be in charge of the bank or the company, who is responsible for the errors.

How to do bank reconciliation?

Traditionally, bank reconciliation has been based on a simple method, to the supply of any. Let’s see it:

  • On one hand, the bank statement of the month.
  • On the other hand, the income and expenses record of the company corresponding to the same month.
  • Rule and pencil, and to compare line by line, concept by concept, amount by quantity, that everything coincides.
  • Grosso modo, this is the great method of bank reconciliation that, by the way, nowadays many billing and accounting programs solve you in a heartbeat.

The importance of bank reconciliation

Whether automatic or not, bank reconciliation is inevitable. But not by accounting whim that only experts can glimpse, but for several reasons that we expose you below:

  • To avoid mistakes. And unpleasant surprises: imagine that in your bank account appears an expense that you have charged by mistake.
  • To check transactions. It is a classic the receipt or invoice that has been lost and that we have not accounted for and, voilà, the bank statement reminds us that such a transaction did exist and that you better count it.
  • To control the performance of your company better. The bank reconciliation allows you a perfect overview to understand the evolution and status of your income and expenses. This will guide you better in your business action.
  • To prevent losses. It is a corollary of the previous point. It consists of detecting a possible bad course of your company and acting on time.

In general, it is normal that the bank statement and the registration of your accounts do not match. Do not be alarmed. The ultimate goal of bank reconciliation is precisely that: to find out why this difference occurs (which may be because revenues or expenses appear for the previous month, for example), if there is an error, what kind of error and find a reasonable explanation and without alarmism.

Benefits of the bank reconciliation of the automated company

Many times, banking conciliation is considered as a heavier and slower administrative task, with little value for the company, when in reality it is a management and control tool that can provide important information about the business. Therefore, it can be very beneficial to automate this task. We explain why.

The main benefit, but not the only one, of the automation of this task is the reduction of the time it requires. This means having to spend less time and less staff for this process and therefore increase their efficiency. An improvement that, without doubt, is also an economic improvement even if indirectly.

A benefit or improvement derived from the previous point is the optimization of the frequency with which the bank reconciliation is carried out. Being a much more agile task, it can be done more often. In this way, the ability to react to errors or mismatches that have arisen is increased, and being more recent, it is also easier and faster to find what has caused them and give them a solution.

In addition, as with any other process of the company, if it is done manually and based on paper, it is easier for errors or misunderstandings to occur, for a document to be lost, etc., than if it is done digitally. This avoids the “human failure” factor, for a more accurate and exhaustive result of bank reconciliation.

Greater control of economic resources.

The bank reconciliation will allow you to check the accuracy of the accounting information, so that you can have a more accurate picture of the economic situation of your SME.

It facilitates decision making.

The more information you have about the financial status of your company, the better decisions you can make. The bank account reconciliation will allow you to make strategic decisions based on reliable and updated data.

Provides security before an inspection.

Bank reconciliation is not mandatory, but having up-to-date accounting and square accounts will make you feel more secure in the face of an inspection since you will have already detected and corrected errors or mismatches.

With our qualified and trustworthy staff is backed by 15 years of experience and we strive to give the best customer service possible. You can contact us right now, here at AQ Bookkeeping you will enjoy professional back reconciliation services at an excellent price. Call us now!