If you have a hard time managing your bookkeeping, then you are not alone. In fact, only 14% of business owners are comfortable with finance, bookkeeping, and bank reconciliation. However, like it or not, bookkeeping is a must if you want to keep your business healthy and profitable.
Bookkeeping mistakes can hinder profits from your business. Fortunately, there is a way that you can do to avoid that, which is a bank reconciliation. With bank reconciliation, you might need to manage it with an integrated system to minimize your struggles in business.
Our ERP system consists of various enterprise-class solutions that can be customized to meet the unique needs of the financial service industry. With the help of our Finance ERP system, we can help you automate your daily business operations and optimize client requirements fulfillment in a real-time platform. Further, we will discuss more about what bank reconciliation is.
Table of Contents
- The importance of it
- How to do it
- How often should you do it?
Definition of bank reconciliation
Bank reconciliation is when you compare your company’s financial statements with bank financial statements. Essentially, you make sure the information, transactions, and the amount of money in the company’s financial statements match the bank’s financial statements.
The purpose is to check whether there is an error in both statements and detect fraud. Often, there are transactions recorded on your financial statement, but you can’t find them on the bank statement.
Usually, this happens because the check you wrote hasn’t yet been deposited by the recipients. Without bank reconciliation, this error will be difficult to detect and can harm your company.
The importance of a bank reconciliation
Bank reconciliation is not only useful for avoiding errors and detecting fraud but also has other uses that can help your company. Let’s discuss further.
You and your financial department is not the only one that can make mistakes; banks can also commit an error. Look for any discrepancies between both records and figure out which one is accurate, and which one needs correction. Bank reconciliation is very effective in detecting bookkeeping errors for both sides.
There are still various types of accounting errors that even professionals do them sometimes, such as:
- Duplicate expenses
- Bank feeds missing a transaction
- Sloppy data entry
This reconciliation can help you identify bookkeeping errors and avoid potential losses for your business.
Bank reconciliation can help you identify fraud before it goes out of control. If you notice a transaction occurs without your approval, investigate immediately. Maybe someone is using your credentials without you knowing it.
Recently, a friend of mine told me that he had seen a check on a bank statement, but he didn’t remember making one recently. To investigate, he crosschecked it with the company’s financial statements and found nothing similar.
Shortly after, my colleague reported the fraud to the bank, and the bank returned his money. That is why bank reconciliation is important for your business. With the help of the EVA HRIS Essentials System, we can help you automate your administrative tasks, calculate salary and taxes, and manage leave and attendance, all through our Software HRIS from HashMicro.
Improve business operations
If you notice errors becoming too frequent, it means something is wrong with your business operations. It means that your company has a low efficiency, especially in the bookkeeping and finance sections.
It is important that you fix those errors using bank reconciliation. When you reduce errors or even prevent them from happening, your business efficiency increases. Rising efficiency means saving time, and time saved is money saved.
How to do a bank reconciliation
For a company with hundreds to thousands of transactions per month, manual reconciliation is time-consuming. That is why many companies implement accounting systems in the company to facilitate the process.
With accounting software, the reconciliation process will be easier and faster. With just a few clicks, crosschecking company financial statements with bank financial statements can be done quickly and easily.
If you find a discrepancy between the company’s financial statements and the bank’s financial statements, investigate immediately. Check whether there are records of missing transactions or outstanding payments, or is there a bigger problem that you need to address?
How often should you do it?
Actually, there are no wrong answers to this question. However, we suggest that you should carry out bank reconciliation at least once a month.
There are also companies that run this process every few days. The reason is to avoid unexpected expenses or fraud that usually happen in online transactions. If you do the bank reconciliation once a month, by the time you notice a fraud, it will be too late to repair the damage.
Bank reconciliation is an important process that any company must do at least once a month. Not only minimizing bookkeeping errors and detecting fraud, reconciliation is also useful to increase your financial department efficiency, especially if it’s being helped with online Accounting Software features.
HashMicro is here to offer you to minimize manual, time-consuming accounting procedures like bookkeeping, and asset depreciation calculations, and also increase your business profitability with the help of automated, accurate budget calculations with our Accounting Software. Click here to get a free demo now!