Do you only check your bank account a few times a year? If so, you might be missing important details that could cost your company’s finances. Checking your account every month is important for keeping track of your finances and seeing any errors early which can help you avoid big financial troubles in the future.

How do you accurately reconcile your bank statements each month?

Bank reconciliation is simply making sure you have as much money as you think you have – keeping an eye to make sure that no one is taking money from you and that everything adds up correctly. If you fail to do this regularly, you could lose money or be tricked by someone pretending to be honest. It’s important to always double-check your money records to stay safe.

What Are The Benefits of Regular Bank Reconciliation

• Early Detection of Fraud and Errors. Regular checks can help us find mistakes or dishonest actions by the bank, or other people who manage your money, early on.
  

• Maintain Accurate Cash Flow Management: Knowing how much money you have on hand can help you make smart choices about your business.
  

• Helps in Efficient Financial Planning. Keeping track of your money is necessary for planning and predicting how much you can spend when opportunities arise.
  

• Maintains Financial Integrity. Keeping track of your money and making sure all the numbers are correct helps people trust that your reports about your money are true.
  

Tips to Reconcile Your Bank Statements Each Month

Step 1: Gather Your Documents

First, gather all the paperwork (physical or digital) that shows how much money you have in your bank account, and keep track of what you spend each month. This can include lists of your purchases or payments – anything that shows in or out-flows of cash.

Step 2: Match Transactions

Look for any items that don’t seem right on the list. This could be because checks take time to process, bank fees haven’t been included, or the amounts recorded are wrong.

To figure out why things don’t match up, you need to look closely at each difference and figure out why it happened. You might need to ask your bank, look at your receipts, or make sure you typed in the right information.

Step 4: Fix and Reconcile Your Records

Update your financial records to reflect the accurate details as per your investigation. This could mean accounting for bank fees, correcting entry errors, or acknowledging unprocessed transactions.

Furthermore, keep a detailed record of the reconciliation process, noting any changes that are made. For audits and upcoming reconciliations, this documentation is necessary.

Step 5: Review and Approve

Lastly, get a second opinion on your reconciliation work. An external auditor, a financial controller, or a senior accountant could be this person.

Conclusion

Although monthly bank reconciliation may seem like a painful task, the accuracy and security it provides to your company’s finances cannot be underestimated. By ignoring this important phase, you expose your company to fraud and mistakes that go unnoticed. However, if this task sounds overwhelming for you, consider using cutting-edge accounting software, which does the heavy lifting for you, or hiring a qualified accountant like JCSN to make sure there is continuous and diligent financial supervision.

You can schedule a call with our accounting expert now!

FAQs

1. What is bank reconciliation and why is it necessary?
   
   Bank reconciliation involves verifying your bank account’s transactions against your financial records to ensure accuracy and detect discrepancies. It’s crucial for maintaining financial integrity and avoiding potential fraud or errors.
   
   

2. What are the benefits of performing regular bank reconciliation?
   
   Regular bank reconciliation helps in the early detection of fraud and errors, maintains accurate cash flow management, assists in efficient financial planning, and upholds the financial integrity of your business.
   
   

3. What are the key steps to reconcile your bank statements each month?
   
   Gathering your financial documents, matching transactions between your records and the bank statement, identifying and investigating discrepancies, correcting and updating your records, and finally reviewing and approving the reconciliation with a second opinion.
   
   

4. How does regular bank reconciliation affect cash flow management?
   
   By ensuring that all transactions are accounted for correctly, regular reconciliation helps you know exactly how much money is available, aiding in smarter financial decision-making.
   
   

5. What should you do if you find discrepancies during bank reconciliation?
   
   Investigate discrepancies by reviewing transaction details, checking receipts, and contacting your bank if necessary. Adjust your records once the discrepancy is understood to reflect the accurate information.
   
   

6. Why is it important to have someone review and approve the reconciliation?
   
   A second opinion, such as from an auditor or senior accountant, ensures that the reconciliation process is accurate and that no discrepancies are overlooked, enhancing the reliability of your financial data.
   
   

7. What alternatives are available if reconciling bank statements seems overwhelming?
   
   Consider using advanced accounting software that automates the reconciliation process or hire a professional accountant to ensure continuous and diligent financial supervision.